Q3 2023 Knight Therapeutics Inc Earnings Call

Thank you Samira.

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 non <unk> ratio.

95, <unk> EBITDA.

Operating income or loss.

<unk> amortization and impairment of non current assets.

Appreciation purchase price accounting adjustments and the impact of accounting under hyperinflation, but to include costs related to leases.

EBITDA excludes acquisition costs and non recurring expenses.

Defined adjusted EBITDA per share.

I just said it would be there with the number of common shares outstanding at the end of their respective period.

Furthermore, my discussion on the operating results, we will refer to figures that exclude hyperinflation.

In the third quarter of 2020 free we delivered revenues of over $81 million.

<unk>, an increase of more than $12 million or 18% and on a constant currency basis by more than $8 million or 11% versus prior year.

This growth is driven by our oncology and hematology disease portfolio, which delivered over $31 million of revenues, an increase of approximately $5 million or 19% compared to the same period last year.

Our key promoted brands, including <unk>, plus our <unk>, Brazil, and <unk> contributed approximately $7 million of incremental revenues.

This increase was offset by a reduction in sales of approximately $2 million uncertain macro and branded generic products due to the lifecycle and the entrance of new competitors.

As for our infectious diseases portfolio, our revenues were $29 2 million.

A growth of approximately $2 million or 7% compared to the same period last year.

This growth is driven by our key promoted products, including Chris Samba and higher demand have been per veto, partially offset by the purchasing patterns for selected products.

With respect to our specialty portfolio.

The quarter revenues were $21 1 million, an increase of $5 5 million or 36% compared to the same period last year.

The increase is primarily driven by the transition of commercial operations of Exelon from Novartis Tonight.

Most specifically in Q3 22 nine.

<unk> recorded level lower revenues of eggs, along due to the advanced customer purchases of $3 million in Brazil, and Colombia in Q2 'twenty two.

The remainder of the variance is explained by the change in accounting treatment of exit long from net profit transferred to revenues with related cost of sales as well as timing of purchases from certain customers.

Now moving onto gross margin.

We reported $42 1 million or a gross margin of 52% of revenues in the third quarter of 2023 compared to $33 8 million or 49% of revenues in the same period last year.

The increase in gross margin as a percentage of revenue is driven by the change in the product mix.

I will now turn to our operating expenses.

For the first quarter of 2020, our operating expenses were approximately $39 million.

Excluding the impairment of intangible assets recorded in Q3 'twenty two.

<unk> expenses increased by $2 $2 million, which is mainly due to an increase in competition compensation costs related to <unk> long term incentive plan are you spending on professional and consulting fees and expansion in our product development and medical initiatives.

Moving on to adjusted EBITDA.

For the third quarter of 2023, we reported $15 5 million.

EBITDA, an increase of $6 5 million or 72% compared to the same period last year.

In addition, Knight's adjusted EBITDA per share was 15 cents, an increase of seven cents per share or <unk>, 88% over the same period last year.

With respect to gains or losses on our financial assets, which are not reflected in our adjusted EBIDTA in.

In the first quarter of 2020, we recorded $5 6 million of net unrealized gain on financial assets measured at fair value through profit or loss.

This gain is made up of an unrealized gain of $12 9 million driven by the increase in the fair value of our markdown eight warrants and the conversion of our strategic 60 billion into shares.

Set by a loss of $7 $3 million due to the decrease in the share prices of the publicly traded equities of our strategic fund investments.

Moving on to our cash flows.

During the third point of 2020 free night generated cash inflows from operation of $15 $2 million, including a net working capital investment of $7 2 million.

The increase in the working capital is mainly due to an increase in inventory.

Related to our key promoted products and the settlement of the corresponding accounts payable offset by a decrease in accounts receivable.

I will now turn the call back to some retro concluding remarks.

Before discussing our 2020 guidance I'd like to provide an update on our NTIC.

During the third quarter of 2023, we purchased approximately $2 2 million common shares for $9 8 million, which represents an average purchase price of $4 55.

Subsequent to the quarter, we purchased an additional 676000 common shares for $3 $1 million.

Now onto our financial outlook for fiscal 2023.

Like to remind everyone that this guidance is provided on a non-GAAP basis due to the difficulty in projecting Argentinian inflation rates.

Once again, we have raised our financial guidance on revenue and adjusted EBITDA.

We now expect to generate revenues between $325 million three.

