Q4 2022 Knight Therapeutics Inc Earnings Call
Speaker 3: Before turning the call over to Samara Sakia, President and CEO of Knight, 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. The company considers the assumptions on which these forward-looking statements are based on.
Speaker 3: forward-looking statements, whether a result of new information, future events, except as required by law.
Speaker 3: We would also like to remind you, questions during today's call will be taken from analysts only. Should there be any further questions, please contact Knight's Investor Relations Department via email to info at knighttx.com or via phone at 514-484-4483.
Speaker 3: I would like to remind everyone that this call is being recorded today, March 23, 2023, and would now like to turn the meeting over to your host for today's call, the Mayor of Sequia. Please go ahead, Ms. Sequia. Thank you for being with us.
Speaker 4: Thank you, Karen.
Speaker 4: Good morning everyone and welcome to Knight Therapeutics fourth quarter and URAN 22 conference call.
Speaker 4: I am joined on today's call with Amal Khoury, our Chief Business Officer, Arvind Uchina, our Chief Financial Officer, and Jeff Martins, our Global VP Commercial.
Speaker 4: I'm excited to announce that we delivered another great year in 2022 and reported record revenues of over $290 million, a growth of 21% over last year, as well as record adjusted EBITDA of over $54 million, an increase of 42% over last year.
Speaker 4: This growth was generated by the Fourier effect of Exelon, the impact of our recent launches in Colombia, as well as continued growth from our key promoted products.
Speaker 4: We have also executed on all aspects of our portfolio strategy. We in-licensed a Kinzio, a product with existing sales in our key markets, and further expanded our innovative pipeline with the in-licensing of FOSTA-MATININ from Rigel. We also added three products to our branded generic pipeline, which include the right...
Speaker 4: and obtained a regulatory approval of Palbasil in Argentina.
Speaker 4: In addition to delivering record results and advancing our pipeline, 2022 was very productive as we completed the integration of GBT and fully onboarded Exelon and Ekinzio.
Speaker 4: Turning now to the NCIB, during the year we purchased approximately 5.6 million common shares for aggregate cash consideration of over $30 million.
Speaker 4: Subsequent to the quarter, Knight has purchased an additional 1.3 million common shares for aggregate cash consideration of $6.5 million.
Speaker 4: The average purchase price of the shares purchased through the NCIB
Speaker 4: Launching July 22 was $5.31 per share.
Speaker 4: I'm now going to turn the call over to Jeff to provide more details on our product results.
Speaker 5: Thank you, Samira. In 2022, as Samira mentioned, we have delivered record revenues of over $290 million, an increase of over $48 million on a constant currency basis, or 20% over prior year.
Speaker 5: We grew across all of our therapeutic areas due to the increasing market penetration of our new launches, as well as the full year acquisition effect of Exelon.
Speaker 5: Now I'm moving to our oncology hematology portfolio.
Speaker 5: During the year revenues, excluding hyperinflation, were $105.5 million, a growth of $16.4 million, or 18% versus the same period last year.
Speaker 5: This includes a contribution from our key promoted brands.
Speaker 5: our key promoted brands, including new launches.
Speaker 5: of Lembema, Palavant, and Rembrandt Columbia in the first quarter of 2022.
Speaker 5: the growth of our promoted products in all territories.
Speaker 5: and the addition of a Canzeo in Brazil and Canada. This increase was partially offset by a decline in sales of certain branded generic products.
Speaker 5: due to their life cycle and entrance of new generic competitors.
Speaker 5: As for our infectious disease portfolio, we delivered revenues of $116.5 million, excluding hyperinflation.
Speaker 5: Our portfolio grew by $29 million due to an increase in patient treatments as our markets reduced COVID-19 restrictions.
Speaker 5: Growth of our key promoted products and a one-time sales contract with the Ministry of Health in Brazil for Amazon. We recorded a $7.5 million in the quarter, which represents 40% of the full value of the contract, and we expect to deliver the balance in the first half of 2023.
Speaker 5: This quote is offset by an estimated $14.2 million due to lower COVID-related demand for certain of our infectious disease products that were used to treat invasive fungal infections associated with COVID-19 and plan and the plan transition and termination of the Gilead Agreement effective July 1, 2022.
