Q2 2020 Knight Therapeutics Inc Earnings Call
[music].
Morning, Ladies and gentlemen, my name is Michelle and I will be or operator today.
Tonight Therapeutics Inc. Twentytwenty second quarter final results conference call.
Turning the call over to Jonathan Ross Good Minchey. All night listeners are reminded that portions of today's discussion may by their nature necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward looking statements.
Company consider she assumptions on which these forward looking statements are based to be reasonable at the time favorite prepared the cautions that these assumptions regarding future events, many of which are beyond the control at the company and its subsidiaries may ultimately proved to be incorrect accompany disclaims any intention.
Okay sure update or revise any forward looking statements by their results new information feature events, except as required by law, we but also like to remind you question. During today's call will be taken from analysts Alain should there be any further questions. Please contact nice Investor Relations Department fit.
<unk> email to info.
Gee, you Dee Ann I G. H T. Dot night again that is in follow G D and K and I G.H.T. dot com or via phone at 5.46788930, I would like to remind everyone that this call is being recorded.
Today August 13th 2020, I went down like to turn the meeting each year host for today's call Jonathan Ross Goodman. Please go ahead Mr. Goodman.
Good morning, everyone and welcome to make Therapeutics second quarter 2020 conference call.
I'm joined on today's call the summer socket ARQ <unk> operating officer mockery, our VP of business development and Arpan, we're trying to our chief financial Officer.
Despite the fact that due to cope with we continue to dance or acquisition or group of people scanner, but the launch of our tender offer depart maybe 48.8% of GBP.
Furthermore, even faster commercial presence in product pipeline with the regulatory approval of the girl in Canada.
When beemer in Ecuador, and the Canadian and licensing and Onboarding doctoral store.
Well now turn the call over the summer Who'll walk you got to bolt and folio and corporate.
Uh huh.
Thank you job and good morning, everyone.
I'll provide an update on our products, which has continued to advance in the quarter.
As announced in January Knight has partnered with DAP. Your farm in an exclusive agreement that Greg Tonight, The Canadian rights to commercialize trip trial and market as true star and the L. Each are each I guess for the treatment of prostate cancer.
This quarter with the transfer the marketing authorization and they took over the commercial activities of trials are in Canada.
In addition, as we discussed in or last call. In April 2020 night obtained to help Canada's approval for Estrella or turned up in order for the treatment of irritable bowel syndrome with constipation.
We expect to be launching its really an early 2021.
In addition on June Thirtyth 2020, our partner Ardelyx announced that it had submitted a new drug application to the U.S. food and drug administration for the control serum phosphorus.
The control of serum phosphorus in adult patients with chronic kidney disease on dialysis.
Finally in July 2020 night obtained regulatory approval for Len via email or.
Then bad Lenvatinib in Ecuador for the treatment of advanced liver cancer as well as advanced kidney cancer in combination with Everolimus and differentiated fired cancer.
Lung FEMA is sold by GBT under an exclusive license agreement with a site.
Moving onto our corporate update during the second quarter, we announced that we had completed the 2019 and she'd be an had purchased a total of 12 million 53692 common shares at an average price of 714 per share.
Subsequent to the quarter in July 10th we announced the acceptance by the Toronto stock exchange of the company's notice of intention to make a normal course issuer bid, which commenced on July 14th 2020, undo that 2020, and she I'd be nightmare purchase for.
Cancellation up to 10.8 million shares.
Over the next 12 months as of today Knight has not purchase any shares under the 2020 in Cherokee I'm not going to turn the call over to a mall a true update on BD activities.
Thank you semi around and good morning, everyone. A as we previously announced the acquisition of 100% of could be at this cannot was by way of a two step transaction.
The first step was the acquisition of 51.2% majority stake or private transaction that we closed on November 29 to 2019 and that game Tonight, a controlling interest rate in December of last year.
We started the process for the second stuff, which is the mandatory tender offer for the minority BPR holders.
On July 15, 2020, following approval by the Brazilian Exchange and Securities Commission, we launched the tender offer to acquire the remaining 48.8% of GBP.
In accordance with the offer you do our whole birds are eligible to tender their VTR at the auction, which will take place Tomorrow August 14th.
At the end of the auction nights to its wholly owned subsidiary will take up all BDR standard at the auction and will settle within two business days.
If at least 67% of the participating BDR city auction or tens are all this for those cards in the offer notice night will discontinue the PDR program and the list GBP.
