Kamada Ltd. — FY2020 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2020; the filing also presents unaudited quarterly results, including fourth-quarter 2020. Figures are in U.S. dollars unless stated otherwise. Financial statements follow IFRS as issued by the IASB, not U.S. GAAP.
Business context
Kamada is an Israel-based plasma-derived biopharmaceutical company. Its Proprietary Products segment manufactures and sells products including GLASSIA (AAT) and KEDRAB/KamRAB (rabies immunoglobulin); its Distribution segment sells third-party pharmaceuticals in Israel. The business is concentrated in GLASSIA, the United States, and a small number of customers. Takeda accounted for about 49% of FY2020 revenue and Kedrion about 14%.
Financial performance and position
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Revenue | $133.2 million | $127.2 million | Up 5% |
| Gross profit / margin | $47.6 million / 35.7% | $49.7 million / 39.1% | Profit down 4% |
| Operating income / margin | $19.2 million / 14.4% | $22.8 million / 17.9% | Down 16% |
| Net income | $17.1 million | $22.3 million | Down 23% |
| Basic / diluted EPS | $0.39 / $0.38 | $0.55 / $0.55 | Lower |
| Operating cash flow | $19.1 million | $27.6 million | Down $8.5 million |
| Adjusted EBITDA (non-IFRS) | $25.1 million | $28.5 million | Down 12% |
Revenue growth reflected higher sales of KamRAB and other proprietary products outside the U.S., increased KEDRAB sales to Kedrion, and higher IVIG distribution sales. These were partly offset by a $3.2 million decline in GLASSIA sales to Takeda. Costs of revenue rose 11%, faster than revenue; management attributed weaker proprietary gross margin to product mix and lower plant utilization. Distribution gross margin was 13.6%, versus 15.1% in 2019.
Fourth-quarter 2020 revenue was $31.5 million, gross profit $10.2 million, operating income $2.6 million, and net income $1.6 million. Fourth-quarter 2019 revenue was $32.1 million and net income $5.4 million.
At year-end, cash and cash equivalents were $70.2 million and short-term investments $39.1 million, totaling $109.3 million; working capital was $152.9 million. Total liabilities were $32.0 million and shareholders’ equity $178.6 million. Bank loans were $0.3 million; lease liabilities were $4.7 million. Operating cash flow was positive, while investing activities used $13.1 million, including $5.5 million of capital expenditures. Financing provided $23.4 million, principally reflecting the 2020 FIMI private placement, which raised $25 million gross.
Material changes and outlook
- GLASSIA transition: Takeda’s 2021 minimum purchase commitment is approximately $25 million, compared with $64.9 million of 2020 sales to Takeda. Takeda planned to complete the manufacturing technology transfer and begin its own production, subject to FDA approval. Kamada expects royalties of 12% on net sales through August 2025 and 6% thereafter through 2040, with a $5 million annual minimum for 2022–2040; management estimates royalties of $10–$20 million annually, based on current sales and forecasts.
- Management expects lower 2021 revenue and profitability, citing reduced GLASSIA sales, distributor and Israeli-customer inventory levels, product-mix changes, and reduced plant utilization. It anticipates lower full-year proprietary-product gross margins. No comprehensive numerical full-year revenue or earnings forecast is provided.
- A contract manufacturing opportunity for a specialty hyper-immune globulin product could contribute an estimated $8–$10 million of annual revenue from early 2023, subject to successful technology transfer and regulatory approvals.
- An October 2020 agreement with Israel’s Ministry of Health covered an initial Anti-SARS-CoV-2 IgG supply for approximately 500 hospitalized patients, expected to generate about $3.4 million of 2021 revenue. The product remained investigational, and broader demand and development plans were uncertain.
- In January 2021, Kamada agreed to acquire B&PR’s Beaumont, Texas plasma collection center for approximately $1.63 million, subject to closing conditions. This is a subsequent event, not a FY2020 operating result.
- The pivotal Phase 3 InnovAATe inhaled-AAT study experienced COVID-related recruitment delays. A prior European Phase 2/3 study did not meet its primary or secondary endpoints, and the European marketing application was withdrawn. Regulatory approval and commercial success remain uncertain.
Risks, contingencies, and unusual items
- Concentration risk is significant: GLASSIA represented about 53% of FY2020 revenue, KEDRAB about 14%, and U.S. sales about 64%. Takeda’s manufacturing transition creates a major near-term revenue and plant-utilization risk.
- COVID-19 did not materially affect overall FY2020 operating results, according to management, but reduced KEDRAB sales by Kedrion and left higher-than-planned inventory there; the pandemic also delayed clinical recruitment and affected demand, logistics, and costs. Future effects were not reasonably estimable.
- Plasma supply, manufacturing quality and regulatory compliance, product safety, reliance on strategic partners and distributors, pricing and tender competition, and potential inventory write-offs are material operating risks. Inventory was $42.0 million, and FY2020 inventory impairment charges were $1.5 million.
- Management reported no material pending legal claims. Contractual commitments at year-end included $24.6 million of purchase commitments, $5.2 million of lease obligations, and $0.3 million of bank-loan obligations. No material off-balance-sheet arrangements were reported.
- FY2020 included a $1.5 million net foreign-exchange and derivatives expense. The company reported a $1.4 million income-tax expense, primarily associated with utilization of deferred tax assets. It had approximately $27.3 million of tax-loss carryforwards and no deferred tax asset recognized for the remaining losses.
- The independent auditor issued an unqualified IFRS audit opinion and an unqualified opinion on internal control over financial reporting. The auditor identified inventory valuation as a critical audit matter, involving judgment about manufacturing capacity and potential quality-related write-offs.
Most important facts for investors to verify
- Confirm Takeda’s actual GLASSIA transfer and FDA approval timeline, 2021 purchase volumes, subsequent royalty terms, and realized royalty revenue.
- Track GLASSIA-related revenue replacement, plant utilization, proprietary gross margins, and any workforce or cost reductions.
- Reconcile the filing’s selected-financial-data liquidity figure of $100.3 million with the audited balance-sheet cash and short-term investments totaling $109.3 million.
- Check KEDRAB sell-through, Kedrion inventory, and customer demand after the pandemic-related decline in U.S. sales.
- Verify the status, funding, and regulatory milestones for InnovAATe, Anti-SARS-CoV-2 IgG, the contract-manufacturing program, and the B&PR acquisition.
- Assess the effect of the 2020 share issuance and FIMI’s approximately 21% ownership, as well as customer concentration, purchase commitments, and liquidity under the expected 2021 revenue decline.