Kamada Ltd. — FY2022 Form 20-F
Reporting period: Year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter report. Financial statements are audited and prepared under IFRS as issued by the IASB, in U.S. dollars.
Business context
Kamada is an Israeli biopharmaceutical company with two segments: Proprietary Products, principally plasma-derived therapeutics, and Distribution, which sells third-party medicines in Israel. Its main products include CYTOGAM, KEDRAB and GLASSIA. The 2022 results reflect the first full year of sales from four products acquired from Saol in November 2021: CYTOGAM, HEPAGAM B, VARIZIG and WINRHO SDF.
Key financial metrics
| Metric (US$ millions, except percentages) | FY2022 | FY2021 |
|---|---|---|
| Total revenue | 129.3 | 103.6 |
| Gross profit / gross margin | 46.7 / 36.1% | 30.3 / 29.3% |
| Operating income (loss) | 4.5 | (0.7) |
| Net income (loss) | (2.3) | (2.2) |
| Cash from operating activities | 28.6 | (8.8) |
| Capital expenditures | 3.8 | 3.7 |
| Cash and cash equivalents at year-end | 34.3 | 18.6 |
Proprietary Products revenue was $102.6 million, up 35.9%, with gross profit of $44.4 million and a 43.2% segment margin. Distribution revenue was $26.7 million, down 4.9%; segment gross profit was $2.3 million and margin was 8.7%. Total assets were $322.4 million and shareholders’ equity was $176.0 million at year-end. Inventories were $68.8 million.
At December 31, 2022, bank loans were $17.4 million, including $4.4 million current maturities; lease liabilities were $3.2 million. Acquisition-related contingent consideration was $23.5 million, and other assumed long-term liabilities were $61.0 million in total, of which $29.7 million was classified as current. The company reported compliance with its Bank Hapoalim financial covenants.
Material changes versus the prior comparable period
- Revenue increased 24.8%, principally reflecting $52.1 million from the acquired product portfolio (versus $5.4 million recognized after the acquisition date in 2021), higher KEDRAB sales and GLASSIA royalties.
- GLASSIA revenue shifted from product sales to Takeda ($26.2 million in 2021) to $12.2 million in 2022 sales-based royalties, plus a one-time $2.0 million payment for transfer of the U.S. biologics license. Ex-U.S. GLASSIA sales were $5.9 million, down from $7.6 million.
- Gross profit rose 54.0%; company-wide gross margin increased from 29.3% to 36.1%, supported by product mix and royalties. Distribution gross margin declined from 10.7% to 8.7%, primarily due to lower IVIG sales amid European supplier shortages.
- Operating income improved from a $0.7 million loss to $4.5 million income. Higher selling and marketing expense—$15.3 million versus $6.3 million—reflected the build-out of U.S. commercial operations.
- Despite the operating improvement, net loss was $2.3 million. A $6.3 million expense from revaluation of acquisition-related liabilities was a major below-operating-line factor.
- Operating cash flow improved to $28.6 million from cash use of $8.8 million, with a $7.6 million reduction in trade receivables also contributing. Cash and cash equivalents rose by $15.7 million during 2022.
Outlook, commentary, risks and unusual items
- Management forecast FY2023 revenue of $138–$146 million and EBITDA of $22–$26 million; midpoint growth versus FY2022 was stated as 10% for revenue and 35% for EBITDA. This is management guidance, not a guarantee.
- Management expects GLASSIA royalties of $10–$20 million annually from 2023 through 2040, subject to Takeda’s sales. The agreement specifies a 12% royalty through August 2025, then 6% through 2040, with a $5 million annual minimum.
- The company expected FDA approval to manufacture CYTOGAM at its Beit Kama facility by mid-2023 and Canadian approval by Q3 2023. Existing CYTOGAM inventory was expected to meet demand through the second half of 2023. These were forward-looking expectations in the filing.
- The Phase 3 InnovAATe trial for inhaled AAT had enrolled 50 patients by late February 2023, after COVID-related recruitment delays. The earlier European Phase 2/3 study did not meet its primary or secondary endpoints, and the related European marketing application was withdrawn. Trial completion, regulatory approval and commercial prospects remain uncertain.
- Management stated cash and expected operating cash generation should cover liquidity needs for at least 12 months. It anticipated approximately $24.9 million of payments over the next 12 months for acquisition-related contingent consideration, inventory liabilities and assumed liabilities. Planned plasma-center expansion and possible manufacturing transfers may increase capital spending.
- Unusual operating item: the 2022 Beit Kama labor strike reduced gross profit by $4.3 million. The 2022 result also included $7.2 million of acquired-intangible amortization and $6.3 million of acquisition-liability revaluation expense.
- Key risks include dependence on CYTOGAM, KEDRAB and GLASSIA royalties; plasma supply and third-party manufacturers/distributors; regulatory approval and manufacturing transfer execution; excess plant capacity; product competition and pricing; and exposure to Israel-related disruption. A distributor terminated for Russia and Ukraine sought damages in a Geneva conciliation proceeding; the company said the claim’s prospects and potential liability could not then be assessed.
Important facts for investors to verify
- Confirm subsequent results against the FY2023 revenue and EBITDA guidance and understand the company’s EBITDA definition.
- Check actual FDA and Canadian approvals and commercial manufacturing progress for CYTOGAM, plus inventory and supply continuity.
- Track GLASSIA royalties received, Takeda’s sales performance and the assumptions underlying the $10–$20 million annual forecast.
- Review acquisition-related payments, revaluation charges, debt balances, covenant compliance and cash available after the expected $24.9 million of payments.
- Monitor InnovAATe enrollment, trial endpoints, regulatory discussions and remaining funding needs, as well as plasma-center expansion costs and approvals.
- Assess the Russia/Ukraine distributor dispute and any updates to its claims or potential financial exposure.