If after the tender and there was mainly be dealers represents less than 40% of the total shares outstanding which include both deals in common shares then need to proceed with a squeeze out process all as outlined in the ultra bonus.
I will now turn the call over to Arvind took over the financial results for the quarter.
Thank you demo.
Because of this conference call.
Right understood earnings, which is a non Petrobras measure.
Nice defines adjusted earnings as for breaking lost income I understood to exclude amortization and impairment of intangible assets.
Station acquisition costs, and nonrecurring expenses incurred but includes net interest income and costs related to these.
In addition, the adjusted earnings do not like the portion that you'd be jeez, I mean attributable to the non controlling interest.
I'm pleased to report that with the quarter ended June so to your Twentytwenty reported revenues of $50.3 million, an increase of $15 million, all 1562 per cent compared to the same period last year.
The growth in revenues is explained by the consolidation of GBP its financial results, which accounted for 48.9 million Boes incremental revenues.
You bet, you generated $21.8 million in Brazil, and point $7 million in Argentina $8.5 million in Colombia, and just under eight gondolas and the rest of Latin America.
The increase of 55% or $1.1 billion nice revenues for the quarter was mainly due to timing sales I mean would be though groping movantik sale and be in licensing or coastal.
We also reported gross margin of $22.2 million, 42% of Netsols.
Compared to 22 $2.9 million for 92% of net sales in the same period, but.
The change in gross margin in dollars and as a percentage of shields was mainly due to their consolidation of diabetes financial results.
Furthermore, we recorded an inventory provision of $1.6 million due to the black of could be 19 on so to new product launches in Canada and Latin America.
In addition, after excluding the impact of hyperinflation in accordance with our yesterday Tonight. The gross margin as a percentage of sales would have been 47% type person. How you then.
I would like to remind this news about the presentation, explaining the basics counting hyper inflation.
Do I volleyball, nice website under the investors relation because on future function.
I was selling and marketing Ginnie and R&D for the quote that increased by $13.3 million for 214% over this compared to the same period last year.
The apartments is explained by the consolidation of diabetes financial results, which accounted for 15 were going to those incremental expenses.
Nice portion of selling marketing Jenny and R&D decreased by 1.7, London, those compared to doesn't get rid last year.
Mainly due to nonrecurring expenses in the same good quick took 2019 relate that to marry Jochumsen Sheboygan I could just company.
I would like to I'd that night expects to incur significant additional expenses in the second half of 2020 related to closing the GBP mandatory tender.
Now moving onto amortization of intangible assets.
The quarter I Wouldnt ization of intangible assets is that $5.8 million, an increase of $5.4 million versus the prior period.
Increases related to the amortization of the definitely intangible assets, but we have acquired in digital coupons action.
Nice interest earned on cash marketable securities and strategic loans was 3.7 million Boes.
<unk> decreased $2.5 million, 40% compared to the second quarter.
2019 between decrease in the average cash and marketable securities balances, partially offset by a bridge loan.
In addition, we recorded interest expense for the quarter of $2.3 million through through the interest expense on diabetes Bank loan.
1.1 adult lives as well as interest accretion of $1.2 million on the liability related to the mandatory tender.
For the quarter adjusted earnings were just under 10 million Boes hundred, 19% or $5.4 million compared to the same quarter last year.
The consolidation of GBT its financial results accounted for 7.6 million of decrease which is partially offset by decrease in night interest income.
Doesn't it nonrecurring.
Adjustments made to the operating loss for the second quarter of 2020 is greater than $4000 and we present additional restructuring activities in connection with the integration of GBP.
Now moving onto gains and losses that are not reflected in adjusted earnings.
With the quota recorded in net gain on financial asset measured at fair value for profitable loss of 16.5 million, though.
Mainly due to unrealized gains on revaluation of the strategic fund investments.
In addition, we recorded in that game on demand, that's we tend to offer or.
I'm fuel I believe you reported one adults threepd unrealized gains on foreign exchange revaluation of the Brazilian real denominated mandatory tender offer liability upside by an unrealized loss on board and none to their broker wouldn't control.
Furthermore, we recorded it realized gain of one what's great million dollars an hour and she has been inside these automatic share purchase.
Lastly, we recorded replenishing loss of $4.1 million due to the consolidation of GBP its financial results as well as nights related losses, and certain U.S. dollar denominated financial losses.
I will now turn to keep balance sheet items I'd like to encourage yet it just doesn't play.
At the end of the quota nights had to $567 million in cash cash equivalents restricted cash and marketable securities.
