Kamada Limited (KMDA) CEO Amir London on Q2 2021 Results - Earnings Call Transcript
Aug. 11, 2021 2:50 PM ETKamada Ltd. (KMDA)
Q2: 2021-08-11 Earnings Summary
EPS of $0.02 misses by $0.03 | Revenue of $24.25M (-26.64% Y/Y) misses by $1.42M
Kamada Limited (KMDA) Q2 2021 Earnings Conference Call August 11, 2021 8:30 AM ET
Company Participants
Bob Yedid - LifeSci Advisors
Amir London - Chief Executive Officer
Chaime Orlev - Chief Financial Officer
Conference Call Participants
Anthony Petrone - Jefferies
Operator
Greetings and welcome to the Kamada Limited Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Bob Yedid with LifeSci Advisors. Thank you. You may begin.
Bob Yedid
Thank you, Doug, and welcome to all our listeners. This is Bob Yedid with LifeSci Advisors. Thank you all for participating in today's call. Joining me from Kamada are Amir London, Chief Executive Officer; and Chaime Orlev, Chief Financial Officer. Earlier this morning Kamada announced financial results for the three and six months ended June 30, 2021. If you've not received this news release please go to the Investors page of the company's website at www.kamada.com.
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 and future results of Kamada. I encourage you to review the company's filings with Securities and Exchange Commission including without limitation the company's Forms 20-F and 6-K which identifies specific risk factors that may cause actual results or events to differ materially from those described in the forward-looking statements. Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the date of the slide, broadcast Wednesday, August 11, 2021. Kamada undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.
With that said, it's my pleasure to turn the call over to Amir London, CEO. Amir?
Amir London
Thank you, Bob. My thanks also to our investors and analysts for your interest in Kamada and for participating in today's call. I'm pleased to report today that our business continued to perform as anticipated through the first half of 2021. Chaime will provide the key details around our second quarter and first six months financial results shortly. But I would like to indicate that despite the expected decrease in revenue, as compared to the first half of last year, we achieved gross margins of 37% in the first half of this year as compared to 34% during the first six months of 2020.
With that, let me begin by indicating two recent advancements. The first is related to workforce downsizing we previously discussed, which was largely completed during the second quarter. As we mentioned on our last call this downsizing is expected to result in an annualized reduction in overall labor cost of approximately 10%. As a reminder, the downsizing was implemented in order to align our workforce to the low utilization of our plant following the planned completion of the transition of glass manufacturing to Takeda later this year. The second is the recent FDA approval of a label update for KEDRAB. Our human rabies immune globulin product HRIG is marketed by Kedrion in the US. This label expansion confirms our product safety and effectiveness in children.
KEDRAB is now indicated for passive transient post exposure prophylaxis of rabies infection in persons of all ages when given promptly after contact with rabies or possibly rabid animal. This FDA approval was based on data from the US post-marketing pediatric study. The first and only clinical trial to establish pediatric safety and effectiveness of any HRIG in the US. Importantly, this label update has a potential to increase KEDRAB US market share and product revenues. While the ongoing global COVID-19 pandemic continues to impact sales of KEDRAB, we anticipate that sales of this product will continue to grow meaningfully in the years to come in the US capturing a significant portion of the estimated annual $150 million US HRIG market.
Turning to our product pipeline. The InnovAATe Phase 3 clinical program for our proprietary inhaled AAT for the treatment of Alpha-one Antitrypsin Deficiency is continuing to progress. As a reminder, InnovAATe is a randomized double-blind placebo-controlled pivotal Phase 3 trial performed under an IND and European CTA designed to assess the efficacy and safety of inhaled AAT in patients with Alpha-one deficiency and moderate lung disease. These high-priority program continues to be the focus of potential commercial partner discussions for us as we remain focused on evaluating strategic opportunities for this important product candidate in the market, which is currently already estimated at over $1 billion and growing 6% to 8% annually.
