Q2 2023 Knight Therapeutics Inc Earnings Call
Good morning, Ladies and gentlemen, my name is Eric and I will be your operator today welcome to Knight Therapeutics second quarter 2023 results conference call.
Before turning the call over to Samira, <unk>, 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 these assumptions on which these forward looking statements are based to be reasonable at the time they were prepared but cautions that these assumptions regarding the future events many of which are beyond the control of the company and its subsidiaries may ultimately prove to be incorrect.
The company disclaims any intention or obligation to update or revise any forward looking statements, whether as a result of new information future events, except as required by law.
We would also like to remind you questions. During today's call will be taken from analysts only.
It'd be any further questions. Please contact Knight's Investor Investor Relations Department via email to in full at night T X dot com or via phone at 5144844483 I.
I would like to remind everyone that this call is being recorded today August 10, 2023, and would now like to turn the meeting over to your host for today's call Samir secure.
Please go ahead Mr <unk>.
Thank you Eric Good morning, everyone and welcome to Knight Therapeutics second quarter 2023 conference call I'm joined on today's call with them, all Curry, our chief business Officer, and Arvind <unk>, our Chief Financial Officer.
I'm excited to report the night achieved record revenues of over $90 million for this quarter.
Furthermore, during the first six months of the year and that has delivered revenues of over $172 million and adjusted EBITDA of 30 over $32 million, a growth of 24% and 4% respectively compared to the same period last year.
This strong performance is a testament to the hard work and dedication of our team and continued success of our portfolio. In addition, our team continues to focus on advancing our pipeline with the approval and submission of innovative and branded generics products across our territories.
During the quarter Knight submitted the marketing authorization for two innovative products I mean, Judy in Mexico, and hemisphere in both Argentina and Mexico. In addition, we advance or branded generics portfolio, particularly in Chile with the submission of marketing authorizations for run rate or just that you have in car sense.
Our car sales stomach and obtaining regulatory approval of that trainer on all that in mind.
Subsequent to the quarter, we submitted cost amount in there for regulatory approval in Mexico, and Colombia and obtained regulatory approval in Brazil from an Judy.
Upon obtaining and visa approval for me Julian Brazil, we submitted an application for pricing approval just seen it.
He met is the regulatory body that establishes maximum prices allowed for drugs sold in Brazil, and Brazil prior to being able to launch we do need gene that approval off pricing.
The timing and outcome of this pricing approval is process is uncertain and could take up to two years. The commercial launches named Uzi is dependent upon obtaining a favorable cement price.
I'll turn the call now over to Arvind to provide an update on our financial results.
Thank you Sandra when speaking of our financial results I will refer to EBITDA and adjusted EBITDA, which are non <unk> measures as well as I just said.
EBITDA per share, which is a higher price ratio.
I defined as operating income or loss, excluding amortization and impairment of non current assets depreciation purchase price accounting I just snuck in the back of accounting under penetration, but it can include costs related to leases.
Understood.
<unk> acquisition costs and nonrecurring expenses.
95, EBITDA per share I, just cause EBITDA over the number of common shares outstanding at the end of their respective periods.
In the second quarter till 'twenty, two 'twenty three I remember I mentioned, we delivered record revenues of over $19 billion.
Our revenues excluding hyperinflation.
More than $15 million or 20% on and on a constant currency basis by more than $13 million or 17% versus prior year.
This growth is mainly driven by our infectious disease portfolio, which delivered $45 $6 million of revenues.
Including the impact of the planned transition and termination agreement.
We'd gilead effective July <unk> 2022.
Portfolio grew by $19 million or 71% compared to the same period in the prior year.
This growth is driven by our key promoted products, including the previously announced it would be some contract with the Brazilian Ministry of health for $18 million.
As for our oncology and hematology portfolio, our revenues, excluding hyperinflation were $27 $9 billion, a growth of one $9 billion or 7% compared to the same period last year.
Our key promoted brands, including lending and 12 store as well as the addition of I can think of them contributed $5 $9 million of incremental revenues.
