Paul Arndt - IR, LifeSci Advisors Amir London - CEO Gil Efron - Deputy CEO and CFO.

Raj Denhoy - Jefferies Lauren Chung - Maxim Group.

Good day, and welcome to the Kamada Fourth Quarter and Fiscal Year 2016 Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Paul Arndt. Please go ahead, sir..

Thank you, Amie. Good morning. This is Paul Arndt 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 fourth quarter and the 12 months ended December 31, 2016. If you have not received this news release or if you’d like to be added the Company’s distribution list, please call Bob Yedid from LifeSci Advisors at 646-597-6989.

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 identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements.

Furthermore, the content of the conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, Monday, February 06, 2017. 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 would like to turn the call over to Amir London.

Amir?.

Thank you, Paul, and thanks also to our listeners for your interest in Kamada and for participating in today’s call. We are very pleased with both, our financial performance and the progress achieved with our development pipeline in 2016.

We believe we’ve laid a strong foundation in 2016 that positions us well for further success in 2017, including attaining our previously stated objective of reaching $100 million in total revenue in 2017 as well as generating positive cash flow this year. Before I look ahead to 2017, let me discuss some of our significant 2016 achievements.

Let me begin with some key financial metrics. First, our sales of GLASSIA continued to be robust and helped to drive year-over-year growth of 30% in our Propriety Products segment and 11% year-over-year growth in total revenue.

I will discuss last year’s progress shortly in the context of our recently extended agreement with Shire, but this product continued to perform exceedingly well with over 25% increase in number of patients treated with GLASSIA globally in 2016. This provides us with confidence that our 2017 revenue and cash flow expectations are achievable.

Looking again at cash flow, we reached cash flow breakeven in the fourth quarter of 2016. In addition our gross profit grew 40% year-over-year in 2016 and our gross margin improved to 27.9% from 22.6%. Gil will provide a detailed review of our financial results shortly.

So, let me now move on to our market growth and development, and operational accomplishments in 2016. Let me begin with our proprietary inhaled Alpha-1 Antitrypsin therapy for the treatment of Alpha-1 Antitrypsin Deficiency, which is important progress for this product candidate in both the Europe and the U.S.

Before I detail this progress, let me remind you that we believe our inhaled AAT represents an attractive treatment alternative compared with the current AAT treatment that requires weekly IV infusion.

It offers a significant opportunity to bring in inhaled therapy to patients suffering from genetic lung diseases, not merely as a more user-friendly treatment, but also due to the targeted delivery directly to the lung, which is expected to enhance efficacy. With that, let us review the results of our inhaled AAT in Europe.

In March of 2016, we submitted a Marketing Authorization Application MAA to the European Medicines Agency, EMA, for this product. Following this submission, we received EMA’s day 120 questions in July.

I’m pleased to report that we recently provided our responses to these questions to the EMA, and expect a regulatory decision for this product in the second half of 2017.

Based on the combination of lung function measurements, which are the gold standard for pulmonary diseases and symptom improvement along with the safety profile of the product, we are confident that our inhaled AAT meets the risk/benefit balance required by EMA.

A critical aspect of our response to the EMA day 120 questions was a positive top line result from our U.S. Phase 2 clinical trial of inhaled AAT, which we announced in August. As you will recall, this study met its primary endpoint and the data was quite compelling compared to the current standard of care, which is the IV.

We reviewed the results of this study on our last call, so I won’t go into too much details here, other than to say that the measures of AAT concentration at lung target site seen in the study were extremely encouraging and demonstrated that inhaled formulation provides substantially higher level of antigenic AAT and Anti-Neutrophil Elastase compared to the placebo and also higher than those achieved with existing IV standard of care when we compare it to previous IV studies.

During the next few months, we plan on having constructive dialogue with FDA regarding the traditional safety data in order to obtain guidance on the regulatory pathway for inhaled AAT in the U.S.

Next, I’d like to discuss significant progress we achieved in 2016 with our AAT IV for the treatment of Graft-Versus-Host Disease or GvHD, which is being developed as part of our collaboration with Shire. As a reminder, this product, AAT IV, is being developed as a treatment of acute GvHD with lower GI involvement.

In the first quarter of 2016, as part of our collaboration with Shire, we initiated the Phase 2/3 clinical trial to evaluate safety and efficacy of AAT IV as an add-on therapy to conventional steroid treatment in up to 168 patients with acute GvHD with lower GI involvement.