We are engaged in ongoing dialog with multiple parties and I'm pleased with the level of external interest generated in our product. Potential partners have clearly recognized the value of this compelling development program. Let's move on to the progress of a Plasma-derived immunoglobulin[ph] product as a potential therapy for COVID-19 disease. During the second quarter, we completed the supply of the product with Israeli Ministry of Health per our initial supply agreement. As a reminder, the initial order from Israeli Ministry of Health for the product is sufficient to treat approximately 500 hospitals patient and have generated approximately $3.4 million in revenues for Kamada. The therapy is available nationwide in Israel and patients are continuing to be treated as part of the MOH clinical study on named-patient basis. We remain in active discussions with several countries regarding the possible supply of IgG product. Moving on to Kamada plasma, our US plasma collection we've initiated plans to leverage our FDA license and open additional centers in the US through which we intend to significantly expand our plasma collection capacity. This plant expansion is expected to enhance our IgG competitive position in the various markets.
Lastly, we are having productive active discussions with multiple parties around new strategic business development opportunities that will utilize and expand our core plasma-derived development, manufacturing, and commercialization expertise. We are excited about the direction of this dialog and believe there are interesting prospective transactions available to us that could significantly impact our business.
As we have said previously, we are focused on identifying plasma derived product that can be acquired or we can provide manufacturing services. Our team remains highly focused on realizing this compelling opportunities which will be funded by our strong cash position of nearly $105 million as of June 30, 2021. As a reminder, our strategy is focused on driving profitable growth from our current commercial activities as well as our plasma-derived product development and manufacturing expertise. As such, we intend to further evolve into a vertically integrated specialty plasma-derived company for development and all the acquisition of plasma-derived products and distribution capabilities.
In summary, we remain highly confident in the strength of our overall business, which consists of multiple revenue generating operating lines that can each drive significant long-term growth opportunities for Kamada.
With that, I now ask Chaime to review our financial results. Chaime, please.
Chaime Orlev
Thanks, Amir, and good day everyone. As Amir noted, our business performed as expected throughout the first half of 2021. In the second quarter of 2021, total revenues were $24.2 million compared to $33.1 million for the second quarter of 2020. For the first six months in 2021, total revenues were $49.1 million compared to $66.4 million in the similar period of 2020. This decrease is mainly related to the expected reduction of sales of Glassia to Takeda due to the product manufacturing transition that will be completed this year.
During the first six months of 2021, we sold approximately $17 million of Glassia to Takeda, which is part of our overall expected $25 million in product revenue from the supplier to Takeda for full-year 2021. From a profitability standpoint gross profit for the second quarter of 2021 was $9.1 million as compared to $11.1 million in the second quarter of 2020. For the first six months our total gross profit was $18 million as compared to $22.6 million of total gross profit in the first six months of 2020. In both the second quarter and first half of 2021, our gross margin was 37%, an increase from 34% in the equivalent period in 2020.
Looking ahead to the second half of 2021, we do expect a shift in product sales mix with higher weighted sales in our distribution products which have lower gross margins as well as continued reduction in Glassia sales to Takeda. Therefore, we would not expect our gross margins in the second half of the year to be a strong as they were in the first half. Operating expenses in the second quarter of 2021 included approximately 600,000 in other expenses related to a one-time severance related cost associated with the workforce downsizing, which was largely concluded.
Moving on, net income was approximately 900,000 or $0.02 per share in the second quarter of 2021 as compared to net income of $3.5 million or $0.10 per share in the second quarter of 2020. For the first six months, net income was $3.6 million or $0.08 per share as compared to net income of $8.7 million or $0.20 per share in the first six months of 2020. For the first half of 2021 our adjusted EBITDA, excluding the one-time severance costs was $6.7 million compared to $11.8 million in the first half of 2020. Coming to the balance sheet continues to be a significant spread of our company. As of June 30, 2021, the company had cash, cash equivalents, and short-term investment of approximately $105 million as compared to approximately $109 million on December 31, 2020. The decrease is mainly related to working capital timing differences.
As Amir mentioned, we intend to leverage these cash resources for expansion of our plasma collection activity and targeted strategic business development opportunities.
That concludes our prepared remarks, we will now open the call for questions. Doug?