This was partially offset by a reduction in sales of approximately $4 million and so I think naturally branded generic products due to the lifecycle and entrance of new competitors.
Now moving two hours or the specialty portfolio during the quarter revenues, excluding hyperinflation was $16 $9 million reported full year declined by approximately $7.5 million, excluding the change in the accounting treatment for example.
The decline is due to advanced purchases of eggs alone in the first quarter of 2023, and the second quarter of 2022.
Related to the commercial transition from Novartis Tonight.
Bulk of the advance purchases, we had recorded higher revenues in the first quarter of 2020 free due to the transition from Mexico and in the second quarter of 2022 due to the transition of Bridgeville at Colgate.
Now moving to gross margin.
Excluding the impact of hyperinflation, we reported $42 million or 45% of revenue in the second quarter took twice to try to compete.
Compared to $48 million or 54% of revenue in the same period last year.
The decline in gross margin as a percentage of revenue is partially explained by the change in the accounting treatment escalator takes it all.
I would like to remind everyone that in the second quarter of 2022 rigs alone was recorded as a net profit transfer from Novartis.
Knight had reported revenues and related cost of sales for eggs alone instead of a net profit transfer I. Just said gross margin would have been <unk> 50 per side for Q2 'twenty two.
The decrease in the adjusted gross margin of 50% in Q2 'twenty to 245% in Q2 'twenty three is due to the product mix of our IP.
Now moving on to our operating expense, excluding hyperinflation for the second quarter. Our operating expenses were approximately $3 million, an increase of $3 $9 million compared to the same prior year period.
The increase was mainly due to our expanded scope structure promotion and medical activities and certain variable costs, such as logistics expenses, which rose as a function of hydro sales.
Moving on to adjusted EBITDA.
For the second quarter of 2023 reported 14 point $15 billion or I should say EBITDA decrease of $3 $6 million or 20% compared to the same period last year.
In addition, banks I just did EBITDA per share was <unk> 13 cents, a decrease of two cents per share or 15% over the same period last year.
Now moving on to gains or losses on our financial assets, which are not reflected in our adjusted EBITDA.
In the second quarter, we recorded $3 $9 million of net unrealized gain on financial assets measured at fair value through profit or loss.
This gain is driven by positive mark to market I just met as a result of the increase in the share price of the publicly traded equities caused by our strategic fund investments.
Moving on to our cash flows during the second quarter of 2020 free nights had cash outflows from operations of approximately $1.5 million compared to cash inflows from operations of $13 $2 million in the same period last year.
The cash outflows from operations during the second quarter of 2023.
Due to this had told me because I work.
Stable.
Related to inventory purchases I would keep promos to products and the planned transition and termination of our Gilead agreement.
We've tried to split.
Entry under the two year transition led to an increase of $6 million in our accounts receivable, which will be collected and jewelry.
I will now turn the call back to <unk> for concluding remarks.
Thank you Arvind.
Just to provide you an update on our N CIB during the second quarter 2023, we purchased approximately $2 9 million common shares for aggregate cash consideration of $13 $7 million at an average price of $4.78.
Subsequent to the quarter on July 14th 2023, we launched a new normal course issuer bid under this N T. I D. We can purchase for cancellation up to approximately 6 million common shares.
Turning over to our financial outlook for 2023, I'd like to remind everyone that this guidance is provided on a non-GAAP basis due to the difficulty in projecting Argentinian inflation rates, we have updated our financial guidance on revenues and expect to generate between $3 $10 million to $330 million in revenue and.
A $10 million on the lower and upper end of the range.
Our adjusted EBITDA is expected to be between 16% to 17% of revenue.
The increasing financial outlook is primarily due to an improvement in Latam currencies against the Canadian dollar in the first and second quarter of 2023.
This guidance is also based on a number of assumptions, which are described in our press release should any of the assumptions differ the financial outlook and the actual results may vary materially.
