Kamada Ltd. (KMDA) Q2 2025 Earnings Report, Transcript and Summary

Greetings, and welcome to the Kamada Limited Second Quarter 2025 Earnings Conference Call. [Operator Instructions]. 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 are Amir London, Chief Executive Officer; and Chaime Orlev, Chief Financial Officer. Earlier today, Kamada announced its financial results for the 3 months and 6 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. 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 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?

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 for $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 our 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 midpoint of our updated 2025 guidance represents 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 in 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 benefit of CYTOGAM was 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 6 months of 2024 was primarily due to increased sales of GLASSIA in ex-U.S. market and VARIZIG 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 2 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 5 years. Moving to business development and M&A. We are currently conducting active due diligence of several potential commercial targets. During the balance of 2025 and into 2026, we expect to secure compelling in-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 will 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 3 Texas-based Plasma Centers, and we're happy to announce earlier this week the U.S. FDA approval of a state-of-the-art center in Houston, Texas. We're especially appreciative of the work of a 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 2 centers in Houston and 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 the year 2025. With that, I turn the call over to Chaime for a detailed discussion of our financial results for the second quarter of 2025 and first 6 months of the year. Please go ahead, Chaime. Thank you.

Thank you, Amir. As Amir stated at the top of the call, our results for the second quarter and 6 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 6 months of 2025 were $88.8 million, an 11% increase from the $80.2 million generated in the first 6 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 6 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 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 2024 (sic) [ 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 expenditures while continuing to generate meaningful revenue growth. Net income was $7.4 million (sic) [ $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 '24. Net income for the 6 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 6 months of '24. The increase in net income is attributable to 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 '24. Adjusted EBITDA was $22.5 million in the first 6 months of 2025, a 35% increase compared to the $16.6 million for the first 6 months of '24. As Amir indicated, we're increasing our adjusted EBITDA guidance for the year to between $40 million and $44 million. Cash 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 payment. And we ended the first half with a cash balance of $66 million that is planned to be used to fund new business development initiatives. Before turning the call over for 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 drug 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.

[Operator Instructions] The first question is from Annabel Samimy from Stifel.

Congratulations on a good quarter. So just a couple for me. It seems like for the last 2 quarters, GLASSIA and VARIZIG have been the growth drivers, I guess, for reasons you've stated, especially VARIZIG. But 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? Or maybe are physicians just slowing down on adoption of CYTOGAM until the next batch of data? Just any color there would be great. And then I'll just follow up after that.

Yes, we mentioned specifically GLASSIA ex-U.S in 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 has -- is like a 4 year -- it's an 8-year with a 4-year committed volumes. 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. But I think in general, it's an opportunity to emphasize the strength and diversity of the portfolio. With 6 FDA-approved products, marketing 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. And this year, it's been mainly GLASSIA and VARIZIG. Previous years, it's been CYTOGAM and KEDRAB. But all in all, it's a very strong, diverse portfolio that allows us to continue maintaining the growth year after year.

Yes, definitely noted. And then 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 then the external BD and how that might be funded?

So we plan to utilize to use our existing cash. If needed, we have additional sources for additional funding and multiple vehicles of funding that we can put to work. We are looking and screening for commercial stage assets. 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. And 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 be mature over the next few months into 2026 and have a meaningful impact on our 2026 performance. Funding to the scale of the transaction we're looking to do, we will have sufficient funding to execute those transactions.

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

Yes. Good question. So yes, there is a lot of activity in the alpha-1 space in general. Our inhaled program is the most advanced in terms of an efficacy study in a pivotal stage. So there's no other Phase III pivotal studies that are structured around efficacy endpoint. 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 2 or 3 additional technologies which are currently being developed. The market is growing. We see the growth through our royalties from Takeda. So the 6%, 7%, 8% annual growth is actually happening. What used to be a $0.5 billion market is like $1.3 billion, $1.4 billion market. We believe that by the time that we are going to have the result from our study, this is going to be like a $2 billion market. So 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 ], it will be a very strong competitor and player in the alpha-1 space in general.

[Operator Instructions] The next question is from James Sidoti from Sidoti & Company.

So 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. Were there onetime sales in the quarter? Or how should we view this distribution channel going forward?

Thank James. No, this is not onetime sales. 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 margin this quarter. The more we launch biosimilars and based on our innovative portfolio in Israel will help us also improve our margins. So this is a process that has started and will continue over the next few years.

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

Correct.

Okay. And then a similar question on the SG&A expense. I mean, down pretty significantly from year -- down significantly year-over- year. Were there onetime things there that helped that? Or do you think you'll stay around these levels?

So we are very conscious about our expenses. I think we've been very disciplined in the way that we deploy investment and ongoing expenses. There's been a slight, I'll say, kind of fluctuation between quarters and between the first 6 months of the year and the second 6 months of the year. So the second 6 months of the year might be a little bit higher, again, insignificant, a little bit higher in general. But I think what's very highly promising, and I think all analysts and investors need to look at this, our ability to generate a good and improved rate of EBITDA from top line. We said in the past that when we were on the 20% EBITDA of top line that we were targeting 25% and above. I think we've been able to demonstrate this over the last few quarters, and this is our goal to continue to be profitable. And from every dollar we make that we will have a bigger portion all the way to the bottom line EBITDA.

Okay. And then last question for me, something I asked 3 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?

I'll refer this question to Chaime.

Yes. I'll take this question. So we anticipate 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're still of the opinion that by the end of 2025, the company will be utilizing all of its tax losses carryforward, 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.

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

Well, we're looking at anywhere between 20% or 25%.

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

Thank you very much. In closing, we continue to invest in the 4-pillar growth strategy with continued progress made in organic growth of our existing commercial portfolio, business development and M&A transaction to support and expedite our growth, expansion of our plasma collection operation and the progression of our ATT therapy program. We look forward to continuing to support clinicians and patients with those important life-saving 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.

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