Speaker 5: Now moving to our other specialty portfolio. During the year, revenues excluding hyperinflation were $69.8 million, an increase of $21.3 million compared to prior year. This increase is mainly due to the full year effective exelon.
Speaker 5: and the change in accounting treatment from net profit transfer to recognition of net revenues and related cost of sales.
Speaker 5: I will now turn the call over to Arvind to provide an update on our financial results.
Speaker 6: Thank you, Jeff.
Speaker 5: In the course of this conference call, I will refer to EBITDA and adjusted EBITDA, which are known IFRS measures.
Speaker 7: NITE defines AVID as operating income or loss excluding amortization, an impairment of intangible assets, depreciation, purchase price accounting adjustment, and the impact of accounting under high penetration. NITE defines AVID as operating income or loss, including amortization, an impairment of pathological assets, depreciation, purchase price accounting, and the impact of amortization, an impairment
Speaker 7: but to include costs related to leases.
Speaker 7: I just said EBITDA excludes accruation costs and non-recurring expenses.
Speaker 7: I will go directly to Gross Margin since Jen has already discussed our revenues.
Speaker 7: For the fourth quarter of 2022, excluding the impact of hyperinflation, we reported a gross margin of $41.9 million, or 50% of revenue, compared to $28.6 million, or 51% of revenue in the same period last year.
Speaker 7: For the year ended December 31, 2022, gross margin excluding hyperinflation was $150.3 million or 52% of revenue.
Speaker 7: compared to $118.8 million or 50% of revenue in the same period last year.
Speaker 7: The increase in gross margin as a percentage of revenue is due to the change in product mix as well as the foliar effect on the acquisition of Exelon.
Speaker 7: We want operating expenses excluding high compensation, amortization, and impairment of intangible assets.
Speaker 7: For fourth quarter, our operating expenses were $29.2 million, an increase of $4.6 million compared to the same prior year period.
Speaker 7: The year ended December 31, 2022.
Speaker 7: Our operating expenses were $99.3 million, an increase of $15.2 million versus last year.
Speaker 7: As we return to normal commercial activities, we see an increase in our sales, marketing, and medical costs for our key promoted brands, including promotions spent behind the relaunch of Exelon and Akinzio.
Speaker 7: In addition, we saw an increase in compensation expenses as we strengthened our structure, including the management team and certain variable costs such as logistic expenses which rose as a function of higher sales.
Speaker 6: On toitions.
Speaker 7: For the fourth quarter of 2022, we reported $13.8 million.
Speaker 7: increase of $8.1 million dollars or 143% compared to the same prior period.
Speaker 7: When the year ended December 31, 2022, our adjusted Aveda was a record $54 million, an increase of $16 million, or 42% over the same prior year period.
Speaker 7: Moving on to impairment of non-current assets which is not reflected in our ages that have been done.
Speaker 7: For the year ended December 31, 2022, under IFRI, we recorded an impairment of $24 million, of which $21.6 million relate to PP&E, an intangible asset in Argentina.
Speaker 7: The main reason for the write-down in Argentina is the increase in the value of non-monetary assets due to the high pronunciation adjustment under Air France.
Speaker 7: Under high-compensation accounting, the net carrying value of non-monetary assets including PPE and intangible assets is adjusted by the inflation index and converted back to Canadian dollar at the closing rate of the reporting period.
Speaker 7: During a period where the inflation index is higher than the devaluation of the urgent time peso related to the Canadian dollar, the net carrying value of the non-monetary assets will increase in Canadian dollar which can lead to an impairment.
Speaker 7: Now moving on to gains or losses on our financial assets which are not reflected in our agenda I just did a bit of that.
Speaker 7: In 2022, we recorded $20.7 million of net unrealized losses on financial assets measured at fair value through profit or loss.
Speaker 7: The loss is driven by the mark-to-market adjustment of underlying assets as a result of a decrease in the share prices of the WPTrader equities held by our strategic funds.
Speaker 7: Moving on to our cash flows, in 2022, NIGE generated cash and sales from operations of $40.5 million, including a networking capital investment of just under $10 million, mainly due to the onboarding of Amazon and Accentable.
