Bob Yedid - LifeSci Advisors Amir London - CEO Gil Efron - Deputy CEO and CFO.

Raj Denhoy - Jefferies.

Good day, and welcome to the Kamada Limited Third Quarter 2016 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Bob Yedid. Please go ahead sir..

Thank you, Jim, good morning. This is Bob Yedid with LifeSci Advisors. Thank you all for participating in today's call. Joining me from Kamada are Amir London, Chief Executive Officer; and Gil Efron, Deputy CEO and Chief Financial Officer.

Earlier this morning, Kamada announced financial results for the 2016 third quarter and the nine months ended September 30, 2016. If you have not received this news or if you like to be added the company's distribution list please call Paul Arndt from LifeSci at area code 646-597-6992 or go to the company's Investor Relations Web site.

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 identifies 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 this live broadcast, November 10, 2016. 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, I'd like to turn the call over to Amir London.

Amir?.

Thank you, Bob, and thanks to our listeners for your interest in Kamada and for participating in today's call. We are very pleased with our financial performance in the third quarter and in the first nine months of 2016.

We also continue to advance our key strategic initiatives aimed at expanding revenue growth and progressing our clinical program across a number of orphan indications.

Importantly, the growth in our proprietary product revenue is driven by the growth in our sales of Glassia, which is consistent with the growth in the number of patients treated with Glassia in the U.S, which we reported for 2014-2015, to be continued as well during this year.

This growth resulted in the increasing orders from our strategic partner in the U.S. share [ph].

Based on patient trends and our strong financial results in the third quarter and first nine months of 2016, we are very confident in our ability to achieve our revenue guidance of $75 million to $80 million in 2016, and reiterate our goal of $100 million of total revenues in 2017.

While Gil will provide a detailed review of our financial results shortly, I'd like to share with you a few of the highlights of our performance for the third quarter of 2016, as these results continue to drive our confidence in Kamada's 2016 and 2017 revenue projections.

Our total revenues for the third quarter 2016 was $19.4 million, a solid increase of 21% from the third quarter of 2015. Sales in our proprietary product grew a robust 57% to $15 [ph] million in the third quarter of 2016 as compared to prior year period.

What is most exciting about this result is we expect the strong revenue momentum to continue into the fourth quarter of 2016, which is typically our strongest quarter of each year. In addition to the revenue growth, we see significant improvement in our profit as Gil will detail later on.

With that, let me now provide you with the business and clinical update from several and very positive strategic developments from the third quarter, as I mentioned before. First, we extended our strategic partnership with Shire for supply of Glassia through 2020.

The updated agreement sets minimum revenues for Glassia for the next four years, from 2017 to 2020, is approximately $237 million, and revenues may be even extended by an additional $51 million to $288 million during this period.

This extension represents the first time the companies have extended the contract from the first in supply of Glassia in the start of a strategic relationship in 2010.

We believe this contract extension reflect Shire's solid outlook for increased demand for Glassia over the long term, as well as Kamada's ability to grow our capacity to meet this increasing demand with the highly reliable [indiscernible].

This extended agreement complements our co-development project with Shire for IV AAT for additional indication, including Graft versus Host Disease in lung transplants. This minimum commitment by Shire further strengthen our confidence in achieving the expected $100 million revenue target in 2017, and represents further growth in the years ahead.

Second, we announced positive top line results from our U.S. Phase 2 clinical trial for inhaled AAT therapy for the treatment of Alpha 1 Antitrypsin Deficiency. We're excited the study met its primary endpoint, and the data was very compelling compared to the current standards of care which is the IV treatment.

If approved we believe inhaled AAT has the potential to change the treatment paradigm for Alpha 1 deficiency. As a reminder the trial was a double-blind placebo-controlled study evaluating the [indiscernible] AAT by inhalation in 36 Alpha 1 deficient patients.

Patients were treated with Kamada inhaled AAT at either 80 or 150 milligram per day or placebo vie the eFlow device for 12 weeks during the double-blind period. Primary efficacy measures included antigenic AAT levels and Anti-Neutrophil Elastase inhibitory ANEC levels in the lungs.

