Israeli Biotech Kamada Surges as European Results Loom

Kamada Ltd. (KMDA)’s investors will find out by the end of this quarter whether they were right to bet on the maker of treatments for hereditary lung disease getting close to a major expansion in Europe.

That’s when Kamada expects the results for a mid-stage study testing its inhalator device in more than 160 patients with a condition called Alpha-1 Antitrypsin deficiency. Success would bring the company closer to approval in a European market that brokerage Leader & Co. estimates is worth about $200 million a year with potential for growth.

“If this trial succeeds, their chances of becoming the main player there will be very good,” said Sabina Podval, an analyst at Leader in Tel Aviv who recommends buying Kamada shares. “They would be the only company with an inhalation therapy.”

Success also may catapult Nes Ziona, Israel-based Kamada into position as the country’s second-biggest health-care company, behind Teva Pharmaceutical Industries Ltd. (TEVA) Kamada shares have risen 54 percent in the past year, compared with an 11 percent increase for the TA-100 Index as of yesterday’s close. The shares advanced 1.7 percent to 57.74 shekels at the close in Tel Aviv.

With a market value of 2 billion shekels ($568 million), Kamada ranks fourth among health companies domiciled in Israel. Teva is by far the largest, with a market value of about $37 billion, followed by Taro Pharmaceutical Industries Ltd. and device maker Given Imaging Ltd.

Nasdaq Listing

Taro isn’t listed in Israel, is managed from the U.S. and is majority owned by India’s Sun Pharmaceutical Industries Ltd. Given is in the process of being acquired by Covidien Plc.

To be sure, part of the reason for the surge in Kamada’s stock in the past year was the company’s listing in May on the Nasdaq Stock Market in the U.S., which gave it increased visibility in the world’s biggest equity market. Four U.S.-based analysts now recommend investors buy the shares.

“The Nasdaq listing had a pretty significant contribution to the stock,” said Podval.

Kamada and competitors such as Barcelona-based Grifols SA (GRF) market intravenous treatments for Alpha-1 Antitrypsin deficiency, a disease that RBC Capital Markets says is still largely underserved, with only about 7,000 patients globally being treated out of as many as 200,000 with the illness. Kamada sells Glassia, its intravenous drug, in the U.S. with Baxter International Inc.

Sales Agreement

A simpler drug that demonstrates strong efficacy could capture market share in Europe, according to Adnan Butt, a San Francisco-based analyst for RBC, wrote in a report. Kamada estimates only 2 percent of patients in Europe are treated.

To prepare for a potential 2015 approval, Kamada signed an agreement in 2012 for Chiesi Farmaceutici SpA of Italy to distribute the inhaled product. A Kamada spokesman declined an interview request before the trial results are announced.

AAT deficiency occurs if the AAT proteins made in the liver are not the right shape and get stuck inside liver cells, failing to make it to the lungs in large quantities and increasing the risk of lung disease. The malady is an inherited condition most often occurring in people of European descent.

Kamada’s injectable product treats about 400 of the 5,500 patients in the U.S. at an annual price of about $80,000 to $100,000 per patient, according to RBC. Only about 1,500 patients are treated in Europe, where the market remains largely untapped because payors are more strict with reimbursements, according to RBC.

‘Game Changer’

Most patients in Europe are treated with Grifols’s Prolastin and Trypsone, RBC said. If Kamada shows strong clinical efficacy, it could convince insurers and governments to cover the drug and doctors to prescribe it, RBC said.

“Approval of an inhaled AAT would be a game changer there because not only will patients have a more convenient drug available to them but also have efficacy data based on clinical outcomes,” Butt wrote.

Analysts predict that Kamada sales will increase by 58 percent to $111.3 million by 2016, according to the average of three estimates compiled by Bloomberg. Less than 5 percent of revenue came from Europe in 2012.

“Kamada’s ability to validate this drug would give a boost for the confidence in the biotech sector,” said Podval, the Leader analyst. “It’s a good sign to see a biotech company growing and generating significant sales.”

To contact the reporter on this story: David Wainer in Tel Aviv at dwainer3@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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