Q4 2023 Knight Therapeutics Inc Earnings Call
Good morning, Ladies and gentlemen, my name is Sylvie and I will be your operator today.
Welcome to Knight Therapeutics fourth quarter and year end 2023 results conference call.
Before the call before turning the call over to somebody right.
Secure 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 those 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 many of which are beyond the control of the company and its subsidiaries.
May ultimately prove to be incorrect.
The company disclaims any intentions or obligations to update or revise any forward looking statement, whether a result of new information future events, except as required by law.
We would like to remind you questions during today's call will be taken from analysts only.
Could there be any further questions. Please contact Knight's Investor Relations Department via email to info at night T X dot com or via phone at 5144844483, I would now like to remind everyone that this call is being recorded today March 21st too.
And in 'twenty, four and I would like now like to turn the meeting over to your host for today's call Samira secure fakir. Please.
Please go ahead.
Thank you so the.
Good morning, everyone and welcome to Knight Therapeutics fourth quarter and year end 2023 conference call I'm joined on today's call with them, our core our chief business Officer, and Arvind <unk>, our Chief Financial Officer.
Last month, we celebrated our 10 year anniversary and I am proud to say that we have delivered record revenues for each of those 10 years and record EBITDA since 2019.
In 2023, we reported record revenues of $343 million and record adjusted EBITDA of over $60 million growth of 18% and 11% respectively versus last year.
While delivering on these record results, we have made significant progress in advancing our product pipeline in Canada, and Latin America, we submitted for regulatory filings for <unk> five products and G. E. M. S ear Teva lease rent bright and carpet across multiple territories and received approval from them.
Julian Brazil for Paolo seal and that training in Chile, and car had been Columbia.
In addition to our regulatory submissions and approval, we launched two products in Canada, the jewelry as well as in vaccine, which competes in a growing market of over $90 million outside of Canada, We launched many juvie in Brazil, and probably still in Argentina.
Turning now to the NCI D. During the year, we purchased approximately 11 1 million common shares for aggregate cash consideration of over $53 million, which represents an average purchase price of $4.82.
I will now turn the call over to Arvind to provide an update on our financial results.
Thank you Sandra.
Speaking of our financial results I will refer to EBITDA and adjusted EBITDA, which are non <unk> measures.
Well I I, just thought it'd be a depth of share which is based on the reservation.
90 defined EBITDA as operating income or loss, excluding amortization and impairment of non current assets depreciation and purchase price accounting adjustment and the impact of accounting under hyperinflation.
But to include costs related to leases.
I, just did that exclude acquisition costs and nonrecurring expenses.
95 <unk>.
Yeah, I just thought it would be done with a number of common outstanding shares at the end of their respective periods.
Yeah.
Furthermore, my discussion on the operating results refer to figures that exclude hyperinflation.
For the fourth quarter of 2020, we delivered revenues.
$8 million, representing an increase of $5 million or 5% versus prior year.
In 2020 free ice under I mentioned, we delivered record revenues of over $343 million, representing an increase of $51 million or 18%.
On a constant currency basis revenues increased by approximately $38 million or 12% versus prior year driven by growth across all of our therapeutic areas.
In 2020, our oncology and hematology disease portfolio delivered approximately $122.7 million, a growth of $17 million or 16% compared to last year.
Our key promoted brands, including land VEBA Trust Toro power seal and Atkins do contributed approximately $27 million of incremental revenues.
The increase was offset by a reduction in sales of our luxury wine branded generic products of approximately $10 million due to the lifecycle and the entrance of new competitors.
Okay.
Our infectious disease portfolio delivered $141 million, an increase of over $24 million or 21% compared to the same period last year.
The portfolio grew by $32 million, excluding the impact of the planned transition and termination of our agreement.
Effective July 2022.
Yeah.
The increase was driven by the growth of our key promoted products, including <unk> and Chris Samba as well.
Right.
In 2023, we sold a total of $25 $2 million of MB, So under our sales contract with the Ministry of health in Brazil.
Embroidered moh, an incremental $18 $2 million compared to the moh sale in the prior year.
In December 2020, free we have signed a new contract can be solved with the moh and great Bill.
We expect to deliver approximately $16 $5 million. In addition to the $2 5 million already delivered in Q1 2024.
Moving to our other specialty portfolio.
The portfolio generated approximately $18 million in 2023, an increase of $10 million or 14% compared to last year.
The increase is primarily driven by the transition of commercial activities, our biggest along from Novartis Tonight, which resulted in the change in accounting treatment from net profit transfer revenues were related cost of sales.
Now moving onto gross margin.
We reported $42 4 million or a gross margin of 48% of revenues in the fourth quarter of 2023.
Baird to $41 $9 million or 50% of revenues in the same period last year.
For 'twenty 'twenty free we reported $166 million or a gross margin of 48% of revenues.
$250 million or 52% of revenues last year.
As a reminder, ex along was recorded as a net profit transfer from Novartis for Brazil, and Colombia in the first half of 2022.
If knight had reported revenues and related cost of sales for example, instead of a net profit transfer.
Gross margin in both 2023 and 2022 would have been.
48, and 50% respectively.
