Kamada - Earnings Call - Q2 2025

Transcript

Speaker 0

Greetings and welcome to the Kamada Ltd. second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brian Ritchie, Managing Director of LifeSci Advisors. Thank you. You may begin.

Thank you. This is Brian Ritchie with LifeSci Advisors. Thank you all for participating in today's call. Joining me from Kamada Ltd. are Amir London, Chief Executive Officer, and Chaime Orlev, Chief Financial Officer. Earlier today, Kamada Ltd. announced its financial results for the three months and six months ended June 30, 2025. If you have not received this news release, please go to the investors' page of the company's website at www.kamada.com. Before we begin, I would 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 Ltd.

I encourage you to review the company's filings with the Securities and Exchange Commission, including, without limitation, the company's Forms 20-F and 6-K, which identify specific 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 live broadcast, Wednesday, August 13, 2025. Kamada Ltd. 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 is my pleasure to turn the call over to Amir London, CEO. Amir?

Speaker 3

Thank you, Brian. 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 that our results for the second quarter and the first half of 2025 were strong and that we continue to generate significant profitable growth. Total revenues for the first half of the year were $88.8 million, representing an 11% year-over-year increase, and adjusted EBITDA was $22.5 million, up 35% year-over-year and representing a 25% margin of revenues. For the second quarter, revenues were $44.8 million, up 5% over the prior year quarter, and adjusted EBITDA was $10.9 million, up 20% year-over-year. These impressive results were driven by the diversity of our product portfolio and disciplined management of operational expenses.

We expect to continue generating profitable growth through the remainder of 2025, and based on a positive outlook, we are increasing our adjusted EBITDA guidance to between $40 million to $44 million and reiterating our annual revenue guidance of $178 million to $182 million. The midpoints of our updated 2025 guidance represent an increase of approximately 12% in revenues and approximately 23% in adjusted EBITDA, respectively, over our last year 2024 results. We're excited for growth prospects in our business over both the near and longer term, guided by our four-pillar growth strategy of organic commercial growth, business development and M&A transactions, our plasma collection operation, and the advancement of our pivotal phase III InnovAATe program.

As you may recall, last quarter we announced the initiation of a comprehensive post-marketing research program for CYTOGAM, which we believe will help demonstrate the advantages of the product in the prevention and management of CMV disease. Although CMV disease continues to be a significant risk factor for organ rejection and mortality in transplantation, for years, no new up-to-date clinical data regarding the benefits of CYTOGAM were published. To address this, we developed this program in collaboration with leading Key Opinion Leaders to explore advancement of novel CMV disease management. The research studies supported by this program will focus on late-onset CMV prevention and mitigation of active CMV disease, exploring alternative dosing strategies, and investigating potential new applications of CYTOGAM. We believe that the data generated by this program will support further product utilization for CYTOGAM, leading to additional organic growth.

Our revenue growth for the first half of the year compared to the first six months of 2024 was primarily due to increased sales of GLASSIA in the ex-U.S. market and various ex-sales in the U.S., as well as GLASSIA royalty payments. This positive trend is indicative of the diversity of our portfolio and our successful marketing activities across different territories and medical specialties. Also, as part of our activities to advance organic growth, following our first biosimilar product launch in Israel last year, which is expected to generate approximately $2.5 million in revenues in 2025, we anticipate launching two additional biosimilars later this year and have several others in the pipeline to be launched in the coming years. We believe that this portfolio will become an increasingly important portion of our distribution business, with annual sales of between $15 million to $20 million within the next five years.

Moving to business development and M&A, we're currently conducting active due diligence over several potential commercial targets. During the balance of 2025 and into 2026, we expect to secure compelling e-licensing collaboration and/or M&A transactions, which will enrich our portfolio of marketed products and complement our existing commercial operations. We anticipate that such transactions would generate operational and/or commercial synergies with our current commercial portfolio and support future profitable growth. In addition, we continue to ramp up plasma collection at our three Texas-based plasma centers, and we're happy to announce earlier this week the U.S. FDA approval of our state-of-the-art center in Houston, Texas. We're especially appreciative of the work of our dedicated team of plasma collection experts who achieved inspection and licensure of this facility on schedule.

As previously stated, this center has annual collection capacity of approximately 50,000 liters of plasma, and each of our two centers in Houston and in San Antonio is expected to generate annual revenues of between $8 million to $10 million in sales of normal source plasma at full capacity. Turning now to our ongoing pivotal phase III InnovAATe clinical trial for inhaled alpha-1 antitrypsin therapy, we continue to advance this program with its revised enrollment goal of approximately 180 subjects, and we are on track to conduct an interim futility analysis by the end of this year, 2025. With that, I'll turn the call over to Chaime for a detailed discussion of our financial results for the first quarter of 2025 and the first six months of the year. Please go ahead, Chaime. Thank you.

