A month ago, we published a recommendation for five Israeli biomed shares, including Kamada Ltd. (TASE: KMDA). Kamada was included on the basis of the pending US Food and Drug Administration (FDA) approval of the company's drug, Glassia. This approval was granted on Friday.
The FDA's approval for marketing in the US of Glassia intravenous AAT (Alpha-1 Antitrypsin) drug for congenital respiratory diseases was expected. This is an important milestone for Kamada, which set its sights on the transition to plasma products with high profit margins, and the move leads to recognizing the decline in the basic risk of investing in the share.
The intravenous AAT market in the US is estimated at $450 million a year, with a growth rate of 7%. The market is dominated by Talecris Biotherapeutics Holdings Corporation (Nasdaq: TLCR), Baxter International Inc. (NYSE: BAX), and CSL Ltd. (ASX: CSL).
Kamada, which has a distribution agreement with AmerisourceBergen Corporation (NYSE: ABC) for Glassia, should win a 10-15% share of the AAT market in the US within a few years. We expect that by 2013, the company will reach $50 million in AAT sales and $20 million in sales of other products.
The FDA approval reduces the investment risk in Kamada's share. However, we are keeping our target price unchanged at NIS 30 because we're waiting for the data about the progress of the launch, the results of discussions with the FDA on the format of the clinical trial for inhalable AAT, and progress in Kamada's rabies plan.
Applying a sales multiple of 4 on the 2013 results, while using a 15% discount over three years, plus the value for R&D, leads us to estimate Kamada's company value at $210 million, or NIS 30 per share (after discounting convertible bonds and warrants).
Bottom line, although it was expected, this was a very positive approval for Kamada, and reduces the risk of investing in it. We advise keeping the company's shares in the recommended basket of holdings.
Kamada's share price fell 4.1% in morning trading to NIS 23.26, giving a market cap of NIS 664 million.
Dr. Yoav Keidar is the life sciences expert advisor at Clal Finance Ltd.
Published by Globes [online], Israel business news - www.globes-online.com - on July 5, 2010
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