Considering the recent volatility in certain of our currencies, we will continue to monitor and revised our foreign exchange assumptions, which may materially impact our results and forecasts.
Looking ahead, we remain committed to continuing to build the leading Pan American ex U S. Specialty pharmaceutical company, we have over $140 million in cash cash equivalents and marketable securities and we generate cash from operations, which positions us well to continue to execute on our strategy to in license and acquire innovative pharma.
The circles as well as develop our branded generic product portfolio.
Thank you for your support and confidence in the 19. This concludes our formal remarks I'd like now like to open up the call for questions Eric.
Yeah.
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 Knight's Investor Relations Department via email to info at night, 90 X dot com or via phone at 514484.
4483.
If you would like to ask a question. Please press star followed by the followed by the number one on your telephone keypad. If you would like to withdraw your question. Please press star two if you're using a speaker phone. Please lift your handset before pressing the keys one moment. Please for your first question.
Your first question comes from Doug Mime.
With RBC. Please go ahead.
Yes.
Good morning, everyone.
Congratulations on a strong quarter.
First question is maybe mostly for Arvind them. When we look at the gross margins in the 45% that was reported this quarter and taking into account.
And to the end zone contract and Exelon accounting treatment would you see that our margins are going to stay within this 45% or so range or could you could we see some significant fluctuations in that number moving forward.
<unk>.
Hi, Doug So the 45% gross margin as I mentioned is really driven by the exelon.
Then as well as the product weight, what I can say about the gross margin going forward, we don't provide guidance on gross margin.
But we did provide the guidance on EBITDA margin.
Ron mentioned that would be in the 16% to 17% range up revenues.
Yeah.
Okay, and then maybe.
For a mall just she can walk through how she sees the pipeline how it's changed over the last little while hasn't increased are there different things that you're looking at today relative to say six months or a year ago, and maybe comment on pricing and I'll leave it there. Thank you.
Yeah.
Good morning, guys.
Sure. So the I would say maybe.
The bottom line answer is we haven't really seen any significant no fundamental changes in the deal flow the types of opportunities.
That was lucky.
And so we continue to look as a reminder, our explore product or transactions that range that's correct.
The sales pipeline.
Pipeline assets and that's both on the innovative and the branded generics side in addition to developing.
Internally branded generics.
The therapeutic areas.
We're still looking within our therapeutic areas.
We of course, when we added extra alone.
Brought with it an additional focus on adding products.
To complement.
And we're always evaluating to see if there are different therapeutic areas.
We're not in today that could be interesting.
And also depending on the D. C. Python theory, one, particularly interesting opportunity in the Tms and the EPA then we look to see them.
Yes.
That's an area that we need to accelerate.
Behind in terms of valuations there.
There are two I would say I haven't really seen.
It changes from our perspective.
Yeah.
Thank you.
Thank you. Your next question comes from Andre <unk> with <unk> Research capital. Please go ahead.
On a nice quarter are similar in the mall and maybe you could just elaborate.
Elaborate a little bit more on the business development side are you.
<unk> seen interesting opportunities in Mexico, I know, you're sort of looking at that area is that still the case and are you looking at any other regions.
Like emerging market regions like for example, eastern Europe , or the middle east or he's sticking.
Right now with Pan America. Thank you.
Sure.
So we're I would say on the second part of your question, we're still focused right now on our current geographic footprint So Canada.
And we are still looking at Mexico again.
And our business as we said before our business there is.
Yeah.
And in Canada and in both of the East.
Yes, we are we continue to look for opportunities to increase the presence. So we're continuing to learn.
We're still seeing reports until we find the right opportunity to execute on them and that's really the focus outside of kind of the high times for now.
Not something that we're working on.
That's great. Thank you.
Thank you. Your next question comes from and Jay Leno with National Bank. Please go ahead.
Good morning, Thanks for taking my questions and congrats on a good quarter.
I'm, just going to tag onto that the BD development questions as well.
Try to asking a little bit of a different way, but the commentary on the earnings with that the focus is on advancing the pipeline with the submission of innovative branded generic products. I mean is this just kind of a writing or is there a more focused on advancing the portfolio.