Speaker 1

Thank you, Amir. As Amir stated at the top of the call, our results for the second quarter and six months ended June 30, 2025, were strong. Total revenues were $44.8 million in the first quarter of 2025, up 5% compared to the $42.5 million in the second quarter of 2024. Total revenues for the six months of 2025 were $88.8 million, an 11% increase from the $80.2 million generated in the first six months of 2024. As Amir indicated earlier, the increase in revenue was driven by the diversity of the company's portfolio. Gross profit and gross margins were $18.9 million and 42% in the second quarter of 2025 compared to $19 million and 45% in the second quarter of 2024.

Gross profit and gross margins for the first six months of 2025 were $39.7 million and 45% compared to $35.7 million and 45% in the first half of 2024. The decrease in gross profitability in the second quarter of 2025 is attributable to a change in product and territory sales mix, whereas during this quarter, the increase in revenue was generated by ex-U.S. sales as compared to sales mix in the equivalent quarter last year. Operating expenses, including R&D, sales and marketing, G&A, and other expenses, totaled $11.9 million in the second quarter of 2025 as compared to $13.3 million in the second quarter of 2024. The decrease in operating expenses, which was also demonstrated in the first quarter of the year, is indicative of our ability to adequately manage our operational expenditure while continuing to generate meaningful revenue growth.

Net income was $7.4 million or $0.13 per diluted share in the second quarter of 2025 as compared to $4.4 million or $0.08 per diluted share in the second quarter of 2024. Net income for the six months of 2025 was $11.3 million or $0.19 per diluted share as compared to net income of $6.8 million or $0.12 per diluted share in the first six months of 2024. The increase in net income is attributable to an increase in operating profits, which increased by 54% for the first half of the year and 25% for the second quarter, as well as changes in the financial and tax expenses between the periods. Adjusted EBITDA was $10.9 million in the second quarter of 2025, up 20% from the $9.1 million achieved in the second quarter of 2024.

Adjusted EBITDA was $22.5 million in the first six months of 2025, a 35% increase compared to the $16.6 million for the first six months of 2024. As Amir indicated, we're increasing our adjusted EBITDA guidance for the year to between $40 million and $44 million. Cost provided by operating activities was $8 million in the second quarter of 2025, and we continue to maintain a strong cash position even after the special dividend payments. We ended the first half of the year with a cash balance of $66 million that is planned to be used to fund new business development initiatives. Before turning the call over to questions, I would like to indicate that we are continuing to monitor the evolving tariff situation closely. Based on presently available information, our assessment is that the recently imposed tariffs are not applicable to direct products.

To date, we have not experienced impact or interruptions of our operations or ability to maintain cost and pricing as a result of the tariffs. With that, we will open the call to questions.

Speaker 0

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. The first question is from Annabel Samimy from Stifel. Please go ahead.

Speaker 4

Hi, everyone. Thanks for taking my question and congratulations on a good quarter. Just a couple from me. It seems like for the last two quarters, GLASSIA and VARIZIG have been the growth drivers, I guess, for reasons you've stated, especially VARIZIG. Can you give us an idea about dynamics behind KedRAB and CYTOGAM, which I guess had been the growth drivers? Is it more difficult year-over-year comps? Are they performing as expected? Maybe physicians are just slowing down on adoption of CYTOGAM until the next batch of data? Any color there would be great. I'll just follow up after that.

Speaker 3

Hi, Annabel. Yes, we mentioned specifically GLASSIA, ex-US and royalties, and VARIZIG because these are the products which had a significant contribution to our year-over-year growth. KedRAB and CYTOGAM are performing according to our expectations. As you know, the KedRAB contract with Kedrion is like a four-year. It's an eight-year with a four-year committed volume. Kedrion buys the product. We supply them according to the inventory management. We continue to see in-market growth, but in general, the numbers are similar to 2024 numbers. CYTOGAM is going according to the plan. We expect that the growth will come once we have the additional clinical and medical data, which we are currently collecting. I think in general, it's an opportunity to emphasize the strengths and diversity of the portfolio. We have six FDA-approved products marketed in over 35 countries, over 25 products in our distribution business, the soon-to-be plasma sales.

We have a very strong organic growth that's coming from multiple products. This year, it's been mainly GLASSIA and VARIZIG. Previous years, it's been CYTOGAM and KedRAB. All in all, it's a very strong, diverse portfolio that allows us to continue maintaining the growth year after year.

Speaker 4

Yeah, definitely noted. You have a solid cash position for a profitable company, but is it sufficient for impactful BD given it's declined in the last couple of quarters? How should we think about the balance of your internal investments that you're obviously making quite a few, and the external BD and how that might be funded?

Speaker 3

We plan to utilize our existing cash. If needed, you know we have additional sources for additional funding and multiple vehicles of funding that we can put to work. We are looking and screening for a commercial stage asset. I think the fact that we're looking for commercial assets gives us a lot of bandwidth in terms of the ability to fund those transactions. We are mainly focused on plasma-derived products as well as specialty pharma, and within the specialty pharma, the transportation field. As I mentioned during the call, we would like to leverage our supply chain capabilities, commercial infrastructure, take advantage of the synergies, and we are actively screening and doing due diligence on some multiple targets and hopeful that it will mature over the next few months into 2026 and have meaningful impact on our 2026 performance.