This is a two-part, multicenter, prospective study with the primary endpoint of overall response rate at day 28. Most recently, we announced the Positive Scientific Advice Response from Committee for Medicinal Products for Human Use of the EMA focused on Company’s development program in Europe for AAT IV in acute GvHD.

The response from the CHMP included important guidance related to the design of the Company’s planned Phase 2/3 European study with the regulatory pathway for approval based on conducting such a study. Kamada continues to review the guidance received and discuss this information with the European Scientific Advisory Board.

Following this, Kamada intends to submit a Clinical Trial Authorization application CPA to the EMA in 2017 in order to conduct the European Phase 2/3 study. Importantly, the design of the U.S. Phase 2/3 clinical trial of AAT IV in acute GvHD supported guidance received from the EMA. Kamada intends to conduct the European study in parallel with the U.S.

study. Now, I’d like to discuss our extended strategic partnership with Shire for supply of GLASSIA through 2020, which was announced few months ago.

As a reminder, the updated agreement sets minimum revenue for GLASSIA for the next four years of 2017 to 2020 at $237 million, and revenue may be expanded by additional $51 million to $288 million during this period.

The minimum commitment by Shire further strengths our confidence in achieving the expected $100 million revenue target in 2017, and represents further growth in the years ahead. It’s important to understand that this is the fourth time that Shire or Baxalta has extended the GLASSIA supply agreement since start of the partnership in 2010.

The minimum commitment represents a doubling in annual GLASSIA revenue from approximately $30 million in 2016 to an average of $60 million annually in the next four years. In addition, the extended agreement with higher level of annual revenues in 2017 and beyond underscores the 25% growth in treated patients we’ve seen each year from 2014 to 2016.

With this higher level of GLASSIA supply revenues in 2017 to 2020 as expected royalty stream from 2021 and beyond, we believe the GLASSIA business in the U.S., the franchise gives significant value to our shareholders. With that let’s look ahead to the reminder of 2017 and our expected key milestones.

On the development side, we look forward to the EMA’s decision on our inhaled AAT in the second half of 2017. We also look forward to clarified regulatory pathway in the U.S. for inhaled AAT in the coming months and to submit an IND for Phase 3 study in the U.S. thereafter. For AAT IV in acute GvHD, we look forward to making progress with our U.S.

study conducted in collaboration with Shire and submitting a CPA application to the EMA in 2017 in order to conduct the European Phase 2/3 study. We also have milestones in each of our additional programs in 2017.

First, final report on our Phase 2 study in type-1 diabetes in the mid-year; second interim report from our lung transplant study in the second half of the year; and third, interim report on the U.S. GvHD study at the end of 2017.

Also, in August, in order to [ph] Kamada’s human plasma-derived anti-rabies immunoglobulin therapy, we are excited about our PDUFA date of August 29, 2017 for the completion of the review of our recently expected BLA. As we have said previously, we believe this represents an annual market opportunity of more than $100 million.

Moreover, this has a potential to be an extremely profitable product for Kamada. As a reminder, upon a favorable regulatory outcome this year, we intend to launch the product in the U.S. soon thereafter with our partner Kedrion Biopharma, a company dedicated to plasma-derived protein therapeutic.

From a financial perspective, to reiterate what I stated earlier, we expect to reach $100 million in total revenue and generate positive cash flow in 2017. We also expect to see continued growth beyond 2017 driven by continued GLASSIA growth and the launch of our rabies IgG and our inhaled product in the EU.

With that, I will now turn the call over to Gil for his review of the financials.

Gil?.

Thank you, Amir, and good day, everyone. Kamada’s financial performance in 2016 was quite strong, and we are in an excellent position to grow our business further in 2017. Let me begin my review of the financials with the discussion of our fourth quarter results. I follow this with the review of our results for the 12 months ended December 31, 2016.

Total revenues for the fourth quarter of 2016 was $24.3 million, a decrease of 5.5% from the $25.6 million for the fourth quarter of 2015. Revenues from the Proprietary Products segment were $17.7 million in the fourth quarter of 2016, flat as compared to the 2015 fourth quarter.

It should be pointed out that our Proprietary Products revenues in 2016 were back-ended toward the fourth quarter, while 2016 Proprietary Products revenues were more evenly recorded throughout the year, resulting in difficult comparison for the fourth quarter of 2016.

For the fourth quarter of 2016, Distributed Products revenue was $6.6 million compared with $8.1 million in the same quarter of 2015. The decrease was due to increased competition for this product. Gross profit for the fourth quarter of 2016 was $5 million, a decrease of 38% compared with $8 million for the fourth quarter of 2015.