AATD patients treated with Kamada's inhaled AAT demonstrated a significant increase in the ELF AAT antigenic level with a key value less than 0.002 in both active arms versus the placebo. The results are more than twice the increase of ELF antigenic AAT level observed in Kamada's previously IV AAT pivotal study at 60 milligram per kilogram per week.

In addition, ELF ANEC levels also increased significantly in those treatment arms achieving P value of less than 0.004, and again the increase is ELF ANEC level was also more than twice that's demonstrated in our IV AAT pivotal study.

We will continue our discussions with the FDA to look additional Phase 2 data in order to obtain guidance on the regulatory pathway for inhaled AAT in the U.S. during 2017.

We received the day 120 questions from the EMA for our MAA submission in July of this year, and we intend to utilize the excellent results from this successful Phase 2 study to support our full responses to the EMA's day 120 comments in early 2017 with regard to Kamada MAA for inhaled AAT.

To reiterate what we have said previously, we believe our inhaled AAT represents an attractive treatment alternative compared with the current AAT treatment that requires weekly intravenous infusion.

It offers a significant opportunity to bring in inhaled therapy to patients suffering from genetic lung disease, not merely as a more user-friendly treatment, but also due to its targeted delivery directly to the lung, which is expected to enhance efficacy.

Third, we announced plans of a Phase 2/3 clinical trial for AAT IV for treatment of Graft versus Host Disease as part of our collaboration with Shire.

This clinical trial will be a two-part multi-center prospective study to [indiscernible] frequency of AAT IV as an add-on therapy to conventional steroid treatment in up to 168 patients with acute GVHD with lower doctor intentional involvement. AAT IV previously received orphan drug designations from the FDA and from EMA for the treatment of GVHD.

Study results are expected to be available in 2020. The study in GVHD is one of the two clinical development project for IV AAT in the strategically collaboration [indiscernible] along with studying lung transplant rejection.

So, as announced on November 7th, that we are expected to resume our BLA for Kamada's human plasm derived anti-rabies immunoglobulin therapy. We remain excited about the commercial potential for the product in the U.S.

There's approximately 40,000 post-exposure prophylaxis treatment administered each year representing an annual market opportunity of more than $100 million. Our product has the potential to provide stability and secures availability in a market that has experienced insufficient supply and shortages in recent years.

The FDA has assigned the PEDUSA date on August 29, 2017 for completion of the review of the BLA. Upon favorable regulatory outcome next year, we plan on launching this product in the U.S. soon thereafter our partner Kedrion Biopharma. Kedrion is a great partner. It's a company dedicated to human derived protein therapeutic.

For decades, they have been collecting and fluctuating [ph] blood plasma to produce and distribute plasma-derived product for use in treating and preventing serious disease. Since its introduction by Kamada several years ago, we have sold more than 1 million vials of our rabies IgG vaccine KamRAB outside of the U.S.

in countries such as India, Thailand, Australia, Israel, Mexico, Russia, and more.

Turning now to the rest of our clinical program for our intervenous IV AAT, in addition to Glassia use as an AAT augmentation therapy for Alpha-1 deficiency, we also continue to advance clinical development of our IV AAT in a number of orphan indications where there is a considerable unmet medical need in immunomodulatory, anti-inflammatory, and tissue protecting properties of our highly purified AAT may positively treat these diseases.

In lung transplant rejection, our Phase 2 proof-of-concept study is ongoing. As a reminder, this Phase 2 trial is randomized open label single-site study of 30 lung transplant recipients to evaluate the safety and efficacy of IV AAT on top of standard-of-care versus standard-of-care alone.

We are planning to have interim data for the first 10 patients of this trial by mid 2017. Lastly, the development program for IV AAT to treat newly diagnosed Type 1 diabetes. We continue to expect the data from Phase 2 clinical trial by mid 2017.

Enrollment of 70 patients in the study has been completed and we look forward to update you on further development in this product. With that, I will now turn the call over to Gil for his review of the financial.

Gil?.