Funding, you know, to the scale of the transaction we're looking to do, we will have sufficient funding to execute those transactions.

Speaker 4

Okay. If I can just squeeze in one more on the inhaled AAT program, obviously, we're just waiting for the interim analysis right now. Can you sort of describe the competitive landscape? There have been, I guess, some more developments, whether it's gene therapy, other programs, anything that we should be watching for that might change the potential market opportunity there?

Speaker 3

Yes, good question. Yes, there is a lot of activity in the alpha-1 space in general. Our inhaled program is the most advanced one in terms of an efficacy study in a pivotal stage. There are no other phase III pivotal studies that are structured around efficacy endpoints. We are making progress. There are other companies also making progress. I think you and other people following this space know that there are maybe two or three additional technologies which are currently being developed. The market is growing, growing. We see the growth through our royalties from Takeda. The 6%, 7%, 8% annual growth is actually happening. What used to be a $0.5 billion market is like a $1.3, $1.4 billion market. We believe that by the time that we are going to have the results from our studies, this is going to be like a $2 billion market.

We believe that there is enough business and enough opportunity for multiple new technologies and multiple new players. We believe that our technology, being like a second-generation augmentation therapy with better ease of use and quality of life, with hopefully, if we are successful in the study, efficacy data will be a very strong competitor and player in the alpha-1 space in general.

Speaker 4

Great. Thank you for taking my questions.

Speaker 3

Of course.

Speaker 0

As a reminder, to ask a question, please press star one. The next question is from James Sidoti from Sidoti & Company. Please go ahead.

Speaker 2

Hi. Good afternoon. Thanks for taking the question. You know, as you said, the quarter really demonstrated how diverse your different revenue streams are. The one that grew this quarter in particular was the distributed revenue segment, I guess, with the launch of the new product, the new biosimilar product. Was there one-time sales in the quarter, or how should we view this distribution channel going forward?

Speaker 3

No, this is not one-time sales. You know, the launch of the biosimilar product and the future launches we expect to do more by the end of this year is going to build on an existing infrastructure of our commercial activity in the Israeli market, and this is something that we will continue growing. You also have seen that we had a better gross margin this quarter. The more we launch biosimilars and based on our innovative portfolio in Israel, it will help us also improve our margins. This is a process that has started and will continue over the next few years.

Speaker 2

Okay. There was no stocking or channel filling in the quarter. These were, you think, these types of numbers you think will be going forward?

Speaker 3

Correct.

Speaker 2

Okay. A similar question on the SG&A expense. I mean, down pretty significantly year-over-year, down significantly year-over-year. Were there one-time things there that helped that, or do you think you'll stay around these levels?

Speaker 3

We are very conscious about our expenses. I think we've been very disciplined in the way that we deploy our investment and ongoing expenses. There's been a slight, I'd say, kind of fluctuation between quarters and between the first six months of the year and the second six months of the year. The second six months of the year might be a little bit higher, again, insignificant, a little bit higher in general. I think what's very highly promising, and I think all analysts and investors need to look at this, is our ability to generate, you know, a good and improved rate of EBITDA from top line. We've said in the past that when we were under 20% EBITDA of top line, that we are targeting, you know, 25% and above.

I think we've been able to demonstrate this over the last, you know, few quarters, and this is our goal to continue to be profitable. From every dollar we make, we will have a bigger portion all the way to the bottom line EBITDA.

Speaker 2

Okay. The last question from me, something I asked three months ago. You said the tax rate would continue to be a little bit lumpy in 2025. What was responsible for the tax credit in the June quarter, and where do you think the tax rate will be in September and December?

Speaker 3

I'll refer this question to Chaime Orlev.

Speaker 1

I'll take this question. We anticipate that the Israeli entity or the parent company is reporting in Israeli shekels. Over the course of the last quarter, there's been fluctuations in the currency exchange between the Israeli shekel and U.S. dollars that affected our results for tax purposes and made the change. Overall, we still are of the opinion that by the end of 2025, the company will be utilizing all of its tax losses carried forward, and we will be moving into tax payments. Right now, the changes that you see are mostly in deferred tax, either assets or liabilities, which are causing the bumpiness, as you alluded to.

Speaker 2

Okay. When those NOLs are used up, as you look into 2026 and beyond, what do you think will be an effective tax rate?

Speaker 3

We're looking at anywhere between 20% and 25%.

Speaker 2

All right. Thank you.

Speaker 0

There are no further questions at this time. I would like to turn the floor back over to Amir London for closing comments.

Speaker 3

Thank you very much. In closing, we continue to invest in the four-pillar growth strategy. With continued progress made in organic growth of existing commercial portfolio, business development, and M&A transactions to support and expedite our growth, expansion of our plasma collection operation, and the progression of our AAT therapy program, we look forward to continuing to support clinicians and patients with those important lifesaving products that we develop, manufacture, and commercialize. We thank you all for your interest in Kamada, and we are committed to creating long-term shareholder value. We hope you all stay healthy and safe. Thank you for participating in today's call.

Speaker 0

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.