The decrease was due to the change in product mix.
I will now turn to our operating expenses.
Operating expenses, excluding amortization and impairment of non current assets for the fourth quarter were approximately $35 million, an increase of $1 3 million or 4% compared to the same period last year.
Oh 2023, our operating expenses, excluding amortization and impairment were 108 six.
$6 million, an increase of $93 million or 9% compared.
Compared to last year.
The increase in operating expenses was due to an increase in our compensation expenses. So it didn't variable costs, which such as logistics fees, which increased as a function of how your revenues.
As well as an increased selling marketing and medical activities related to our key promoted products.
In addition, we accelerated our development activities related to our product pipeline.
In 2020 free night invested $2 $5 million on 90 pipeline products, an increase of $2 $2 million compared to the prior year.
All costs related to development activities have been expense. These costs include regulatory submission analytical method transfers stability studies and bio equivalent studies.
Moving on to adjusted EBITDA for the fourth quarter of 2020, we reported $12 $1 million.
EBITDA a decrease of one $8 million operating per cent compared to the same period last year.
For 2023.
The increased by $6 million.
So we have a record $16 million or 18% of revenues.
Adjusted EBITDA per share was <unk> 59, an increase of 23% compared to the prior year.
Moving to impairment of non current assets, which is not reflected in our adjusted EBITDA.
Oh 2020 pre recorded an impairment of $9 3 million.
The net book value of the intangible asset exhaustively accounted in U S dollar.
Revalued from U S dollar to Canadian dollar at the end of every reporting period.
The appreciation of the U S dollar basis, the Canadian dollar from the acquisition date of May belong to the closing foreign exchange rate of 2020 has led to an increase in the value of the asset in Canadian dollars and the resulting impairment loss.
Yeah.
Now moving onto gains or losses on our financial assets, which are not reflected in our adjusted EBITDA.
In 2023, we reported a net loss of $10 million driven by an unrealized loss of $22 million, mainly due to negate the mark to market adjustment on our strategy close.
This was partly offset by a realized gain of $12 million due to the disposal of certain equity investments, including the moksha. It works.
Moving on to our cash flows.
During 2020 free nights generated cash inflow from operations of $36 million, including a net working capital investments of $28 million.
Driven by the Onboarding of <unk> and <unk>.
As well as investments in inventory to support our new product launches and our growing promoted products.
I will now turn the call over to amount to provide more details on our product pipeline.
Thank you Arvind.
In the past year, we have expanded our product pipeline with three additional projects. We have in licensed the branded generic molecule in oncology hematology for Brazil. This is a branded generic and innovative dry that today is estimated to have sales in Brazil of over $170 million of credit types UBS.
In addition, as of today there are no generics branded generics that have launched against this innovative shopping for yourself.
In addition, Knight and licensed Calgary for Canada, Calgary is an extended release formulation of <unk>, a multi modal service ordinary Jake and norepinephrine modulating agents and non stimulant medications for the treatment of attention deficit hyperactivity disorder or ADHD.
<unk> is commercially available in the United States as a prescription medicine to treat ADHD in patients six years of age and older.
Calgary is the first new non stimulant to enter the market in over 10 years and will represent a new option in a segment that is valued at over $80 million. According to <unk> and that continues to have a significant unmet medical need.
<unk> expects to submit <unk> for regulatory approval in the second half of 2024.
Subsequent to year end, we in licensed IPX, two or three for Canada, and Latin America.
<unk> is a novel oral formulations of coffee dose of levodopa extended release capsules designed for the treatment of Parkinson's disease.
Still three was studied in the rice PD clinical study that showed that treatment with IV extra three demonstrated statistically significant improvements in daily good on time with fewer doses of <unk> three compared with immediate release carbon seal study for Delphi.
In that study Ics you will see a nice dose an average of three times per day versus five times per day for immediate release copies of all equal itself out.
<unk> is expected to compete in the market value that over $50 million in Canada and over $120 million in Brazil, all based on data.
These recent deals illustrates our focused approach to building on the strong platform and capabilities that we have specifically in oncology and central nervous system.
As well as our strategy to build a balanced portfolio that includes both innovative products as well as branded generics and therapies for acute conditions as well as coffee thesis.
In the four years since the acquisition of <unk>.
Our team has added 13, new products to our portfolio and we'll continue to build on that momentum to further rejuvenate our portfolio and accelerate the growth of our business.
I will now turn the call back to Samir asked for concluding remarks.
Your mom.
Now I'll cover our financial outlook for fiscal 2020 for them I would like to remind everyone that this guidance is provided on a non-GAAP basis due to the difficulty in predicting Argentinian inflation rates.
This guidance is based on a number of assumptions, which are described in our press release, including foreign currency exchange rates, which with the exception of Argentina are currently forecasted to remain on average at similar levels as 2023.
Considering the volatility of Latam currencies, we will continue to monitor and revised our foreign exchange assumptions, which may materially impact our results and forecast.
Should any of the other assumptions differ the financial outlook and the actual results may vary materially.
We expect revenues, we expect to generate revenues between $335 million or $360 million and adjusted EBITDA of approximately 17% of revenues.