$335 million, an increase of $16 million on the lower end and $5 million on the upper end of the range. Our adjusted EBITDA is now expected to be approximately 18% of revenues.

The increase in financial outlook is primarily due to the improvement of the Latam currencies against the Canadian dollar and then additional Amazon order, we received from limit from the Ministry of health of Brazil for $4 $9 million, which we expect to deliver in Q4 of 23.

The guidance is also based on a number of assumptions, which are described in our press release.

Any of the assumptions, Jeff for the financial outlook and actual results may vary materially.

Considering the recent volatility in certain of our currencies. We will continue to monitor and this is foreign exchange assumptions, which may materially impact our results and forecasts.

We remain on track to deliver record results in 2023, while continuing to advance our product portfolio and build our pipeline for long term growth. Furthermore, we ended the quarter with $153 million in cash cash equivalence and marketable securities.

This positions us well to continue to execute on our mission to build a leading pan American ex U S specialty pharmaceutical company by bringing innovative products and generic branded products to our markets. Thank you for your support and confidence in the 19th this concludes our formal remarks I'd like to open up the call for questions over to.

Mark.

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 saw email to info nine TX dot com.

My phone apps following one for all eight four.

All right.

That said if you wish to ask a question. Please star one on your telephone keypad now sensible Q1's, Youll names announced you can ask a question.

On your question.

Forest will speak to you.

<unk> starts shoots accounts. So so once again Thats star one so I'll ask a question, we'll start to if you need to kind of muscle. Our first question comes from the line of Andre Uddin of research capsule. Please go ahead. Your line is open.

Good morning, everyone Sameer.

Sameer if we're just looking at Brazil.

Can you please discuss the market potential Logan and Judy and <unk> I'm not sure if I got the host pronunciations rate. Thanks.

Sure. So let me start first with <unk> Z.

I can tell you we don't really provide guidance our revenue by product, but what I can tell you is <unk> doing about $100 million U S.

Today, just a couple couple in the U S $100 million in.

U S $100 million, so, let's say around $130 million Canadian there are just a couple of years into the launch.

Given that and if you know like or our markets or about 5%.

A lot of time market is about 5% we are launching at optimal price.

This is where the brand is whether it's in the U S or the market. There is a lot of interest in the category. It is a medically necessary products.

And that.

This is to help you kind of come up to that number.

In the case of <unk> eight.

Even more rare disease day.

One thing is that it's really genetically based.

And that we expected that to be a much smaller product.

We do we are working with.

Our specialists in the market to see where and how the testing will work.

That's great. Thanks, Lance useful and just looking ahead I know you haven't provided guidance yet for 2024, but where would you say your growth is primarily going to come from in 2024.

It's coming from a whole bunch of different places so we have.

In our oncology product portfolio I look at products like Lindsey MA akin Jr. Star. They all continue to grow we will be launching in Juvie, which is coming earlier than we originally expected we are launching in taxi.

So in Canada next year.

And all of those products are going to continue to provide growth. We also have Chris samba and our infectious disease portfolio.

<unk> is continuing to grow in all of our markets.

And.

We're going to continue to build our pipeline and advance the pipeline that we have.

And so in terms of growth is that would you say that would be single digit growth or is it going to be double digit growth.

Can you can you provide that color a little bit.

Not yet we will be providing guidance kind of earlier in the next year, when we announced Q4, okay. That's great. Thank you Sir.

Thank you.

Thank you. Our next question comes from the line of David Martin at Bloom Burton. Please go ahead. Your line is open.

Hi, This is <unk> on behalf of Dave Congrats on a great quarter and the increased guidance, we gave a few questions.

First one running oncology hematology portfolio.

Has the full impact of generic competition launched launched himself in the third quarter and it's not fully in this quarter how much erosion do you anticipate going forward.

Sorry, just to clarify issued hugging that generic competition on our.

All right.

<unk>.

On our own branded generics.

It has is that.

<unk> has been delayed because the.

The Colombian agency has.

Has been behind in their approvals so it hasn't fully impacted in Q3, we do expect to.

What we are seeing from the agency with some changes and updates to their regulations that theyre going to start there theyre going to startup proving faster now.

We do expect it to come next year that being said like I said earlier to Andre.

<unk> are continuing to show great growth.

Okay. Thank you and one last question in the assumptions to your revised guidance you mentioned the discontinuation of certain distribution agreements does this refer to agreements that have already been discontinued or agreements you expect to be discontinued going forward and if it's allowed.

Yeah.