Thank you, Amir, and good day everyone. We are very pleased about our strong financial performance during the third quarter and first nine months of 2016. First, let's take a look at our third quarter results followed by our results for the nine months ended September 30, 2016.

Total revenue for the third quarter of 2016 were $19.4 million, up a solid 21% from the $16.1 million for the third quarter of last year. Revenues from the proprietary product segment was $15 million in the third quarter of 2016, up a robust 57% as compared to the $9.6 million in the 2016 third quarter.

As a new stuff, we have an increase in Glassia sales this year as a result of increase in number of patients treated by Glassia in the last two years as well as since the beginning of this year.

For the third quarter of 2016, distributed products revenue was $4.3 million compared with $6.5 million in the same quarter of 2015 and the decrease is due to the timing of orders and sales during the year and the different product mix.

Gross profit for the third quarter of 2016 was $6.3 million, up 69% compared with $3.7 million for the third quarter of 2016.

Gross margin increased to 32.4% from 23.1% in Q3 2015, primarily as a result of the increase in profitability in the Proprietary Products from 28% to 37% and the higher mix of the Proprietary Products revenue [indiscernible] distributed products revenue. Looking now to the rest of the P&L.

R&D expense in the third quarter of 2016 were $4.4 million, down slightly from $5 million in the third quarter of 2015. Selling, general and administrative expenses in the third quarter of 2016 were $2.9 million, an increase of 8% from a year ago.

For the third quarter of 2016, we resulted an operating of $1 million, compared with an operating loss of $4 million for the third quarter of 2015. The net loss for the third quarter of 2016 was $1 million, or $0.03 per diluted share, compared with a net loss for the third quarter of 2015 was $4.6 million, or $0.13 per diluted share.

The adjusted net loss for the third quarter of 2016 was $0.7 million, this compared with an adjusted net loss of $4.1 million for the same period in 2015. Positive adjusted EBITDA for the third quarter of 2016 was $0.2 million, compared with negative adjusted EBITDA of $2.6 million for the third quarter of 2015.

Let's now review our results for the nine months ended September 30, 2016. Total revenues for the nine months ended September 30, 2016 were $53.2 million an increase of 20% from the $34.2 million recorded in the same period in 2015.

Revenues from the Proprietary Products segment were $38.3 million in the nine months ended September 30, 2016, as compared to $25.4 million in the same period in 2015, an increase of 15%.

This increase is mainly driven by higher [indiscernible] sales and was offset by a decrease in the distributed product revenues that was $15 million compared with $18.8 million in the comparable period of 2015. This decrease of approximately 20% in the distributed product was primarily due to decrease in [indiscernible] sales in 2015.

Gross profit for the nine months ended September 30, 2016 was $16.7 million, compared with $7.7 million last year, an increase of 150%. Gross margin increased to 31.3% from 17.5% a year ago, primarily as a result of higher mix of Proprietary Products revenues. Looking now to the rest of the P&L.

R&D expenses in the nine months ended September 30, 2016 was $12 million, consistent with the comparable period of 2015. Selling, general and administrative expenses in the nine months ended September 30, 2016 was $8.2 million, an increase of 5% from $7.9 million in the year ago period.

For the nine months of ended September 30, 2016, we reported an operating loss of $3.6 million, compared with an operating loss of $12.2 million for the nine months ended September 30, 2016.

The net loss for the nine months ended September 30, 2016 was $4.9 million, or $0.14 per diluted share, compared with a net loss for the comparable period of 2016 was $12.3 million or $0.34 per diluted share.

The adjusted net loss for the nine months of ended September 30, 2016 was $3.9 million, substantially less than adjusted net loss of $10.7 million, for the same period of 2015. Positive adjusted EBITDA for the nine months of this year was $0.1 million, compared with the negative adjusted EBITDA of $8.3 million for the prior year period.

Turning now to our balance sheet, as of September 30, 2016, Kamada has cash, cash equivalent, and short-term investment of $27.2 million, compared with $28.3 million as of December 31, 2015, and to the $29.5 million as of June 30, 2015.