Speaker 7: Finally, in December we closed alone with the International Finance Corporation for $52 million denominated in Brazilian variety, combined with Mexican and Chilean pesos.
Speaker 7: A five-year loan has customary financial and non-financial covenants and is secured against certain assets of night as well as a restricted gas quality role of 35% of the loan balance. The currency interest rates on the long range between 7.9% to 15.8% annually.
Speaker 7: I will now turn the call back to Samara for concluding remarks.
Speaker 4: Thank you, Arvind.
Speaker 4: Now turning to our financial outlook for 2023.
Speaker 4: Excluding the impact of IAS 29 or hyperinflation, NITE expects to generate revenues of $280 to $300 million and adjusted EBITDA between 13 to 15% of revenues.
Speaker 4: I'd like to remind everyone that this guidance is provided on a non-gay basis due to the difficulty of predicting Argentinian inflation rates.
Speaker 4: The guidance is also based on a number of assumptions which are described in our press release.
Speaker 4: Should any of the assumptions differ, the financial outlook and the actual results may vary materially. Contact us today for a fullUBARquet Myth proper!
Speaker 4: Our team has been extremely successful executing on our Pan American ex-US strategy and has built a profitable business with a unique platform and a strong foundation from where to continue growing over the long term.
Speaker 4: We ended 2022 by delivering record revenues and record adjusted EBITDA as a result of growing our current portfolio as well as adding new products that leverage our existing platform.
Speaker 4: Looking ahead, while we face headwinds with the entrance of new competitors on certain of our branded generics products as well as in current investments related to launch products, Knight is expected to continue to generate strong cash flows from operations and with over $150 million of cash and $175 million of financial assets.
Speaker 4: We remain well positioned to execute on our mission to acquire, license, develop and commercialize pharmaceutical products in Latin America and Canada.
Speaker 4: Thank you for your support and confidence in the NITE team. This concludes our formal remarks. I'd like to now open up the call for questions.
Speaker 3: Thank you. Before we begin, may I please remind you, questions during today's call will be taken from analysts only. Should there be any further questions, please contact NYT's Investor Relations Department via email to info at NYTTX.com or via phone at 514-8
Speaker 3: four eight four 4, four eight three.
Speaker 3: If you would like to ask a question, please press star followed by the number 1 on your telephone keypad.
Speaker 3: If you are using a speakerphone, please lift your handset before pressing any key. If you would like to withdraw your question, please press star 2.
Speaker 3: Again, that's star 1 if you'd like to ask a question.
Speaker 3: We'll take our first question from David Martin with Blue Curtain.
Speaker 3: first question from David Martin with Blue Burton. Your line is now open. Please go ahead.
Speaker 5: Good morning. A few questions. Great quarter. You mentioned facing generics in the upcoming year. I'm wondering, is this year expected to be more heavily genericized than in the past? Or is this pretty status quo as far as generic threats? Is Axilen one of the products where you anticipate?
Speaker 4: generics that have been the large contributors are facing more competition, more new entrants in that same molecule in the next year.
When it comes to our innovative portfolio, including Exelon, we've known about generics on Exelon. We've faced already some generics. We do expect... read joke...
Depending on the market, either a new entrant or a couple more new entrants, for the year we're still expecting it to be generally flattish as a brand.
Okay, okay and you mentioned the M-Biosome contract. I think you said seven and a half million received to date which is 40% of it. Was that all in Q4 and then when do you expect to receive the remaining 60%?
So it was all in Q4, the 7.5 million related to Ambosome, and the second portion of that order is supposed to deliver in the first half.
Okay, and then lastly, can you give any commentary on your business development pipeline right now? Does it look as strong as ever? Have there been any changes that you've seen?
Good morning. This is Amal. Yes, the pipeline is very – the deal flow is very healthy. The team is very active. And we continue to look at opportunities along all three.
all three work streams, so acquisitions of products and portfolios, and licensing of innovative products, as well as growing our branded generics portfolio, so whether it's internal development or licensing. So, the technology remains quite active along all three.
Okay, thanks. That's it for me. Thank you, David. We'll take our next question from Andre Leno with National Bay. Please go ahead.
