Pharmaceutical company Kamada Ltd. (TASE: KMDA) received two milestone payments on Monday from Chiesi and Baxalta - undisclosed sums, which are believed to be a few million dollars.
The Chiesi installment was paid following the submission of a marketing authorization application for the inhaled AAT therapy to the European Medicines Agency. The Baxalta payment was earned after reaching a sales target (also unreported) for the AAT intravenous therapy in the US.
“These funds do not dilute our shares, they strengthen our position,” says CEO Amir London, in a special interview with “Globes”.
“The funds from Baxalta attest to a growth in sales to that company, and it confirms our ability to meet our own forecast of $100 million revenue in 2017.”
This is London’s first in-depth conversation with a media outlet since taking over from co-founder and long-time CEO David Tsur last year.
“Kamada now revolves around 3-4 central areas of operations,” he says. “The first is an intravenous treatment for hereditary emphysema.” Recent reports show that area to have reached a plateau of $70 million in sales, but London notes it is “only because of inventory management by our distribution partner Baxalta, which previously purchased more of the product than it needed because of contractual obligations and is now procuring less than its overall demand. We know its demand, and we feel comfortable with our forecasts.”
Baxalta was recently acquired by Shire. How does that affect you?
“So far, it hasn’t. The deal will only officially close in mid-year. Shire focuses on rare diseases, which fits into our vision. And while Baxalta was mostly focused on the US, Shire also has a serious presence in Europe.”
Why did you never market intravenous AAT in Europe?
“We wanted to ‘skip a generation’ in Europe, because when we were ready to expand to that market we already had the product as inhalation therapy.”
At the time it was said the Europeans were less enthused about the idea of treating hereditary emphysema with AAT, which is why the intravenous treatments never gained ground there.
“There is no question patients suffering from hereditary emphysema are missing the protein, that replacing the protein with a foreign supply is the accepted treatment for the disease. The question is for what treatment the insurance companies are willing to pay. There are countries in Europe where they pay handsomely, and countries where they do not pay at all.”
And what about the patients?
“They receive treatment only for the symptoms. To put it plainly: they die.”
London notes the market for treatment for a shortage in the AAT protein both in the US and in Europe is growing by 10% annually., “But we’re growing at 25% each year because our medicine is the best. It hasn’t shown up in the revenue, because of Baxalta’s inventory management. But their inventory is dwindling, meaning from now on the sales will reflect the actual growth in demand.”
The agreement said that at some point Baxalta will manufacture the product in-house and pay royalties.
“The construction of their plant has taken a bit longer, and they have extended the original agreement in which we sell them the product until 2018. The Shire move could change their decision over the factory, and we are preparing for that possibility.
“The expected royalties are in the low double-digits; from our point of view, it is less profitable per patient, but the understanding was that once they manufacture in their own plant, they would market our product to patients currently treated with older therapies. Today it is only offered to recently diagnosed, so that we have something to gain from the move.”
Phase two inhalation
Kamada planned to expand into the European market with an inhalation treatment which has zero competitors. That plan was shaken up when Kamada failed two years ago to meet its key targets in an inhalation therapy trial. However, London like Tsur before him claims there is no hitch.
“The European authority said it will examine the data from the trial in its entirety and ‘will not hold it against us’ that we did not meet our primary goal. I can repeat that phrasing even if you wake me up in the middle of the night. They could have halted us and asked for another trial, but they didn’t.”
Kamada submitted the full trial to EMA recently and is awaiting approval for the product no earlier than mid-2017.
What are they checking if not the key target?
“The trial was designed to prove episode prevention. That’s what we failed to show. We did meet the goal of improved lung function, which is the accepted aim in therapeutic trials for lung treatments; we didn’t pick it as our primary goal because we thought it would be harder. But that’s actually the one we met.”
Why does the treatment not improve the episodes as you expected?
“We did not understand the disease completely when we started the trial a decade ago. Now, after the trial, we understand it much better.”
Looking forward, the company wants to introduce its inhalation treatment in the US. “We launched another trial in the US, which will wrap up by the end of the year. We will soon meet with the FDA to show them the European trial and decide on a regulatory path in the US.”
A rabies vaccine and imports
Aside from its AAT treatment, the third leg on which Kamada is built is a rabies vaccine a $100 million market in the US which has only one central player (a subsidiary of Sanofi). Kamada has a distribution agreement with an American partner, and its product will launch in the US in 2017 after receiving all regulatory permissions. “Our product is very similar to the existing vaccine, but there is a need for two suppliers because the current one has failed to meet demand in the past.”
The fourth area of operations for Kamada is its imports into Israel, which raise revenue of $27 million. “The profitability in this area is actually improving, because we are bringing in additional products on top of the existing infrastructure. For example, our distribution in Europe, Chiesi, allowed us to distribute their asthma treatment in Israel. But future growth will not come from this area.”
The immunological dream
Which is why beyond its four foundations the company has a dream. “We are discovering our AAT protein is a significant player in the immune system,” says London. The company will test its effect on diabetic patients and those suffering from GVHD, a side effect of leukemia treatment. In both cases, the patients are not experiencing a genetic deficiency in the protein, but additional amounts may prove helpful.
No company in the world uses the AAT protein to that end, meaning Kamada bears the burden of proof. “The foundations of the research already exist in the academy,” says London. “We only compiled it and created a deeper understanding.”
Based on Tsur’s past statements, the diabetes treatment should already be on the market in certain countries.
“It’s more complicated than we thought. Which is why we made a change and decided to turn to Europe and the US first. Fortunately, Baxalta was willing to be our partner in this venture as well, despite the many offers they have.”
In conclusion, London says: “Starting in 2017, we will have a positive cash flow. We still have two important assets we have yet to commercialize the first is the inhalation treatment in the US and the second is the intravenous treatment in Europe. Meanwhile, until the agreements come in, we have enough cash ($28.3 million as of the end of 2015) to continue. The inhalation trial hurt us with the VC market in America, but we’re not just another company, we’re a player in the big leagues.”
Published by Globes [online], Israel business news - www.globes-online.com - on May 5, 2016
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