Question-and-Answer Session
Operator
Thank you, ladies and gentlemen, at this time, we would like to conduct a question-and-answer session. [Operator Instructions] Our first question comes from the line of Anthony Petrone with Jefferies. Please proceed with your question.
Anthony Petrone
Good morning, gentlemen. And congrats on first strong execution over the past first half through the pandemic here. First question would be on timing for Bonsity, the biosimilar for teriparatide and I know that's still on track for next year. Just trying to get a sense of sort of launch preparations behind the scenes and sort of expectations into 2022 for that product. And then similarly on the Hyperimmune globulin contract manufacturing contract signed last quarter 12-year agreement with an undisclosed partner, just again timing on when that will begin and how that's going to ramp over the next couple of years and then I have a few follow-ups. Thanks.
Amir London
Hi, Anthony, it is Amir. Thank you for the questions. So regarding the Biosimilar. Yes, we are on track -- we are on track to get the product launched early next year in 2022 as we've indicated in previous discussions. And regarding the tech transfer this is also moving forward according to the plan. We are going to manufacture the different validation batches over the next few months. We plan to submit the file amendment to the FDA and we are on track to have the product approved to be manufactured at our facility before the end of 2022 and initiate commercial production beginning of 2023, according to the plan. This is a 12-year agreement with expected revenue that can be as high as $10 million a year for a total of $120 million for the course of the agreement.
Anthony Petrone
Okay. And then on the follow-up. You've sort of indicated here on the InnovAATe trial in the development of inhalable potentially the strategic partnerships in the mix there. Just maybe sort of the latest thoughts there on how this asset could actually evolve now that you're seeking partnerships. And then, the last one I'll squeeze in will be on Plasma Centers. The company has been adding capabilities on that end. Maybe just the broader sort of outlook on the initiatives in the supply chain. How many plasma center overall do you think Kamada will have critical mass and will those be exclusively hyperimmune focused or just broader as it relates to plasma collections overall. Thanks.
Amir London
Thank you. Thank you for the questions, Regarding the InnovAATe study, the study is ongoing and we are in the process of expanding it with the plan to open additional sites in the partnering process as we've indicated in the prepared remarks is ongoing. It's high focus for us -- bringing on both[ph] potential commercial partners in terms of more details we will be happy to share this when things will mature and materialize. We are in discussions with multiple parties. We are pleased with the level of interest that has been generated by this program by the different parties and we believe this is definitely an important validation having external partners being recognizing the value of this compelling development program. So, stay tuned and we will update once we have more information about this potential commercialization agreement. In regards to Kamada plasma. So this site in Texas the one that we acquired. We have completed the integration of that into Kamada, according to the plan, we are growing the capacity of that facility. This facility is focused on high premium collection -- only high premium collection while in terms of our plan moving forward our focus at least for the time being will continue to be on the high premium plasma.
It's important for us to be vertically integrated and as we Kamada focus on specialty hyperimmune plasma product, we are planning to be fully vertically integrated in that regard. We are not ruling out the option that is part of the plan. We will also be collecting source plasma once our plan is finalized. We will share it with you with the public in terms of how many centers. how many liters of plasma we plan to collect and how we are going to go about this network of plasma collection centers in the US but this is definitely part of our strategy to be a player in the plasma collection space for Kamada internally[ph] but also potentially as a company that will be selling plasma to external clients.
Anthony Petrone
Thanks again, Amir.
Operator
There are no further questions in the queue, I'd like to hand the call back over to Amir London for closing remarks.
Amir London
Thank you. In closing, we remain confident in the strength and the fundamentals of our business and we look forward to executing on multiple potential compelling partnership and business development opportunities by utilizing our solid balance sheet. We also leverage our core expertise in development, manufacturing, and commercialization of plasma-derived therapeutics to further our evaluation into a vertically integrated company by expanding our plasma collection capabilities.
Thank you all for joining us on today's call. We look forward to providing you with further updates on our progress during the second half of the year. We hope you all stay healthy and safe. Thank you very much.
Operator
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.