An increase of $30.1 million compared to the end of that fourth quarter Twentytwenty.
The increase is mainly due to proceed from the sealed up she has in medicine, partially offset by the purchase Osha and CSB and the acquisition of intangibles.
I would do more cash.
I should your bonus restricted cash and marketable securities with $25.7 million lower than the first quarter of 2020.
Do you tweak the 17 money on $17.9 million of purchases relate to.
JB pinpoint $1 million bested in tangible assets.
$6.8 million of bank will create might offset by $8.1 million terrific from before you can activities.
Great and or the receivable was $77.8 million decrease of $3.3 million compared to Q4 2019.
Oh, the decrease $22.8 million relates to the decrease in both short term and look to trade receivables due to the depreciation of Latam currencies. The net collection collection of receivables and be credit loss provision recorded in Twentytwenty.
The remaining difference is mainly due to the collection nobody distribution receivable from its funding best month, any decreasing interest through scribbled due to the timing of the much reviews of the marketable securities as well as a declining interest rates.
Oh, well inventory balance at the end of the quota was $71.8 million an increase of just under $1.001 billion compared to the end of last year.
The increase is due to the timing of battery purchases and the impact of high penetration that just my.
Socially upside, but in bench, we propulsion and the depreciation of Latam currencies.
The total accounts payable.
Okay, and other likely piece of $68.5 million decrease of $27.6 million.
Oh, 29% compared to Q4 2090.
The decrease is mainly due to be myself in battery purchases the minutes of GBP transaction fees, the depreciation of Latam currencies and the lower accrual Bala as compared to December flaky post 2019 due to timing.
Lastly.
Night reported eight total debt of $46 million, it decreased $9.6 million or 17% compared to Q4 2019.
Mainly driven by the loan repayment of $7.5 million.
And he's going to Cushing revaluation, partially offset by an additional one issue to GBG.
I will now turn the call back to summer.
Thank you Arvind sense, Yeah Burke of current Novartis or close to 19, our focus has been on ensuring the continuity of product supply to patients in Canada, and Latin America, while at the same time, ensuring the safety of our colleagues throughout the region and their families.
While we continue to work from home, we're continuing to execute on the integration of deals just kinda closing, 100% acquisition and working on business development opportunities to grow the business I'll now turn the call back over to Jonathan for his concluding remarks.
Thanks, Amira remain committed to improving the health of Canadians No Latin Americans, while delivering sustained shareholder value.
Thank you for your support and confidence in the night team. This concludes my formal remarks, now I'd like to open up the call for questions spread.
At this time, if anybody would like to ask a question. Please press star one on your telephone keypad again that would be star one on your telephone keypad again, we have a by only take questions from analysts.
Your first question comes from David from Martin Your line is open.
Hi, good morning, congratulations on the good quarter. Our first question in Brazil, you had some shipments that were supposed to occur in Q1 that moved into Q2 I I'm wondering how much of any impact how big were those orders in Q2.
We didn't we we don't usually provide.
The kind of the does shift that happened, but it explains a better if the growth that we have.
Okay.
You are talking.
Okay. I'm also in Q1, you mentioned several things slow down in new cancer diagnoses and slow down in the use of other hospital drugs also the impact to cool bid on your Crystal ball launches in various countries and your integration of GBT I Wonder.
And if any of those issues normalized at all or you still feel like a full impact.
So throughout the market.
We there is a slowdown.
Well, we're seeing there.
In all of the markets it really depends very it's dependent on a market by market.
And the [laughter] be certain.
Certainly like certain treatments are continuing depending on the market. We have some products that are in the retail we have some products at our institutional and specialty and depending on the product it depending on the product or their territory and the level of shutdown, we're seeing a different response.
There is slow pick up but similar to <unk>. This is not just a night or GBT impact you you're seeing this through throughout the industry, where fewer patients are going in.
And fewer diagnoses are happening we are seeing that in oncology, we are seeing that a little bit and we're seeing that also in cytology, but.
The our sales teams our medical teams are continuing to deliver the message digitally in most smart in all markets.
And it varies interest in the products. It's just it is going to take time to normalize stock.
Okay, and what what about your integration of GBT have you been able to accelerate thought process.
We're continuing to work really hard [laughter], both here and in South America, everybody's really focused on execution.
The teams are looking at things like basic stuff like systems and processes, where things are slowly starting to advance and and integration is on multiple fronts and multiple teams and.
Things are starting to come together, but this is this is going to be a long process over the next still over the next few months.
