Q2 2020 Kamada Ltd Earnings Call
Thank you for standing by and that's just a conference operator welcome to the Kamada Limited second quarter 2020 earnings Conference call.
As a reminder, all participants are in listen only mode and the conference is being recorded.
The presentation, there will be an opportunity to ask questions to join the question Q You May Press Star then one on your telephone keypad should you need assistance during the conference call you may signal, an operator by pressing star and zero.
I would now like turn the conference over to try Williams Life Science Research. Please go ahead.
Thank you and good morning, everyone troubling Buyside Pfizer's.
You also participating in today's call joining me from Commodore near London, Chief Executive Officer, and Jaime all that Chief Financial Officer.
Earlier, this Thomas <unk> announced financial results for the three six months ended June 32000, that's why.
Did you have not received this news release. Please go to be investors page of the company's website at www Dot com <unk> Dot com.
Before we begin I would like the cautionary comments made during this conference call by management will contain forward looking statements involve risks and uncertainties regarding the operations and future results.
I encourage you to review the company's filings with Securities and Exchange Commission, including without limitation that companies forms 20-F, 6K identify specific factors that may cause actual results or events to differ materially below as 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 July broadcast August 12 2020.
Commodore undertakes no obligation to revise or update any statements to reflect events or circumstances. After the date of this conference call.
That said, it's my pleasure to turn the call over to Amir.
Yeah Amir.
[noise]. Thank you Charlie My Thanks also go investors and analysts.
<unk> interest in Kamada infill participating in today's call.
I hope you all are keeping safe and healthy in this challenging times.
Let me begin to be discussing the significant progress we have achieved in the development, although plasma derived hemoglobin link product has the potential therapy for coffee 19 disease.
Following our announcement in June being the first company globally within availability all the called 19 I did you product for compassionate use treatment. He needs. When it is this week, we announced initiation of phase one two clinical study he needs right.
This is an open label singular multi center study to assess the safety pharmacokinetics and pharmacodynamics, Although I did you product 12 hospitalized no unventilated called <unk> 19 patients with pneumonia.
Our product. It's also been evaluated <unk>. So I was called two that's what he's asking the DPP.
And the preliminaries dogs are highly encouraging and suggest the potential pilots realization tied to.
Lastly, we intend to father, well the potential although I did you product to prevent Colgate 19 disease in healthy subjects. It treats.
Separate study.
We are very excited but it's meaningful progress and we believe OCO that has the potential to being effective treatment for hospitalized unventilated Colby 19 patients with pneumonia and we look forward to the result from these tried later this year.
As a reminder, mike's going to talk about global collaboration agreement, establishing a twentytwenty cadre on bio pharma for the development manufacturing and distribution. Although I did you product has the potential treatment.
So called <unk> 19 patients.
Lets you into the collaboration between the two companies can't young is responsible for the collection of coffee 19 content absent plasma from U.S. recovered patients cadreon he's already collecting the plasma suites plasma business unit Kedplasma. It's 23 after <unk> send to <unk>.
The United States.
We intend to expand the Cobbett 19 clinical development program to the U.S. and plan to conduct a tree I N D meeting with the U.S. SD eight due to the current quarter in order to obtain after the acceptance well proposed clinical development program.
I see that clearance I in the U.S received comment then can't do an intent to initiate the pinnacle program in the U.S. in L. <unk> 2021.
Moving on I would like to people that we are accelerating local medicine and business development asphalt and while working to mitigate the effect of the plant when they should the lock them in the factory to Takeda doing 2021.
I am optimistic that our organic commercial growth. It's one of the diesel business development opportunities funded by our strong cash position will result in resumed wrapping you and profitability growth beginning in 2023.
As a reminder, we anticipate revenues of approximately $65 million from selling lots it to the K does he see you I mean, the range of 25 million to 50 million 2021 based on the Kid to supply needs.
In addition, based on the agreement between the companies that part of the initiation of says is glassia been affected I took it up we will receive royalty payments from the kids up it to rate of 12% when they sell through August 2025, and it to rate of 6% thereafter until 20.
So.
With the minimum $5 million annually for each of the use from 2020 to 2040.
In addition to block the contribution we expect CAD true ups wrapping you.
In the U.S. markets you to continue to grow as a reminder, kid of U.S. marketshare increased from approximately 10% in 2018 to approximately 20% in 2019 and it continues to grow.
In addition, we anticipate continued strong contribution for most of you could cause any Israel, both existing product as well as new products, which we wouldn't be launching in needs and during the next few years.
Going forward, we also expect meaningful growth for existing propriety I did you do product portfolio as well as Glassia in international markets outside of the U.S.
