Q3 2022 Kamada Ltd Earnings Call
[music].
Greetings and welcome to the commodity Limited's third quarter 2022 earnings conference call.
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Question and answer session will follow the formal presentation.
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At this time I'll turn the conference over to Bobby I didn't have lifestyle advisors, Bob you may now begin.
Rob. Thank you very much. This is Bob you did from lifestyle advisors. Thank you all for participating in today's call joining.
Joining me from Comdata are Amir, London, Chief Executive Officer, and Jaime Orlando Chief Financial Officer.
Earlier today Commodore now its financial results for the three and nine months ended September 32022.
You have not received this news release. Please go to the investors page of the company's website at Www Dot com at <unk> Dot com.
If there are any questions.
At the end of this call. Please feel free to email your questions to IR at <unk> com.
But dot com.
Before we begin I'd like to caution that come.
It's made during this conference call by management will contain forward looking statements that involve risks and uncertainties regarding the operations and future results of comedy.
I encourage you to review the company's filings with Securities and Exchange Commission, including without limitation. The company's forms 20-F, and 6K, which identify specific risk factors, which 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.
<unk> only as of the date of this live broadcast Tuesday November 22022.
I'm Gonna undertakes no obligation to revise or update any statements to reflect events or circumstances or circumstances. After the date of this conference call.
With that it's my pleasure to turn the call over to Amir London, Chief Executive Officer Amir.
Yeah.
Thank you Bob My Thanks also to our investors and analysts for your <unk>.
Interesting comment, though and for participating in today's call.
I am pleased to report Colorado's strong third quarter performance, which demonstrates the successful strategic transition of the company and is consistent with our previously communicated positive outlook.
You'll recall that we had forecasted that our financial results in the second half will meaningfully improve as compared to the last year and the first six months of P. C.
Our performance in the third quarter indicates that the business is beginning to realize the significant benefits of the acquired portfolio.
SBA approved IGT consisting of cycle HIPAA gum.
And we love.
In fact I can.
Can now confidently say that we have completed a rapid transition from a paas dependency on glasses yourself duplicate them.
Into a diversified fully integrated commercial company in the global leader in the plasma derived specialty markets.
In our last call I laid out our expected key sales and profitability drivers for the second half of the U.
This included ICT portfolio sounds little catch up to cadre in Glasgow royalty income.
All of these were indeed important contributor the sales and profitability growth in the third quarter two.
A new entry generated total revenues of 32.2 million now representing a 40% increase year over year and gross margins of 40% up from the 25% in the third quarter of 2021.
31% in the second quarter of 2022.
Our adjusted EBITDA for the third quarter was 6 million.
Representing a 19% homology.
For the first nine months of the year, adjusted EBITDA was $10.6 million, representing 13% margin.
EBITDA level is consistent with our annual guidance.
It represents a 58% increase as compared to last year.
We also continue to generate positive cash flow from operating activities for the third consecutive quarter, resulting in a cash position of $31 3 million as of September 30th 2022.
This significant cash generation is indicative of a busted with commercial operations.
We expect to report further southern girl with an enhanced profitability in the fourth quarter and as a result, we are reiterating our full year 2022 revenue guidance of between 125 to 135 million.
With expected EBITDA margins of 12% to 15%.
This guidance represents a 20% to 30% increase over 2021 revenue it would be.
More than two five times 2021 you'd be done.
Looking further ahead, we continue to forecast growth, it's a double digit rate in the foreseeable use beyond 'twenty to 'twenty two.
The portfolio of the full asks we have proven in the globally. We acquired late last year continues to gain traction and looking for the market and again delivered strong sales and profitability for kind of a dark during the third quarter.
As a reminder, the acquired Florida generated collective revenues of approximately $42 million in 2020, one with over 50% gross margins.
We anticipate that we will significantly grow the new portfolio revenues.
Are you beginning already this year.
I'm pleased to report that in recent months as part of the establishment of a direct presence in the U S market as well.
We deployed a team of U S based experience sales and medical affairs professionals, who rapidly established our operation in these key markets.
The U S sales team is making good progress in promoting our portfolio of specialty plasma derived globally to physicians and other health care professionals.
Cause direct engagement and opportunities at medical meetings.
Our medical affairs team is working to educate physicians, while addressing the same piece, we can clinically inquiries.
Throughout 2022, our team participated and presented at major medical conferences in the U S, including International Society of Heart and lung transplant American transplant Congress and the American Association for the study of liver disease.
Yes.
This area of activities represent the first time in over a decade. This high premium products have been supported by field based activity in the U S.
Ill encourage.