And he is adding products to the portfolio kind of art in the background until the integrations finished or are you looking about a in parallel.
Absolutely not tell I'm going to ask them all but.
But her priority is really to us.
Yeah, no absolutely David it. So we spent the B D never never took the backseat, it's always been front and center and we we haven't at all de prioritized yourself working we're actually.
We've been quite busy hone in on the P.D. front from a you know even from as soon as because the first the private transaction within a we've been active.
Are you seeing opportunities, where you'll be able to get products for both Canada and South Central America.
Yes.
Okay, and then last question Charles Star, a mature product that hadnt been promoted to have you started to see a positive impact on sales of the product now that you've started promoting up.
Absolutely.
Yeah. It is a little bit too early because it was in the middle of Q2.
We've we've had really good interactions with physicians that it's a little too early to tell I remember at this point any and all of those interactions are all virtual.
Okay.
Okay. Thank you.
Again, if anybody would like to ask a question. Please press star one on your telephone keypad.
Again, if anybody would like to ask a question. Please press star one on your telephone keypad. Your next question comes from Justin Key word from Stifel. Your line is open.
Hi, good morning, and thanks for taking my call I was just wondering if there's any type of a pandemic car relief program that contributed to the.
Profit in the quarter and if that's an opportunity in the near term.
Hi, just no Oh, we I I assume you're you're talking about things like government grants.
Correct that we would have taken advantage of so.
The I think they and we did look at this early on.
The only market that is providing any of the ones that we're working in it that is providing pandemic releases in Canada, and we wouldn't be eligible.
And the rest of this is really a continued work by the teams on executing.
Okay understood and then but just a bit of a broader a question just as far as business development opportunities. You know obviously the business is more focused and intellect and is Canada. It's still a priority or are you looking at a new assets here.
Or is the you know shift you know more to the Lat am region.
Oh sure.
Yeah sure.
Well, we're looking we're looking across our territory. So we're looking at opportunities for Canada and lifetime ideally, we'd like opportunities for the entire territory, but we remain flexible for some opportunities that may either only be available for one versus the other or me.
Have a better fit and one portfolio versus the other but we are we continue to look for opportunities in Canada as well as lifetime.
Okay, and I know Mexico.
Well its mentioned as a you know, possibly a good opportunity to.
Increase that exposure of GBT, but obviously there are having some challenges there was the cobot 19 outbreak has that changed your opinion at all it as far as a potential acquisitions in the area has that delayed it or do conversations are they continuing.
Some so it hasn't really changed the interest and the importance of the Mexican market, but there has been some delays or not just for Mexico, but across the board some conversations in some process. He's had has been.
Delayed or temporarily put on hold a because of the pandemic and some conversations continue.
Okay and then just one last question just on the EBITDA or gross margins up.
Is this a good level to use a as far as modeling.
In the near term.
Neil possibly some expected improvement ahead or should we you know maybe I anticipate some some greater cost in the near term.
That's a great pleasure.
Turn it over to Arvind.
Hi.
So on the it'd be the interest as a reminder, like on the gross margin like what you see on our financial statement includes hyperinflation. So so one thing to consider is ambient the gross margin without completion and we do provide the schedule in the press release, where we showed you were smoking without concentration. So that's one thing because.
Peter.
In terms of impact to gross margin in the low to medium term.
It's it's really a multiple talk to her question and that it's quite a it's northeast we'd go into answer. So there's really three things I would consider this one is a contract renewal so as we have negotiation or when you will that contracts.
We generally would expect in the world human on margin.
The second one is FX, we do have high volatility in the last time currency and back to would create volatility into margin and deferred point to consider is your product mix. So as we launch product the euro and neither in the coming usually we will have a change in product mix industry will impact the merger so good.
An older <unk> looks like there's a paid just mentioned it's it's a it's hard to predict the gross margin and really where everyone. Let in India me Jim too.
Long term.
I believe you could look at Yep historical secretion of GBP is margin.
And if you go back in but to the last two years, it's usually pictured thing plus or minus five person when that bridge.
Only basis.
Okay. That's helpful direction I appreciate you taking my questions. Thank you.
Thank you.
Again, if anybody but like I ask a question. Please press star one on your telephone keypad.
I have no further questions. Thank you I turn the call back over the percentage for closing remarks.
Thank you for your confidence in the my team and for joining our Q2 2020 conference call.
They stay healthy they say and stay connected.
Thank you everyone. This will conclude today's conference call you may now disconnect.