Mobile fill the cognizant affecting agreements we signed in late 2018 full in F. D approved commercial stage specialty Highpin globally product, which is currently in its technology transfer season is expected to have significant contribution to our plant utilization.
Okay and growth starting in the beginning Twentytwenty study.
In addition to all of that we believe that that we're leading the development program.
I did you products for copied 19 and being held 80.
If the pool have substantial market opportunities.
Beyond the significant existing into another potential growth catalyst, we intend to utilize our strong balance sheet to identify additional business development opportunities that leverage our expertise and in fact, it could repeat it.
We are optimistic about the future of a business and we are confident that the actions will generate significant shareholder value.
Let's now turn to the current status of our innovate phase three clinical program for propriety inhaled 80 for the treatment of Alpha one antitrypsin deficiency.
As you will recall, we'd been recruiting patients into the phase three trial in Europe through February 2020, Oh is it as we said then I will ask cool you much due to the effect of the coffee 19th and damage on headsets systems recruitment into the study was tempered.
Uh huh.
I'm pleased to both today the recruitment into the study we started in June.
As a reminder, you know they use the randomized double blind placebo controlled pivotal phase three trial designed to assess it FICO seat and safety well being held 80 patients without phone deficiency and moderate lung disease.
Up to 250 patients we'd be randomized one to one to receive either in held a deep. It did those are the 80 milligram once daily or placebo, although to use of treatments.
The primary endpoint or you know they try to use lung function measure if if you want.
Secondary endpoints include changes in lung density as measured by CP skin as well as other parameters of disease severity such as additional pulmonary function. He does the basins rate and six minute walk us [laughter].
Before I turn the call over to Jaime for his review over the second quarter. The first half of Twentytwenty Financial review I'd like to take this opportunity and mentioned the recent changes you know board of directors, which will also announced this morning.
First I'd like to thank Mr. Leone, we cannot be so he's contribution to comment, though as an investor direct though and chairman and office he held for the last seventies.
He's continue supporting contribution to comment that into myself personally was invaluable.
I believe that Measly lost shelf appeal ski nomination is comment the chip is fun is indicative of female confidence in the company's long term growth prospects.
Market position corporate strategy and I was solid management team.
Over the past seven months since the Lux appointment to comment a bold she's made significant contribution and I congratulate him when he was apartment and they look for continued success the corporation.
And the background the FIMI opportunity fund.
The leading private equity invested in Israel and his comment that lead shareholder.
Lastly, I'm happy to welcome Professor <unk> Irish armies to comment as board of directors.
I always extensive experience the senior executive at keeping cost because the needs and we'd be important in strengthening our business, including OCO meso product as well as our clinical pipeline.
Professional shot Macy's highly respected heska, so the needs and and we look forward to eat significant contribution to come into.
With that I'll now ask Jaime to review our financial results Jaime.
Thank you on the air and good day everyone.
We continue to be pleased with the momentum in our business, especially in light of the ongoing operating challenges posed by the covert 19 and that.
We demonstrated solid year over year topline growth during the first six months of Twentytwenty.
In the second quarter total revenues were $33.1 million.
Parents is $35.3 million for the second quarter of 2019, well. This represents a decrease of 6%. The first six months of Twentytwenty. Our total revenues of 66.4 million bothers represented an increase of 7% as compared to the 60.
$2.1 billion total revenues generated into six months from 29 team.
It should be noted that in response to challenges in market conditions due to the call with 19, a dynamic we exited certain sales at the end of the first quarter of this year, thus shifting them away from the second quarter.
Our revenue increase in the first hassle Twentytwenty was also driven by 28% year over year increase in sales of our distributed products. We expect our distributed products in Israel to continue to be an important driver of our growth prospects more more over longer term.
We anticipate that this segment will improve our overall gross margins.
The company's business activity and commercial operation were affected by certain covert 19 pandemic related sectors and the company had taken several actions to ensure its manufacturing plant remains operational with limited disruption to its business continuity, even with the emergency regulation we.
Simply reinforced in Israel due to dependent.
Or over to date, we've not seen any meaningful supply shortages in the U.S. markets for Glassia orchards.
And we do not anticipate shortages in the foreseeable future. We also have not seen nor do we expect any significant supply shortages for a distributed products in Israel in the foreseeable future.
Well the covert 19 related disruptions at various effect on the company's business activities commercial operations revenue and operational expenses as a result of the actions taken by the company to date. It's overall results of operation for the first six months and Twentytwenty and financial position as of June.
Thirtyth Twentytwenty, we're not materially affect.