Positive feedback received from key U S physicians, who are seeking to publish new clinical data related to our portfolio, while conducting educational symposium that we believe will have a positive impact on the understanding of these products contributing to continued growth in demand.
Outside the U S. We continue to generate meaningful sales growth from this product in the international markets.
Highlight the recently signed $11.4 million of agreement to supply very C. One of them to full products to international organization operating principally in Latin America.
This agreement will be a key driver for us in the fourth quarter.
Proximity hospital with anticipated revenue to be generated by this agreement are expected. During this period when the balance will be extended to the first half of 2023.
From a strategic standpoint, this important supply agreement strongly validates our ability to grow the sales of our newly acquired portfolio in the different international markets.
In addition, we recently secured a second significant tend do with extension of an existing supply agreement from the Canadian blood services CBS for the supply of all full product for an additional three years for an approximate total value of $22 million.
Nuclear war secures the ongoing sales of those products in the Canadian market.
CBS manager of the Canadian supply with drug product for all Canadian provinces and territories, excluding Quebec.
The extension with CBS is for a three year period commencing in 2023 with an option to extend for up to two additional years.
Yes.
We're continuing to pursue additional commercial contracting key strategic territories.
I highly encourage by the significant opportunities ahead of us.
These supply agreements and our proactive selling gas to our longstanding distribution relationship underscore comment a few commitment to leveraging this new strategic assets.
I should also add as we continue to expect receipt of FDA approval for their infection site took home the largest of the four quiet about it.
Israeli facility.
The first half of 2023.
So let's move on to catch up our rabbit globally.
Based on the continued moderation of the Covid pandemic in the U S and increased traveling in outdoor activities.
We remain encouraged by the product in market sales by category on during the first nine months of the year, which again grew significantly.
During the third quarter in comparison to the pre Covid pandemic sales levels.
We believe that trend will continue and expect a catch up to be an increasingly important growth driver for us over the next few years and it continues to gain market share.
$150 million U S market.
I should highlight that this product also generates more than 50% gross margins will come under.
Next we continue to receive royalty income on glass yourselves from Takeda.
For the third quarter, we generated royalty income of $3 $5 million as a reminder, royalty income from Takeda represents pure profit will come with that.
That's a royalty agreement with Takeda extends out to 'twenty faulty.
Now, let's look a little further it has future catalyst.
I'll begin with a comment on the plasma or U S based plasma collection company.
Our early 2021 acquisition of plasma collection Center in Houston, Texas represented Communist entry into the U S plasma collection market and supported our strategic goal of becoming a fully integrated specialty plasma products company.
We remained focus on expanding in the high teen in plasma collection capacity at the same time and continue to advance our plans to open additional centers in the U S to further enhance our supply of specialty and normal cells plasma.
In fact, we're in the process of finalizing the selection of a site in Texas for a second collection center with construction and startup activities to be initiated in the near future.
As we've said previously the planned expansion of our plasma collection capabilities is expected to enhance our competitive position in various markets.
Continued revenue growth and strengthen our supply chain.
Let's now turn to our ongoing pivotal phase III clinical trial is evaluating the safety and efficacy of innovating in how the ATP product for the treatment of 80 deficiency.
You will recall that earlier this year falling them or duration of the Covid pandemic study was expanded and now includes six sites across Europe .
I'm pleased to report that enrollment has recently began to accelerate.
To date 30 patients were enrolled for treatment, including 14 patients have already completed the two year study treatment period and the initial trial site in light of the Netherlands importantly, none of those patients discontinued treatment prematurely and no drug related serious adverse events were reported.
High level of patient adherence to the treatment is encouraging.
Additionally, as part of routine and plane monitoring processes and for the first time since study initiation independent data safety monitoring board. The SNB recently recommended the trial continue without modification.
Moreover, based on the encouraging safety indicators observed to date cause these can be supported and expansion because the inclusion criteria.
This includes subjects with severe airflow limitation.
The previous inclusion criteria limited the trial to include only patients with F. N B one between 18 and 50% was extended criteria also allows us to include patients with F&B one over 40%.
This important change is expected to further expedite.
Enrollments.
Importantly, we intend to meet with FDA and with the EMA. During the first half of 2023 to discuss the trial progress and explore potential opportunities to show them the regulatory pathway.
And the most advanced investigational products for 80 deficiency, a substantial commercial opportunity exists for Intel's AEP to be a transformational next generation augmentation therapy in the growing AAP market, which is already over $1 billion market in annual sales in the U S.
In the EU.
In summary.