Gross margin decreased to 20.5% compared to 31.4% in the fourth quarter of 2015. The decrease in profitability was mainly due to a one-time $2.6 million inventory write-off and unexpected temporary shutdown of our manufacturing plant. Our plant has already returned to full functionality during the fourth quarter.

Looking now to the rest of the P&L, R&D expenses in the fourth quarter of 2016 were $4.2 million, below the $4.5 million in the fourth quarter of 2016. Selling, general and administrative expenses in the fourth quarter of 2016 were $2.6 million, a decrease of 7% from the same period last year.

For the fourth quarter of 2016, we reported an operating loss of $1.9 million, compared with operating income of $0.8 million for the fourth quarter of 2015. The net loss for the fourth quarter of 2016 was $1.8 million or $0.05 per diluted share, compared with a net income for the fourth quarter of 2015 of $1 million or $0.03 per diluted share.

The adjusted net loss for the fourth quarter of 2016 was $1.8 million, this compares with adjusted net income of $1.4 million for the same period in 2015. Negative adjusted EBITDA for the fourth quarter of 2016 was $1 million, compared with positive adjusted EBITDA of $2 million for the fourth quarter of 2015.

Let’s now review our results for the 12 months ended December 31, 2016. Total revenues for the 12 months ended December 31, 2016 were $77.5 million, an increase of 1% from the $69.9 million recorded in the 12 months period last year.

Revenues from the Proprietary Products segment were $56 million in 2016, as compared to $43 million in the prior year, a strong increase of 30%.

This increase was primarily driven by GLASSIA sales and was partially offset by a decrease in the Distributed Products revenue which was $21.5 million in 2016 compared with $27 million in the year ago period. This decrease of approximately 20% was primarily due to a decrease in IVIG sales in 2016.

Gross profit for 2016 was $21.7 million compared with $15.8 million in 2015, an increase of 37%. Gross margin increased to 27.9% from 22.6% in 2015, primarily as a result of the higher mix of Proprietary Products revenue. Looking now at the rest of the P&L, R&D expenses in 2016 were $16.2 million compared to $16.5 million for 2015.

Selling, general and administrative expenses for the full year of 2016 were $10.9 million, an increase of 2% from $10.7 million in 2015. For 2016, we reported an operating loss of $5.5 million compared with an operating loss of $11.4 million for the prior year period.

The increase in revenue of 11% has resulted in an increase of gross profit of 37% and while increasing operating expenses by only 2%, resulted in decrease in our net losses. The net loss for the 12 months ended December 31, 2016, was $6.7 million or $0.18 per diluted share compared with a net loss for 2015 of $11.3 million or $0.31 per diluted share.

The adjusted net loss for the full year of 2016 was $5.6 million, substantially less than the adjusted net loss of $9.4 million for full year 2016. Negative adjusted EBITDA for 2016 was $0.9 million, a significant improvement compared with the negative adjusted EBITDA of $6.3 million for the prior year. Turning now to our balance sheet.

As of December 31, 2016, Kamada had cash, cash equivalents and short-term investment of $28.6 million compared with $28.3 million as of December 31, 2015 and $27.2 million as of September 30, 2016.

For the full year 2016, we generated $1.9 million in cash from operations and used $2.6 million for capital expenditures and generated $1.5 million from financing activities, primarily loans to fund capital expenditures. In the fourth quarter of 2016, we generated $2.5 million from operations.

To reiterate our 2017 financial guidance, as Amir noted, we remain confident in our ability to achieve our 2017 revenue goal of $100 million, which primarily reflects growth in Proprietary Products segment. In addition, with this growth driven by our Proprietary Products, we expect to be profitable during 2017.

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

Operator, please?.

Thank you. [Operator Instructions] We’ll take our first question from Raj Denhoy of Jefferies. Please go ahead. .

Hi. Good morning. I wondered if I could ask a couple of questions, first on rabies in United States.

If there is any update in terms of timing around approval for rabies in United States? And then just to clarify again that you haven’t included anything for that product in the United States in your 2017 guidance?.

Hi, Raj; it’s Amir. First of all, the PDUFA date is end of August of this year, and we expect a positive response, positive feedback. So, with that PDUFA date, we expect to be able to launch the product towards the end of the year or beginning 2018. We have not included any projection for rabies in the U.S.

in our $100 million estimation or forecast for this year..

Okay.

And then, when you think about that -- the process of generating sales in United States, I mean is it -- I mean, there is only one other competitor; so, is it a question of sort of getting on formularies or tenders or how do we think about the pace at which that business could start to contribute you even if it’s in 2018?.