Company expects that its continued actions will allow meeting its annual revenue guidance. However, a number of covert 19 related factors may still have an effect on the company's future financial position and results of operations with that said we are we are reiterating our previously provide.
Full year, Twentytwenty revenue guidance of between $132 million and $137 billion.
Turning to profitability for the second quarter of Twentytwenty total gross profit was $11.1 million compared to 13.6 million reported in the second quarter of 29 team.
Try theory gross margins in the second quarter, Twentytwenty were 43% down three percentage points as compared to second quarter of 29 team.
This decrease is inline with our previous guidance oven and you all three to five percentage point decrease which is attributable to a change in cell product mix and reduce plant utilization.
The different mix is the resolved inventory management by our distributors and timing of our product shipments similar influence also impacted the distribution segment profitability this quarter.
For the first half of this year, our total gross profit was $22.6 million and gross margins were 34%. This compares to $24.8 million total gross profit and 40% margin in the first half of 29 team.
Operating expenses, including research and development sales and marketing Jan Hey, as well, there's other expenses totaled $7.1 billion into second quarter of Twentytwenty as compared to 7.2 million in the second quarter 2090.
First half of the year. These costs totaled 13.7 billion compared to the 13.2 million in the first half from 29 team.
The cobot 19 related the late in enrollment in the company's pivotal phase III innovate clinical trial resulted in lower than expected increase in research and development expenses as I'm really noted enrollment in this trial has now resumed and we would expect our operating expenses to increase costs.
Certainly over the second half will twentytwenty.
Our original guidance for annual research and development expense.
It was for an expected 20 to 25 just said.
Increase given that the late mentioned earlier, we currently expects to 15% to 17% increase so full year twentytwenty as compared to 29 team.
Moving on.
Net income was 3.5 million.
Or eight cents per share in the second quarter of Twentytwenty as compared to net income of 6.1 million or 15 cents per share in the second quarter of 29 team for the six months of Twentytwenty net income was 8.7 million or 20 cents per share as compared to net income of 11.1 million.
Or 27 cents per share in six months of 2019th.
During the second quarter and first half so twentytwenty, we continued to generate cash from operating activities and we maintained a strong balance sheet with told what a total of 104.7 million.
Cash cash equivalents and short term investments as of June Thirtyth, twentytwenty as compared to 73.9 million.
At December 31st 29.
Part of the increase is related to the $25 million.
But placement with the senior opportunity fund closed earlier this year.
That concludes our prepared remarks, we will now open the call for questions operator.
Again.
We will now begin the question and answer session to join the question Q. You mean press Star then one on your telephone keypad, you'll hear a telling us knowledge in your request if you're using a speakerphone. Please pick up your handset before pressing the kids to lets try your question. Please press Star then chance.
That's fair amount as collars trying to Q.
First question instrument Raj Denhoy as Jefferies. Please go ahead.
Hi, Good morning, what does maybe I can start with some of the reports during the quarter of.
Compassionate use so plasma products from you guys in Israel treat a koby patience.
Anything you can offer anecdotally about the use and so far and what you're seeing with the product.
Hi, Ross. Thank you for the question. Thank you for joining the call.
They were a few treatment compassionate use them procedure in Israel.
That they say approval for passengers treatment goes between the medical center and the treating physician and the minister of how to comment they not part of this process. We basically made the product available fold in medical centers and they need to apply.
And get them kind of a name patient.
Hey approval for the treatment. So this is no date up that is available to come with them.
Hey, This clinical study, which was started in just just recently is sponsored by comment, though and the data from that study of calls it will be available and will be it showed in due time a with the public.
As we announced earlier this week, we all in college by then its realization data that we've seen in the defense.
I'd say that we are performing and we just need to wait no.
No not too long before we have the data from the clinical study both into mass in the clinical study is a full the last few patients meaning not the one that god. The compassionate use the compassionate use of given to patients that was severely you why their clinical study.
We just described its full hospitalized, but not ventilator patients. We believe that that's the right population for these type of treatment.
We believe that you need to catch the station.
Hey, if I can use it while they are highly viable but before their situation worse than significantly in order for the I'd UGI to be effective.
That's helpful. You also mentioned that you're looking at the product as a preventative potential preventative.
To covert is there anything going off in terms of what that looks like is that a separate trial entirely or how do we think about the timing of that.
Yeah, they shouldn't be a separate trial, we ought to know and in discussions with the regulators and the K well you know with regards to that study.
It's going to be the same product.
While the dozing might be different.
We will be it that's thing you know defensive though this you know the two rights to get to the optimal those full with preventive Oh prophylactic treatment compelled to a sick patients.
No no defense and approaches to that.
Yeah, you May think about the medical stuff you may think about patient so people that well.