We continue to execute on our corporate strategy on all fronts and believe we have the appropriate catalyst to drive double digit growth in the foreseeable years ahead of us.
We're excited about our near term prospects as well as our longer term outlook is Canada is uniquely positioned for growth as a global leader in specialty thousand industry with multiple value creating milestones.
Especially in the month in the quarter.
With that I'll now turn the call over to Jaime. Please review of our third quarter 2022 financial results.
He played.
Okay.
Thank you Amir and good day everyone.
In the third quarter of 2022 total revenues were $32.2 million, a 40% increase from the third quarter of 2021.
The first nine months was 2022 total revenues were $83 $9 million, an increase of 16% year over year.
These quarterly results are indicative of the successful strategic transformation we achieved.
This strategic acquisition.
During 2021.
And resulting in a vertically integrated global commercial biopharmaceutical company with multiple growth drivers.
The year over year growth during the third quarter and first nine months of 2022 was primarily driven by continued strong sales of our recently acquired <unk> Paul.
As Amir mentioned the previously forecasted strong second half of the year was driven by multiple factors, including the.
The continued growth of the new <unk> product sales in the U S fuel by the ongoing marketing efforts and so the expansion of ex U S sales of these problems.
Continued growth of kindred to kindred in support of the product in market sales growth.
And full impact from royalty income from glass.
In addition, fourth quarter revenue will be further aided by the various zinc supply agreement, which will include approximately half of the $11.4 million in total revenues to be generated from this contract.
We recognized $3 $5 million of royalty income from Takeda based on their sales of blocks yeah in the third quarter.
Which was in line with our anticipated quarterly projections.
Minor second half of the year. When include two full quarters of royalty income as compared to only four months in the first half.
Total gross profit for the third quarter of 2022 was $12 $9 million, representing 40% margins compared to high $47 million or 25% margin in the third quarter of 2021.
Gross profit for the first nine months of 2022 was $31 $4 million, representing 37% margins up from the 33% last year.
Let's turn to depreciation expenses.
As previously discussed the company's accounting depreciation expenses associated with intangible assets.
Which were generated through the recent acquisition of the former ITG pub.
In the third quarter and first nine months of 2022.
Cost of goods sold in our proprietary segment included $1 3 million and $3 $9 million respectfully.
Depreciation expenses associated with these intangible assets.
Research and development.
Investments during the first nine months of the year increased to $10.2 million as compared to $7 9 million in the prior year period, primarily due to the expansion of our ongoing pivotal phase III innovates trial for inhaled ATT.
Selling and marketing expenses for the third quarter and first nine months of 2022 awesome pushed these increases are attributable to the establishment of our U S commercial operation to support the distribution and sales of the <unk>.
Recently acquired portfolio for FDA approved commercial pump.
In addition, these costs include pre commercial activities associated with new product launches in the Israeli distribution sector.
As we have since the beginning of the year. We continued to account for financing expenses with respect to revaluation of contingent consideration and long term assumed liabilities all of which are related to the recent acquisition.
The third quarter and first nine months of a thinner these finance charges totaled $2 million and five $9 million.
For the third quarter, we recorded a net income of approximately $480000 or 1% per share on a fully diluted basis.
Adjusted EBITDA was $6 million for the third quarter of 2022.
Adjusted EBITDA for the first nine months of 2022 was $10 $6 million, representing 13% margin, which is in line with our annual financial guidance and represent a substantial increase over the $6 7 million of adjusted EBITDA in the prior year period.
Based on our expectation of significant revenue growth and enhance profitability for the remainder of the.
We continue to expect revenue in the range of $125 million to $135 million and anticipate generating adjusted EBITDA at a rate of 12% to 15% of total bookings.
Finally.
The third straight quarter, we generated positive operating cash flow demonstrating the ability of the company's commercial operations to generate cash during the third quarter of 2022, we generated $5 $5 million of operating cash flows.
Which led to a cash position of approximately $31.3 million at the end of September .
That concludes our prepared remarks, we will now open the call for questions.
Operator.
Thank you at this time, we'll be conducting a question and answer session.
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One moment. Please so we pull for questions once again Thats star one thank you.
Rob Thanks to wobble, a week for some additional questions to queue up I have some that have been.
And emailed into us So let me go through those.
First is.
For a mere in Miami in order.
To meet your full year revenue guidance of $125 million to $135 million.
Your fourth quarter revenue will have to be significantly stronger than the third quarter.
So can you please provide us a breakdown of how that will be achieved.
[laughter].
Thank you Bob for the question and as we said, we're reiterating our full year guidance based on the orders that we have and the sales that have already been executed since the beginning of the fourth quarter.