Okay. So, as you said, there is one predominant supplier in the market. The second supplier, Sanofi, has lost significant market share due to shortages over the years, by the way not only in the U.S. And the market is expecting, and we hear it from the buyers that they are expecting a second trusted supplier, and we plan on being that supplier.

Every hospital has to have anti-rabies IgG on their shelves. So, they are expecting to have at least two trusted suppliers; we will be that second one together with Grifols. .

Okay. And then, maybe could ask about the Shire relationship. I mean, as you noted, it’s been extended to 2020, it seems to be quite beneficial to you. But, may you could talk a bit about your understanding of Shire’s plans here. They had been constructing a facility in Europe to take production at some point.

Is that still the case? Do you have any insight into what their ultimate plans are in terms of whether they’re going to assume production or whether they’ll continue to source it from you?.

So, as it’s happened in the past, our agreements, supply agreements with Baxter and Baxalta and Shire have been extended already four times in the past. We don’t have any visibility beyond 2020 currently.

They may decide to construct their plant and make the product themselves, then we’ll be moving into the royalty based portion of the agreement or they will ask us to continue supplying them with the product. So, they still have time to make the decision.

I’m sure that in due time, we will have sufficient capacity to support an extended number of patients in the U.S. as we’ve done in the past. For the last six years or seven years since the agreement has been signed, we haven’t missed a single shipment.

So, either or they continue buying it from us after 2020 or they make the product themselves, we believe we are in a good position. Once we have any clarity from Shire beyond 2020, we’ll definitely update the market..

We will take our next question from Lauren Chung with Maxim Group. Please go ahead..

Hi. Good morning. Thanks for taking my call. I had a question about your pipeline on the AAT IV for the acute Graft-Versus-Host Disease. You mentioned that you’re waiting from the European regulators about the trial design. How do you envision that trial design versus the U.S.

design, and do you envision those trials -- you said you will be running in parallel; could you give me some more color on that timeline of those?.

Yes. We already have discussion with European and we’ve got feedback through Scientific Advice discussions, and that is of course very encouraging, very positive. Basically, they accepted the design of the U.S. study with some comments, some modifications.

We are meeting in the next two weeks with our advisory board for Europe to digest that feedback and be able to make some modification to the current study, so we can submit a CPA and get approved CPA for Phase 2/3 study in Europe this year. This is our plan for the year. We are planning to run a parallel to the U.S. study.

As you may know, the rights for the AAT IV indication in the U.S. are already Shire’s rights, based on the agreement signed in 2010, and we are collaborating with Shire in the U.S. while in Europe we have the right and we plan on continuing independently.

And this is one of the reasons for parallel two studies which we’ll be running in both territories..

[Indiscernible] Please go ahead..

Two quick questions.

The first, can you give some more color on the write-down maybe in the last quarter? And second, what can we expect profitability wise in 2017?.

Yes. It was result of an unexpected expense or the onetime expense in the fourth quarter and it was for two reasons altogether resulting in about $2.6 million of expense, one was a write-off of inventory, I can say not GLASSIA related.

And then, the second reason was an unexpected shutdown of the facility, was returning from a planned maintenance and shutdown, and that took us a little longer to return. But at this time, we’ve already recovered in the middle of Q4 and we are up and running as planned. So, could you repeat the second question? I’m not sure I remember it..

Yes, sure. No problem.

So, I asked that what can you -- what can we expect profitability wise in 2017? You’ve talked about being profitable, earlier in the call, but can you give some color about it?.

So, we haven’t given specific guidance on profitability, but with $100 million sales and the majority of the growth from the 77 this year or the 70 last year coming from GLASSIA, which represent 50% gross margin, you can calculate the impact of that on our bottom line. With that said, we expect to be profitable and cash positive in 2017..

It appears there are no further questions at this time. I would like to turn the conference back to our presenters for any additional or closing remarks..

Thank you very much. In closing, we are extremely pleased with our financial performance, patent development progress and operational achievements in 2016. We continue to focus strong revenue growth in 2017 as well as moving to a position of profitability.

We also expect to achieve further meaningful progress in our various clinics and regulatory development related, value-creating milestones in 2017. Kamada enters 2017 in an extremely strong operating position, and we remain focused on and committed to growing our business and enhancing shareholder value. Thank you for joining us today on our call.

And we look forward to providing you with further update on our progress throughout the year. Enjoy the rest of your day. Thank you very much..

This concludes today’s conference. Thank you for your participation. You may now disconnect..