At high risk and have been exposed to.
To a thick coffee patient like post exposure prophylaxis, you may think about the elderly population, so there defense opportunities different population, which.
Potentially meet these criteria and we all in advance discussions with different the relevant parties when how could designed the study and to what population.
That's helpful. And then maybe a couple of more so you know Kevin Kedra honest. Your partner you mentioned, obviously in the United States collecting plasma for you here what has been the status of their collection efforts you know how successful had been in actually collecting.
Convalescent plasma there's been some reports of it being somewhat more difficult perhaps to get supply. So how is KEDLI I'm sorry.
So that does it go to progress in the collection you know catching on has a lounge and that's well Oh plasma collection centers in the U.S. they've cool most of those centers.
They all included in the collection I felt.
This plasma U.S. plasma it will be supplied to comment, though you know to flock to initiate also a U.S. and and clinical program.
So the plug your commentary using for the Israeli study is plasma samples collected from convalescent patients in Israel.
We moved very fast already in March in terms of walking here with the needs a with the local authorities on and defining the path for the collecting and working with the Israeli and that's another large bank on the a collection and this allowed us.
If you may remember in June to be the first.
The company globally to announce availability and plasma derived coffee I'd UGI and those would be the first globally to initiate clinical study. So we're very happy with the progress we've been making.
We believe that Sim.
Very high potential for a successful treatment, so coffees 19 patients.
That's helpful. Maybe just just one last one on a quarter since the last couple of quarters now we've seen.
Distributor product sales being quite strong I know crested $10 million. This quarter any time, you mentioned, it's gonna be a continued a contributor at a higher rate here. So maybe just some some background in terms of what's driving that higher revenue from distributed products over the short term I realize there's other things coming longer term, but I'm more curious about what's what's been pushing it recently.
Yes, so over the last few years, we haven't been expanding our portfolio Oh distributed called the sleeves island, they've been signing quite a lot of new agreement well. These are the market.
Defend international.
Oh, yes, so some of his new products that have been register the over the last two years and I've been launched into the Israeli market. Some of it is an increase in the plasma derived product Oh legacy products like Ivy AG that we've been selling and these are for many years. There was additional stocking of Ivy League.
She product any Israel by the hospitals because of the pandemic. So this also had some contribution to our second quarter itself.
And looking into the future like you said you know we've signed.
Highly promising encouraging additional agreements like they wanted to signed late last feel when I looked at and this will be a significant driving through our growth in terms of the bio similar.
Hey portfolio. So we're very happy with the progress, we're making with that is to get that put us in Israel and we're very encouraged by the rate.
<unk>.
We're also looking into the future 2021 and beyond.
That's for the second half of the year, we shouldn't assume that stays about $10 million there was a little bit of perhaps higher selling this higher sales. This quarter. So maybe it falls back a little bit in the second after reading.
Correct I think you need to stick to wasn't just said, it's a reiterating over full year.
Projection.
And we're on track to make that we've been telling you know investors and analysts and over the years don't judge us by quote quote go by quarter, but look at Cowell and you all the projection and annual performance. We've been very good in the last few years, giving an annual Jackson anything good and the same applies full.
This year Twentytwenty.
Great. That's helpful. Thank you.
The next question is from cane, that's high as Chardan. Please go ahead.
<unk>.
Yes, thanks for the.
Gee Hyperimmune.
What are you measuring for efficacy endpoints in the phase one two and Israel.
[laughter] currently <unk> how are you [laughter]. So common so currently and always the phase one two studies calls we all measuring a safety.
And we are looking also at the PK and PD and pharmacokinetics and pharmacodynamics data, but also being an open label study basically we would have data on each and every patient and we've done. So looking it's you know number will have to those days than when the patient has been.
Hopefully it'll be covenant relief from the hospital by the official.
I'm going to school safety and some of it PK and PD.
So just just trying to extend that to the prophylactic use.
Do you have a sense [laughter] from the regulatory authorities, what you'd need to demonstrate an order for to be used prophylactically.
Not yet again like like answered the previous question.
Good luck the Oh, the post exposure prophylaxis is definitely the in every oh direction that really interested in this is positive discussions that we are having internally and with the K well.
And with the treating physicians and we initiated with authorities.
It is to have a clear path forward what would be required in terms of.
And the path forward the cleaning up the medical the regulatory path forward for potentially improve.
Future proof of prophylactic treatment.
They said PK data.
Exactly know all of it in discussion.
We are you getting a sense that if you.
Hum.
No safety issues and huge you can demonstrate.
Some level of anti bodies with them you know some I guess relatively short period, that's why I use those protectionism.