Rather than adding to with new products.
No its really bold, they're not exclusive right to when we bring in products through business development activities. We have one of our you know one of the imperatives is to actually execute on those transactions and progressed those products and and launch them and get them approved and signed launched.
And time.
And that's really what our team has been doing so that's why we're highlighting advancing the portfolio.
And our DTC continues to be very active to identify additional opportunities. So if you recall.
2021 'twenty two we brought in about nine product.
Between the acquisition of Exelon and and the rest was really all pipeline.
So again, it's really important to continue to progress these products and you're starting to see.
The impact that those deals have hard not just on the portfolio itself.
In terms of products that they can think sales, but also on the pipeline and we see them actually progressing so that hopefully soon enough you'll start seeing a contribution on the revenue.
But that doesn't mean that we're decelerating.
The pediatric continues in parallel.
I just wanted to add is it's actually a slow BD brings it in it goes over to our quality and regulatory teams to regionalize and prepare Joe's jeans and then it goes to our commercial team so that that that funnel that pipeline has to continue to move and each of our teams continue to execute on all of that.
<unk>.
Okay. Thank you that's great to hear and one more kind of a follow up on the same topic and I know you mentioned that you haven't seen any big changes in valuation on changes.
But I was just wondering if you can comment a bit at least in the competitors on the potential companies are always goodbye from that to monitor it.
Have you seen any increased financial stress, let's say in the company's SKU monitored given where the interest rates, where they are right now.
Again, we're not.
I guess it depends on.
What you have in mind when you're looking at.
Bringing in products and licensing pipeline product.
Not really seeing that impact and in fact, if there is a distressed company.
Where are we.
<unk> question Big question marks about their ability to continue developing the product that would be.
Actually question, a reason to pause maybe for us.
So so so that's not necessarily something that's that's helping to increase or that's not necessarily an opportunity.
Oh distressed company would not be an interesting opportunity for us in terms of acquisitions again, it really depends on a case by case, if we're looking at a company acquisitions.
We're monitoring so.
Again.
Really look at it on a case by case to see what would be the right opportunity with the right risk profile and the right.
Price tag attached to it.
Okay, great. Thanks, that's good color and one more for me I'll jump into queue, but.
In the prior quarter, so our updates with the guidance mentioned competition was cited as a reason for the guidance that was given at the time, especially earlier this year.
So I was wondering you can talk on specific countries. If you could talk a little bit about whether there's been any changes there or better or hopefully not worse.
Any color there thanks.
Sure. So that's a great question. What we are seeing is we are seeing competition.
And then this is the b.
The reason for the guidance earlier in the year. There is two reasons that we were two or three reasons that we were bringing in that one was currency because we do what we do is when we rely on our currencies were relying on people a lot smarter than ourselves to forecast currency and they.
They will give their guidance was a devaluation and that taught me. The second thing was the termination of Gilead. So we knew that those topline numbers aren't going to be there and the third was competition on our branded generics products, primarily in Argentina, and Colombia, what we have seen especially in Colombia.
That competition has been slower to arrive and that's really a function of the Colombian agency and the second thing is the ones that are there while they are pushing for price decreases and we are seeing price erosion. It hasn't been as aggressive as we had initially thought because we thought there would be more players in the field.
And there are today.
We do expect to them to come it's a it's not a question of if it's a question of when and as long as we can continue to.
You know take take the benefit we will and we will continue to do what we set out to do which is in license or acquire develop and get those products approved and commercialized and our teams are executing on all of that.
And we see it in our numbers.
Yeah, great color. Thank you Samir.
Thank you, ladies and gentlemen, as a reminder, since you have a question. Please press the star followed by the one.
At this time there are no further questions. Please proceed with your closing remarks.
Once again, thank you for your confidence in the 19 and for joining our Q2 23 conference call have a great morning.
Yeah.
This concludes your conference call for today, you May now disconnect your lines. Thank you.
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