KAMADA LTD annual report, Q4 FY2023

Kamada Ltd. — FY2023 Form 20-F Summary

Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter filing; separate Q4 results are not clearly provided in the supplied text. Financial statements are audited and prepared under IFRS as issued by the IASB. Amounts below are U.S. dollars unless noted.

Business context

Kamada is a commercial-stage biopharmaceutical company focused on plasma-derived products, with two segments: Proprietary Products and Distribution. It sells proprietary therapies in more than 30 countries and distributes third-party medicines in Israel. Key products and income sources include KEDRAB, CYTOGAM, and royalties on Takeda’s GLASSIA sales.

Financial performance and liquidity

Metric	FY2023	FY2022
Total revenue	$142.5 million	$129.3 million
Gross profit / margin	$55.5 million / 38.9%	$46.7 million / 36.1%
Operating income / margin	$10.1 million / 7.1%	$4.5 million / 3.5%
Net income (loss)	$8.3 million	$(2.3) million
Net cash from operating activities	$4.3 million	$28.6 million
Capital expenditures	$5.8 million	$3.8 million
Cash and cash equivalents at year-end	$55.6 million	$34.3 million

• Revenue rose 10.2%, led by Proprietary Products revenue of $115.5 million, up 12.5%; Distribution revenue was $27.1 million, up 1.2%.
• Proprietary Products gross margin improved to 45.1% from 43.2%, primarily on higher KEDRAB sales and a more favorable mix. Distribution gross margin improved to 12.5% from 8.7%.
• Cash generation from operations fell sharply despite the return to profitability, largely reflecting a $19.7 million increase in inventory and other working-capital movements. Year-end inventory was $88.5 million, up from $68.8 million.
• The company reported no bank loans at year-end after repaying the $20 million term loan in September 2023. It had $8.8 million of lease liabilities and $68.2 million of contingent consideration and assumed liabilities on the balance sheet. Management expects approximately $15 million of related payments during the next 12 months.
• An unused revolving credit facility was extended in January 2024 for 12 months, with a limit of NIS 35 million (approximately $10 million). The facility includes financial and other covenants.
• The September 2023 private placement raised $60 million gross ($58.2 million net) through issuance of approximately 12.6 million shares to FIMI. FIMI became controlling shareholder with approximately 38% ownership. Shares outstanding at December 31, 2023 were 57,479,528.

Material changes and notable items

• KEDRAB sales to Kedrion increased to $32.8 million from $16.2 million. Takeda GLASSIA royalties were $16.1 million, up from $12.2 million in 2022, which covered only March through December.
• CYTOGAM revenue declined to $17.2 million from $22.6 million. Management attributed the decline mainly to wholesaler inventory management ahead of new company-manufactured product becoming available in October 2023; monthly sales improved in Q4 and through January 2024, according to management.
• Combined CYTOGAM, VARIZIG, WINRHO SDF, and HEPAGAM B revenue fell to $43.9 million from $52.1 million. Management cited distributor inventory management and tender timing for declines in these products.
• Net income improved from losses in 2022 and 2021. Results included $7.2 million of intangible amortization and $1.0 million of expense from revaluation of acquisition-related liabilities. FY2022 included $6.3 million of such revaluation expense and a $4.3 million gross-profit impact from a plant labor strike.
• Inventory impairment charges were $4.4 million in 2023, compared with $4.0 million in 2022. The auditor identified inventory valuation as a critical audit matter; goodwill valuation and U.S. rebates and wholesaler chargebacks were also critical audit matters.

Outlook, management commentary, and risks

• Management forecasts FY2024 revenue of $156 million to $160 million and adjusted EBITDA of $27 million to $30 million, describing this as double-digit growth over 2023. Adjusted EBITDA is a non-IFRS measure; the filing says it cannot provide a reconciliation of the forward estimate to the most comparable IFRS measure.
• The Kedrion binding memorandum of understanding extends the KEDRAB distribution arrangement through December 2031, with a possible two-year extension. Minimum purchases for 2024–2027 are expected to produce approximately $180 million in aggregate revenue to Kamada. Verify execution of definitive amended agreements and actual purchase volumes.
• Takeda royalties are 12% of GLASSIA net sales through August 2025 and 6% thereafter through 2040, subject to a stated $5 million annual minimum. Management projects $10 million to $20 million annually for 2024–2040; Canadian sales were expected to begin in 2024.
• Management expects to open the Uvalde, Texas plasma collection center in 2024, subject to completion and regulatory approvals, and planned to begin work toward a third center. The expansion requires capital and may not deliver expected plasma supply or sales.
• The pivotal Phase 3 InnovAATe trial of inhaled AAT remains ongoing. As of March 1, 2024, 78 patients had enrolled; prior European Phase 2/3 testing did not meet its primary or secondary endpoints, though management cites post-hoc lung-function findings. The FDA had expressed willingness to consider a P<0.1 alpha level, subject to review of a revised statistical plan; efficacy and approval remain uncertain.
• Material risks include concentration in KEDRAB, CYTOGAM, GLASSIA royalties, and the U.S. market; dependence on Kedrion, Takeda, Emergent, plasma suppliers, and distributors; plasma supply, manufacturing, regulatory and product-quality risks; competition and pricing pressure; and the ability to manage excess manufacturing capacity.
• Political and military conditions in Israel following the October 2023 attacks and ensuing conflict could disrupt staff, manufacturing, suppliers, or transport. Management reported no material impact to date, but future effects are uncertain.
• A former Russia/Ukraine distributor affiliate seeks $6.7 million in damages in Geneva. Kamada challenges the tribunal’s jurisdiction; the company says the claim’s prospects and potential liability cannot currently be assessed.
• Israeli tax benefits under the company’s prior Privileged Enterprise status expired at year-end 2023. A new tax ruling application is pending; approval and future benefits are uncertain. The company reports $26.9 million of tax-loss carryforwards and has not recognized a deferred tax asset for them.
• The auditor issued unqualified opinions on the IFRS financial statements and internal control over financial reporting; management also concluded disclosure controls and internal controls were effective at year-end.

Most important facts for investors to verify

• Whether FY2024 revenue and adjusted EBITDA guidance is achieved, and how adjusted EBITDA reconciles to IFRS results when available.
• Whether the Kedrion MOU is converted into definitive terms and minimum KEDRAB purchases translate into revenue and cash collection.
• Whether CYTOGAM’s Q4 recovery continued, and whether the 2023 decline was principally timing-related rather than weaker end-user demand.
• Whether operating cash flow improves as inventory is sold, and whether the $88.5 million inventory balance requires further write-downs.
• Timing and funding of the approximately $15 million of expected near-term acquisition-related payments, and the remaining contingent and assumed liabilities.
• Progress, enrollment, revised statistical plan, and regulatory feedback for InnovAATe; do not treat the FDA’s potential statistical approach as approval or a positive efficacy finding.
• Uvalde center completion, regulatory approval, operating costs, and any measurable contribution from plasma collection expansion.
• Developments in the Geneva claim, Israel-related operational risks, and the pending Israeli tax ruling.