During the first nine months of 2016, we used $0.6 million in cash for operation, used $1.9 million for capital expenditure, and generated $1.5 million from financing activities primarily loans to fund capital expenditures.

In the third quarter of 2016, we used $1.7 million for operation mainly due to the timing of our sales and collections from customer versus purchases of goods.

Looking now at our revenue guidance on the basis of our strong third quarter revenue we feel very confident in re-appearing our guidance for total revenue for 2016 to be between $75 million to $80 million.

In addition of the [indiscernible] on the basis of extended supply agreement with Shire [indiscernible] we also remain confident in our ability to achieve our 2017 revenue growth of $100 million, which primarily reflects growth in our proprietary product segment.

With that overview of our financial performance, let me now request that the operator please open the call for questions.

Operator, please?.

Certainly. [Operator Instructions] And we'll take our first question from Raj Denhoy from Jefferies..

Hi, good morning guys..

Good morning, Raj..

I wonder if I could start with the Phase 2 data that you recently announced the long data. As you noted, quite compelling in terms of looking at the levels of AAT in the lung.

I'm just curious how you think the regulators will view that data, again given that it is not clinical, but really looking at other surrogates versus the Phase 2/3 data that ultimately failed on its primary endpoint.

How do we think about those two things in balances as you move to get that product reviewed in Europe?.

Yes, Raj, thank you for the question. We believe the regulator will look on the significant advantage of the results that we saw in the Phase 2 study that may have a link to the European study explaining the results that we did see in the European study. And then this will help us designing the next step in the U.S.

towards an additional clinical study and for the inhaled AAT..

Okay, but I guess the question is really, we're trying to gauge the prospects for that review now in Europe. And it is now really kind of on the doorstep of it in 2017.

Have you been able to gauge any initial reactions to the Phase 2 data or is it really just sort of too new at this point?.

Yes, I was planning to take those results, include them in the response to the day 120 questions. So we are planning to respond by the beginning of the year, in January 2017, including this data..

Okay, fair enough. And then just for a second question, just on the extension of the deal, the arrangement with Shire now, the 2020. The question is really around why Shire is extending that? Our understanding was, and I think as you always articulated that they would eventually transfer manufacturing over to their own facility.

And the thought was that by 2018 that facility they were building in Europe would be up and running and they would transfer the product there, and start to pay you royalty. Now that's been pushed out to 2020.

Are they still planning on building a facility? Do you have any input into what Shire is doing at this point?.

Hi, Raj, thanks for the question, it's Amir. This is of course an internal Shire decision [indiscernible] now it's moving to Shire, so we are not fully aware of all the internal criteria for making such a decision.

What we know for sure is that we have the capacity to continue supporting the significant increase in number of patients as treated there with Glassia in the U.S. And compared to the regional agreement when it was first signed, we have a much more capacity to support the increase.

So we believe it has to do with the fact that there are internal capacity and a plan therefore their own plan is being pushed. [Indiscernible] continue supplying their needed quantities and we haven't missed a single order in six years and we will continue to supply them as much as needed and if needed we can grow our capacity even further..

Okay, that's helpful. Thank you..

[Operator Instructions] And at the time, it appears there are no further questions. That will conclude our question-and-answer session then. I would like to turn it back to our CEO for additional or closing remarks..

Thank you. In closing, we are extremely pleased with our performance and operational and financial achievements to date in 2016. We continue to focus strong revenue growth in 2016 and 2017 as well as meaningful clinical and regulatory progress in our various development program.

Kamada remains focused on growing our business and enhancing shareholder value. Thank you for joining us today on the call. And we look forward to providing you with further updates on our progress throughout the balance of 2016.

For investors and equity research analysts who would like to meet with us, we will be participating in the LifeSci Corporate Access Event in Samsung Peace Forum on January 9-11, 2017, in conjunction with the JPMorgan Healthcare Conference.

If you would like to meet with us, please email bobyedid@lifesci, the contact information is on the press release. Enjoy the rest of your day. Thank you..

And that will conclude today's conference. And we do thank you for your participation..