Hi, good morning. Thanks for taking my question. The first one is a bit more related to guidance, but what I wanted to ask is the products that are facing the generics competition in 23, is there any kind of new product that you can launch to counter some of that, whether it be branded generics or new ones, or do we expect that?
generic impacts to continue throughout the year and into 2024 with
So basically, can you offset that with anything you think? So we are offsetting. So when it comes to our branded generics portfolio, it's kind of as they mature, new entrants come in. It could be more of a price erosion and a margin erosion.
And that's really what we're seeing going into 23. The way we're countering that is obviously through the promotional efforts on our innovative products that are growing. We're also launching some branded generic products ourselves, newer products. So you see that in the new launches in our press release.
The issue that we have is kind of a timing of when is the new launches happening versus as the erosion and This is why our BD team has been extremely busy on all three fronts acquisition in licensing as well as the generic portfolio and we will continue to
really strengthen the portfolio to be able to manage these waves that are normal.
Great, thank you. Thanks for the answer. And in terms of then the cost, do you expect any increases in the cost, for example, versus what you did in 2022, in 2023, or are they generally more stable?
So when I look at kind of the dollars that we have in our OPEX this year, we expect 23 to be flattish. I'll make sure that I have everything up to date. Okay, thank you.
Great, thank you. And also, there was a mention, a comment on the press release about investing more in 2023, doing some investments. Can you specify what those investments could be? I mean, are there more in personnel or are you adding any?
in manufacturing capacity or in new launches or anything like that? Well, as you know, a lot of our products, when I look at the innovative portfolio, there is a relaunch of Exelon, there is a relaunch of Econzio. We are doing planning and prep for Minjuvi, we have Linfima and Halivan in Colombia.
Those are investments that are going to continue to be ongoing. As I said before, the total value of those dollars is not going to change between 22 and 23.
Great. And the last one for me, I'll jump in the queue. But the contract that you got from the Ministry of Health in Brazil, is there any reason – if you can't characterize it and describe it a little bit, what is it for? Any reason why it could be only one time? Have they found another product? Or is there a generic that's coming along, or any kind of color there? And what's the probability that the page repeats again?
So I think in this case, the government had some experience with Ambasom and during the kind of the public side of the business would have had some experience due to COVID. I suspect that they had shortages maybe on some of the competitor products that are cheaper.
So we receive this contract. We don't put a high likelihood of a renewal of this contract.
So we will shift the second half. We don't expect it again. Okay, I think I will jump in the queue. Thank you.
As a reminder, if you find that your question has been answered, you may remove yourself from the queue by pressing star 2. If you'd like to join the queue, you may press star 1 at this time. We'll take our next question from Scott McCauley with Paradigm Capital. Please go ahead. Good morning, Samira. Congrats to you and the team on that.
shows that that would, you know, the number would come down year over year relative to 2022. So just, you know, despite the growth in the top line, so just wondering what you could share in terms of what's contributing to that kind of margin pressure on the bottom line despite the growth on the top line. Sure. So as we said, where we're seeing the headwinds is really coming
on that product drops straight to the bottom line.
So it's more on the gross, as I think you said, you expect costs and other things on personnel to be flattish. It's more on that gross margin impact from the brand engineer.
on the gross – I think you said you expect costs and other things on personnel to be flattish. It's more on that gross margin impact from the brand engineer. Exactly.
Thank you very much and again congrats on a great year. We'll take our next question from Sahil Dhingra with RBC Capital Market. Please go ahead.
Hi, good morning. Thanks. This is Sahil for Daveen. My first question is just wanted to confirm on Exelon. Are all the commercial rights being transferred tonight? And is Q4 fully burdened with Exelon costs in terms of SG&A?
That would be my first question, please. Sure. So, in the case of Ag Zon, it has trans- the- all of the MA transfers have been done. There is some smaller markets in Central America and Caribbean that remain and won't really have a major impact on our numbers when they do switch over to us.
When it comes to SG&A, we don't really do it by brand, but as I said earlier, when it comes to the total fallbacks, we really don't expect that to change going into 2023.
