Kamada Ltd. — FY2021 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone Q4 filing; quarterly figures below are unaudited. Financial statements are prepared under IFRS as issued by the IASB, not U.S. GAAP. Amounts are U.S. dollars unless noted.
Business context
Kamada is an Israeli biopharmaceutical company operating two segments: Proprietary Products, focused mainly on plasma-derived therapies, and Distribution, which sells third-party pharmaceutical products in Israel. During 2021, it acquired a U.S. plasma collection center and four FDA-approved products from Saol: CYTOGAM, HEPAGAM B, VARIZIG and WINRHO SDF. Shares trade on Nasdaq and the Tel Aviv Stock Exchange under KMDA.
Financial performance and liquidity
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Total revenue | $103.6 million | $133.2 million | Down 22.2% |
| Gross profit / margin | $30.3 million / 29.3% | $47.6 million / 35.7% | Margin down 6.4 percentage points |
| Operating income (loss) | $(0.7) million | $19.2 million | Turned to operating loss |
| Net income (loss) | $(2.2) million | $17.1 million | Turned to net loss |
| Operating cash flow | $(8.8) million | $19.1 million | Cash use in FY2021 |
| Capital expenditures | $3.7 million | $5.5 million | Down $1.8 million |
- FY2021 Proprietary Products revenue was $75.5 million, down 25.2%; Distribution revenue was $28.1 million, down 13.0%. Segment gross margins were 36.2% and 10.7%, respectively, versus 42.8% and 13.6% in FY2020.
- Cash and cash equivalents were $18.6 million at year-end, versus $70.2 million in 2020; short-term investments fell from $39.1 million to zero. Current assets were $130.0 million and current liabilities $54.1 million.
- Bank loans totaled $20.0 million, including a $20 million five-year loan; the separate $20 million revolving facility was undrawn at year-end. Lease liabilities were $4.3 million. The Saol acquisition also added $22.0 million of contingent consideration and $61.9 million of assumed liabilities, principally future royalties and milestones.
- Inventory was $67.4 million, up from $42.0 million, including acquired inventory. The company recorded $3.0 million of inventory impairment in 2021, compared with $1.4 million in 2020.
Material changes and unusual items
- GLASSIA manufacturing transferred to Takeda during 2021. Sales to Takeda fell to $26.2 million from $64.9 million in 2020; an additional $5.0 million sales milestone was recognized in 2021. Starting in 2022, Kamada expects royalties of 12% of net sales through August 2025 and 6% thereafter through 2040, with a $5 million annual minimum. Management forecast $10–$20 million annual royalties, but this is not assured.
- The Saol portfolio generated $5.4 million revenue and $3.6 million gross profit from its November 22 acquisition through year-end. Acquisition consideration included $95 million cash paid, up to $50 million of contingent payments, and $14.2 million of acquired inventory payable in installments. The acquisition was accounted for as a business combination; goodwill recorded was $29.9 million.
- Revenue reductions from GLASSIA and KEDRAB were partly offset by Saol product sales, the GLASSIA milestone, and $3.9 million revenue from an investigational COVID-19 antibody product sold to Israel’s Ministry of Health.
- Lower manufacturing utilization and changes in product mix pressured Proprietary Products margins. Selling and marketing costs rose to $6.3 million, partly reflecting integration and launch activity; R&D costs declined to $11.4 million, mainly because of delayed Inhaled AAT trial activity and reduced COVID-19 program spending. A planned workforce reduction resulted in a one-time $0.7 million severance expense.
Q4 2021, unaudited: Revenue was $31.5 million, gross profit $6.6 million, operating loss $3.3 million and net loss $5.0 million. Q4 2020 revenue was $31.5 million, gross profit $10.2 million, operating income $2.6 million and net income $5.4 million.
Guidance, risks and contingencies
- Management forecast FY2022 revenue of $125–$135 million, representing stated growth of 20%–30% over FY2021, and EBITDA equal to 12%–15% of revenue, stated to be more than 2.5 times FY2021 EBITDA. The filing does not provide a clear FY2021 EBITDA value in the cited discussion.
- Management said cash and cash equivalents and short-term investments should cover liquidity needs for the next 12 months. The company faces debt covenants, including minimum equity of $120 million and 30% of assets, a maximum working-capital-to-debt ratio, and minimum debt coverage requirements.
- Major execution risks include replacing lost GLASSIA manufacturing revenue with royalties and acquired-product growth; integrating the Saol portfolio and assuming direct U.S. commercialization; transferring manufacturing and securing regulatory approvals; and expanding plasma collection. The company depends on third parties for plasma, manufacturing, distribution and key products, while its Beit Kama facility is a significant single-site concentration.
- Inhaled AAT remains in a pivotal Phase 3 trial, with recruitment slowed by COVID-19; the prior European Phase 2/3 trial failed its primary and secondary endpoints. The investigational COVID-19 antibody program’s continuation was under evaluation, and no follow-on Ministry of Health order was reported.
- COVID-19 disruptions affected logistics and clinical recruitment, although management said FY2021 results were not materially affected. Management also cited uncertainty from competition, reimbursement and price controls, foreign-exchange and floating-rate exposure, and geopolitical conditions, including the Russia-Ukraine conflict.
- The collective bargaining agreement expired in December 2021. Employees declared a labor dispute on March 3, 2022; management said it could not predict the outcome, but did not then expect a material effect on product supply. Legal proceedings were described as ordinary-course matters with no currently known material adverse claim.
Most important facts for investors to verify
- Whether the FY2022 revenue and EBITDA targets are achievable, including the actual Takeda royalty base and sales performance of the acquired products.
- Whether the Saol acquisition’s contingent payments, assumed royalties and milestones, and integration costs develop as estimated; check final purchase-price allocation, which was preliminary.
- Progress, timing and cost of product manufacturing transfers, especially CYTOGAM, and required FDA, Canadian and other regulatory approvals.
- Liquidity and covenant headroom as acquisition-related payments fall due; reconcile operating cash use, inventory growth and collections from receivables.
- Recruitment and results for the Inhaled AAT Phase 3 study, and any decision on continuing the COVID-19 antibody program.
- Resolution of the labor dispute and any resulting impact on manufacturing, along with the company’s exposure to suppliers, distributors and its single principal manufacturing site.
The auditor issued an unqualified opinion on the IFRS financial statements and on internal control over financial reporting. Management reported effective disclosure controls and internal financial controls as of December 31, 2021.