Sure. This is this is really the impacts of the Gilead termination that we had last year and thats fully impacted.

Third quarter. There is if you look at kind of the the discontinuation impact it's immaterial. So that's already all washed out of our results.

Okay. Thank you very much.

Yeah.

Thank you just as a reminder, sponsor since if you do wish to ask a question. Please dial star one now.

Our next question comes from the line of Doug <unk>.

All of RBC capital markets. Please go ahead your line is open.

Yes, good morning.

First question just has to do with Exelon, we did see an almost $6 million increase in the quarter, but that was more because of the switch.

To your holding the revenues, but what I'm curious about are the unit sales.

Trends.

Are they starting to drop because of the increased competition on the generic side yet.

Just curious about the unit trains.

Sure that's a great question.

Actually see the objective when it comes to Exelon was really to maintain flattish.

And we're not seat where whether it's in dollars or units, we are retaining our share in the unit volumes are straight.

Yeah.

Okay.

That's really good to hear.

Do you expect that to change those samira.

Based on any change in the competitive environment.

Well.

Yes, and no in the sense that as.

As there are more competitors in the market. There is more share of voice on this one molecule. So we we may hear we may start to lose share, but actually gain volume and.

And we maintain the brand and that that is really what each of our teams are working towards.

<unk> zone.

Another order.

Can you give us an idea as to why because I.

I know that you've indicated that we're not likely to see that again, but what's happening in that market that has the government continue to come back to you.

Sure So one of the reasons.

It really started with hard work on our teams part they're at the competitor product has been on back order.

And has remained on backorder.

Have continued to strengthen our relation with the Ministry of health, what they are seeing from our team is our quality products and reliable supply.

And as long as we continue to deliver on that I believe that we can we can extend.

Their replenishment, we'll see what happens when the.

The competitor is on that.

Returns back in supply.

Excellent thanks very much.

Thank you and that seems to be no further questions in the queue. At this time, so I'll hand, the floor back to all speakers for closing comments.

Maybe just as a sump up there has come forward. One further question that's from the line of Justin <unk> with Stifel.

Stifel. Please go ahead your online.

Good morning, Thanks for fitting me in so just on the financial assets.

A few movements in the quarter you had the repayment from Raska eight and then also a mark to market adjustment.

Just wondering if you could explain the mark to market adjustment and then also the state of the remaining financial assets and if there is any near term further expected liquidity events.

To clarify.

To clarify a couple of things there.

On the financial assets. There is three different things that are happening there. The March eight Sloan has not been fully repaid it will be repaid in Q4 Marcia was recently.

<unk> recently announced that Moksha is has been acquired so our loan will be repaid and there was a.

Because we own warrants we had warrants of that company, we will recognize a gain on the warrants because we have to mark them to market and all of the loan and the warrants will be both paid out we expect in Q4.

The second thing that we had is we converted our loan to synergy to equity and that actually had a gain on there that was about a couple of million dollars.

First is a write down of our financial assets is really coming from the public securities held in our funds.

On.

And those.

We have seen in the capital markets and the biotech index there has been a significant downturn on those.

Those investments and we continue to mark to market. So we have about $100 million of financial assets, and we mark them to market and.

That's really been the the history for the last almost 10 years in night, where that's that's the initial fund investments and the markups and markdowns that we've seen.

Thank you and is there another expected liquidity event aside from Moscow.

Not really.

At the end of this quarter in the loans, we really only have at the end of this year. We will only have synergy lapsed synergy is a loan that is expected to be paid back during 2004, but we may depending on how their results are doing we may continue to extend that out a little bit longer.

And as you know the funds.

On the funds we have.

About $11 million that is pending capital calls that over the last few years.

The funds have been cash flow positive and cash generating rather than.

Our net outflow.

Understood just a question of clarification, the 60 pharma.

Loan was that repaid or does that still remain outstanding.

That was converted to equity.

At the same.

<unk>.

I believe it was 6 million U S or around there.

So.

We had written down given the financial situation of <unk>, we had written that loan down.

Almost zero, so its actually a gain of $2 million in the quarter.

Thank you for taking my questions.

Thank you.

Thank you once again if at all any final questions. Please dial star one on your telephone key patents now.

Okay that seems to be no further questions at this time, so I'll hand, the floor back to speakers for closing comments.

Thank you Mark once again, thank you for the confidence in the 19 and for joining our Q3 23 call have a great morning.

If not please the conference. Thank you all very much for attending you may now disconnect your lines.