Okay, and the difference, my second question would be the difference between the delta for the guidance, it does imply on the lower end you will be probably, the venue will decline and that is mainly due to the branded generics, competition in the branded generics or is there something else? What is way too many meters wide and thepatriotic dynamic could drive us back on
No, the real issue that we're dealing with is we face new entrants, the head-to-head competition in our branded generics portfolio. As that happens, what we see is that we have to lower our price.
That's a straight margin hit that drops straight to the bottom line. It's really an issue of the portfolio. As we launch newer products, both on our innovative portfolio as well as on our GX portfolio, we'll ride this wave out going into the future.
Okay, and my final question is, do you have certainty regarding the timing of these competitor products launching? So, will there be an impact in particular quarter as you think about quarterly revenues or it is uncertain at the moment?
It will really depend on the country and the product.
It's hard to predict right now, but we do expect them coming in.
It's hard to predict right now, but we do expect them coming in. Okay, thank you. Those are all the questions.
Thank you.
Our next question will return to Andrea Leno with National Bank. Please go ahead.
Thank you. Two more questions for me. The first one is more for the BQ team, but when you are looking at new products, especially for 2023, are you looking at more at replacing some of the lost sales that you get from the branded generics, or is the strategy still continuing to try and…
and grow the footprint in Canada and New Mexico. Amal Al-Anjali, Chief Information Officer, Google AdWords Hi, Andrew. This is Amal. It's really all of the above. So we look to bring in opportunities that would be immediately creative. So that would be products or portfolios or M&A with existing sales and existing profitability.
we are also looking at the same time to bring in Pipeline. And that is both innovative as well as branded generic. So really it's full steam ahead on all of the above. So that again, as Samira said earlier.
the phasing issue that we are facing this year with our branded generics portfolio maturing, and the pipeline not yet coming in already this year to compensate for that. The work that the team is doing is to make sure that going forward we don't really have that temporary zip, but we're kind of...
building both with existing ad pipelines. I'm just going to add to her, if you look at what we did in 2021, we added Exelon, we added the Insight products, as well as continued on the development side of our branded generics portfolio, and you see that with some of the submissions that we have approval that we have this year.
When you look at 2022, you have kind of a similar idea in licensing of BGX, in licensing of Innovative with Rigel's product, as well as the additional product with existing sales with Econjio. So there is really nothing that has changed in our BD strategy. We are going to continue to execute on the same strategy.
Okay, great. And as a follow-up, have multiple changed at all when you look at across geographies, or have they remained? Yes, they have changed. Okay, great. And as a follow-up, have multiple changed at all when you look at across geographies,
Has multiple changed at all when you look at across your geographies or at the remains?
So, the deal landscape remains competitive. Of course, the level of competitiveness depends on the type of deal and type of product, but we haven't seen anything kind of dramatically different in terms of valuations or multiple.
have there been any regulatory or access changes in 2023 that you anticipate?
That's a really great question. So one of the things that we know similar to the rest of the market and that's not really a political issue, it's more an economic issue post-COVID, whether it's private payers or public payers or...
Generally, even individuals on cash-pay products, due to economic issues and inflation, everybody is trying to control budgets and spend. So we do face that, and that's not just a night issue. I think it's a global pharma issue. When it comes to the political environment, there has been a lot of discussion about the
may go into place, but probably not in the form that it's in today, just because of the level of debate that we're seeing. In the case of Brazil, they've talked about it, but we really haven't seen anything. The one thing to remember is when it comes to the pharmaceutical industry, this is one where we know that our products
are always going to be necessary. It's really a question of the pricing, the reimbursement, and one of the reasons why we want to maintain a diversified portfolio of innovative products as well as branded generics, because this way we are able to adjust and bring value to those pairs.
Great, thank you very much. That's it for me. Once more, if you would like to ask a question, you may press star 1 on your telephone keypad now. Again, that's star 1 if you'd like to ask a question.
It appears there are no further questions at this time. Ms. Zekia, I'd like to turn the conference back to you for any additional remarks.
Thank you, Taryn. Thank you for your confidence in the NITE team and for joining our Q422 conference call. Have a great morning.
This concludes today's call. Thank you for your participation. You may now disconnect and have a great day.
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