That long lasting would that be sufficient in your view it at least today to have something.
Approved prophylactic use.
We believe and this is very preliminary work I'm, just saying this is not than putting a disclaimer. Now. This has not been you know fully discuss and definitely approve the agreed with the regulators, but potentially having the ability to compare the PK data antibodies level all the prophylactic Isaac.
We do an active vaccine that will be approved this could be a potential one way to look at the product.
So is that you know when when you look and that's it healthy individuals.
It has to do something has to do it has to be sorry, some type of the PK data because you're not treating you know sick patients.
So this is one of the way to look at it.
Tentatively but that could be very loud study that you are treating patients and then you see who gets sick and who doesn't get sick compared to some type of the control group.
This is another option, but again it will depend on how the regulators would like to see such a path pool and the potential future approval.
Okay. That's helpful.
Switching to the operation side and the gross margin.
How much lower should we expect the gross margins will trend down too.
So we gave I mean do unhappy here, we gave a projection on.
Well I Gotta protection that three to five percentage points, a drop in ER and gross margins and proprietary sector as compared to a two last year.
And we we still stand behind that that Don.
And lastly, with was 46%.
Right. So I guess, what I'm asking is that is that.
For [noise].
For this year or what what happens as we try to roll into the first out so I'm not sure.
So we think it does not yet.
Yeah, it's a little bit too early now to give an answer to that you know we are expecting no fees, but from Takeda later this year in preparation for 2021 for what's going to be there. The man, we mentioned is going to be between $25 million to $50 million and sell and it depends on when that.
Tektronix settled blocky up to the K that we'd be completed then when they expect to have that they approve a piece of calls we'll have an impact on our 2021 projection also hey, potentially impact of the coffee 19, I do g.. So they all fuel and items a few things that need to.
Be it cleared between now and analysts you before we can give an educated and projection for next year.
Okay, and then just just finally for the the rabies product.
And just her in terms of the overall market for the rabies product.
Are we seeing.
Any growth there.
Constrained.
Well I.
Outdoor activity related to covert.
So our sale. This you Oh sells out to two Cadreon and they you know salad in the with smoke it same terms or that you marked itself.
We believe is that you know doing the coffee outbreak they've been maybe two or three months.
All potential slowdown Oh sell you to them and like you said lets outdoor activities, but things already ramping up again no. When we went live in most of the U.S. as returning to know.
Okay, all right that's all I. Thank you.
The next question is from Gotti Hassan a private investor. Please go ahead.
And I am here.
I've a question about it's Roger Doug.
I started.
I believe you have the.
I've got though.
You are rolling up the people and you will know few weeks what is the result.
If the result would be.
That's fine.
I do expect that there will be can you that you can start to become the complexion treatment to get due to do it I remember like due to try to fill this treatment.
Also you don't have in the yeah.
I agree with me agreement to sell it to the FDA approval or something like that.
If you can fill it as the compression through spend by payment.
The before you have no you're going to begin the phase.
Whatever you want them to do next year.
I don't know it will be.
Again, you have to repeat the phase one two or you have maybe it was good resolved and <unk>.
We continue to phase two three in the United States.
Thank you. Thank you got to the first time until the later part of your question you know got to the U.S.
Path forward. So as we said you know we are going to hold at pre I in the meeting with FDA and this quarter.
So all those issues you know we'd be raising when do we discussed as part of that process and then we'd have met the clarity and we will announce you know what the plan for in terms of and they did they needed studies.
In terms of a question.
God being.
Paid compassionate to treatment. So it's a little bit too early right now to give you and and and and so for that it's and it's an option, but we will need to wait.
All the data and to have the discussion with the relevant authorities before we can.
Provide any fees, but.
Okay.
Okay. Thank you very much.
So.
This concludes Steve question answer session. I'll, then turn the call back on French Amir London for any closing remarks.
Thank you very much in summary, we are pleased with how our business performed in the first half of Twentytwenty, especially as the global called 19 pandemic persisted.
We have an extremely strong balance sheets and the fundamentals of a business Oh sorry.
Oh I did you put a development program for the treatment of copies 19 continues to advance very fast. In addition, we continued to drive strategic growth from our core business, including Glassia CAD, Rob and I was distributed products in Israel.
We anticipate that though a business development activities will have a meaningful role you know future growth.
And I'm also very excited about the potential over innovate pivotal phase three trial.
So I will you Nick inhaled 80 program and I encourage the enrollment has now been resumed.
We remain highly confident can comment on long term outlook for success.
Thank you everyone joining us on today's call and we look forward to providing you with father, obviously on our progress in the coming month.
We all all of you say healthy and safe.
Very much.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have attachment that.
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