Two things two or three things to take into consideration compared to the third quarter is one the virus the supply agreement the new supply agreement around half will be 50% Covid will be executed in this fourth quarter. So this is an additional.
Around between $5 million to $6 million.
In comparison to the third quarter.
Secondly, in our distribution segment.
We have significant orders, which are pending and will be executed over the next few weeks before the end of the year and in general the new H I G.
Did your portfolio a pull.
So.
Growing and will continue to grow in the fourth quarter. So when we add all of those.
<unk> items together all those all those together and we reach the annual guidance that we've given.
Okay.
Okay. That's.
That's helpful Great.
Other question. We have is just relate it sort of a corollary to that is should we expect increased operating expenses as we look out to 2023 as compared to this year and if so can you quantify how much higher are those expenses might be.
So 'twenty 'twenty three will be a full year of our southern and marketing activity in the US This is something that you know this infrastructure and hiring the people is something that we've done gradually over 'twenty 'twenty. Two so 2023 would be a full year in that regard I've called it all of this activity contributes to our call.
Plant performance and Opal stability, so it's definitely a worthwhile investment and we see this actually happening in the U S market.
Adding to that the inhaled study, which is going to run at an expedited rate in 'twenty to 'twenty three those two components adds to our personnel expenses sales and marketing and R&D and then we expect that next year.
And investments and those items will be approximately.
A increase of 10% to 12% compared to this year.
Okay great.
The next question was that you expect that sales growth from the acquired products.
Will come from additional international contracts.
And or is that coming mainly from discussions whether it be you know sales promotions contacts with by your new sales and medical affairs teams with the physicians and transplant centers.
Both basically so and it's actually already happening and we see this the virus the construct.
So Latin America is one example, extending the agreements in Canada is another example.
We are starting to see the impact of a well it sounds activity in medical its productivity and the market as I mentioned during the call.
It could be in over 10 years over a decade with those products were not supported by field activity.
And it has only been a few months ago, we started to engage in discussion with the relevant physicians.
In the relevant transplant centers and we are highly encouraged with the feedback we're receiving from those health care providers and so all of that will contribute to increased sales, adding to that the fact that we are selling their new products.
Listing distribution Manitowoc.
Across the world in many different countries and then.
Those items, who basically both aspects are contributing to the growth that we already see and our expectation for continued growth in the years to come.
Great.
And just with regards to the transplant centers are there.
Yeah, maybe you could help quantify that for US is there are there.
Is there a certain set of transplant centers you'd like to see cover with that sales and marketing force.
Yeah. So close we are focusing on the on the larger ones are focused on the one that.
Are they using all the products and we'd like to increase usage. We're also talking to centers that have not used it.
Especially side program in recent years and as I said, you know the product will not supported by field activity. So now it's really too. It's a good change in terms of the ability to grow the business and to promote it and talk to physicians and to collect data and presented data.
And to the physicians. So all of this is actually happening as we speak with all of our U S team in terms of quantifying the quantities. So we're talking about 150 to 200 centers that we're covering a very focused therefore with a focused team of experienced specialists and it is.
It's going very well in terms of our coverage and our ability to talk to the right people.
Great.
And just going back to we talked obviously about success of your acquired.
Portfolio of products.
Does does comment I have a ongoing effort or excuse me.
The development effort to continue to look for products.
Like this.
To continue to expand your your portfolio of proprietary products.
Yeah.
We are building the right infrastructure and as I said in a highly focused on specialty plasma products and transplantation centers and in parallel to that we will be looking and we've started to look at what might be in other synergistic products.
BD perspective, we can bring game. This season, therefore that will take us through 'twenty, three and we will be looking for the right opportunity.
Right.
Okay great.
That's all the questions we have from.
We're supposed sooner so that was very helpful. Rob I'll turn it back to you.
Okay.
This time, if you'd like to ask a question star one thank you.
Yeah.
Okay.
Thank you and at this time I'll turn the floor over to Amir London for closing remarks.
Okay.
Thank you very much so in closing we begin to realize the significant benefits of our recent strategic transformation.
Strong third quarter performance is consistent with our forecast of a positive outlook.
Based on our expectation for continued revenue growth and enhanced profitability in the first quarter. We are reiterating our full year 2022 financial guidance.
During the call we continue to focus growth in the double digit rate in the foreseeable use ahead of us driven by proprietary product categories.
We thank all investors for their support and remain firmly committed to creating long term sustainable shareholder value.
Thank you very much we hope you all stay healthy and safe.
This will conclude today's conference you may disconnect your lines at this time and thank you for your participation.