On February 28, 2020 for Knight celebrated its 10 year anniversary.
The past decade, we have made significant progress on our strategy of building our rest of world Pharmaceutical company.
Today, we are a profitable Pan American ex U S company with a unique platform and footprint commercializing both innovative and branded generic products, we have strengthened and built on our platform by adding 17, new products 13, us which came through partnering and forced to our internal development capabilities.
I'm incredibly proud of what we've accomplished to date and I am excited about the future achievements that we will deliver to all our stakeholders. None of this would be possible without the fantastic team that we have in place across all of our countries their unwavering commitment and dedication to serving patients across a large.
Territories have been instrumental in shaping Knight as the partner of choice for Canada, and Latin America.
This concludes our formal remarks, and now I'd like to turn the call back to <unk>.
Speaker Change: <unk> tell me over to you.
Thank you before we begin May I. Please remind you that 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.
<unk>, TX dot com or via phone at 5144844484 issues.
If you would like to ask a question. Please press star followed by the number one on your telephone keypad and if you're using a speaker phone. Please lift the handset before pressing any keys and if you would like to withdraw your question. Please press star followed by two.
Please go ahead and press Star one now if you have any questions.
Okay.
Once again, ladies and gentlemen, if you do have any questions. At this time. Please press star followed by one on your Touchtone phone.
Speaker Change: Yeah.
And your first question will be from Doug <unk> at RBC capital markets. Please go ahead.
Yeah.
Morning, Sameer on Tomorrow.
First question for me just has to do with the pipeline of opportunities that you're looking at right now.
Speaker Change: <unk> been quite successful I'd say over the last year and then lastly.
Our unique products could.
Could you tell us what.
Speaker Change: Things look like for 2024 at this point.
Good morning, Doug.
Yes, we're so in terms of what were looking for nothing has changed we continue to look for to acquire products with existing sales, we look to in license innovative unbranded generic products in our Tas and we look also to identify additional internal development offer.
Speaker Change: CIT at East.
Outlook is again, we never had an issue in terms of that deal flow I think there is a lot of opportunities out there.
Speaker Change: For all of our markets so that continues to be.
We continue to look at a healthy pipeline of deals.
Speaker Change: It's a it's just a question that you know of.
And kind of see the regular frequency of BD is not something that could be scheduled but the deal flow is very healthy and we're really looking to accelerate going forward.
Okay, that's great and then Samira.
Sure.
When you look at the potential headwinds that you may.
You may see whether it be with exelon or perhaps some other generics.
Speaker Change:
Samira: To strengthen the outlook are simply a function of delays in this competition or are you seeing them I'd say.
Stronger operations from the existing portfolio and new launches.
Well, it's been about I think the hedge and the headwinds we do continue to expect headwinds on our branded generic portfolio.
Samira: We had outlined during the beginning of 'twenty, three we expected headwinds coming in Colombia.
Some of that came not all of it came in we expect it to come next year. The agency had been slower and approvals, we expect that to come.
When it comes to Exelon, we're expecting it to remain flattish.
<unk> base business type of acquisition, yes, we know that there's other branded generic competition, but we continue to promote in have been holding.
And then there are offsetting some of the branded generics and very mature product declines.
Is really the new product launches and the variance between the.
The low end and the top end is when it comes to the decline of some of those generics is.
Samira: How fast or how slow as the erosion going T D.
Okay.
Can you I know, it's very early days, but some of the most recent launches.
Perhaps in Brazil can you Tao.
Samira: Give us any information on that.
If you can't tell yet how is it going if theres been anecdotal evidence in terms of how some of these may do in 2024.
They're both in vaccines and consumer as well as remain Judy It really is too early to tell.
What I can tell you going back to its anecdotal in the case of NIM Juvie.
There is very few alternatives for patients who are ineligible for transplant. So there is anticipation that being said, it's going to be a slow uptake.
In the case of in vaccine.
It's a simple product, it's easy to use in a market where there hasn't been innovation in over a decade. It's also publicly reimbursed across on Canada. So we have.
Expectations that it will do well, but it's really too early to tell.
Speaker Change: Perfect. Thank you.
Thank you next question will be from David Martin at Bloom Burton. Please go ahead.
Good morning, this is joey on for David.
We had a question about your specialty portfolio could you provide any clarity into.
What are you guys Kramer.
Differences in purchasing patterns of certain customers driving that slight decrease in the exelon start to have any impact on this portfolio given the generics in Brazil.
Sure.
Speaker Change: What you have is some some customers.
We will place purchase orders depending on the time of year. So that's really what is driving it what we are seeing for example host couple years post COVID-19 some normalization.
Seasonality and some buying patterns in Q4.
He used to normally see that in Canada.
Stop during Covid and candidates come back in Brazil, It's come back.
In the case of Exelon as I said earlier it is a brand that we.
Speaker Change: Expect to stay flattish and it stayed flat between 'twenty, two and 'twenty three.
Alright, Thank you and just turning to like the recent product launches mainly on taxi since the market is like largest control about one product could you just give us any insight on like some advantages of <unk>.
Speaker Change: Z or how you plan to take some of that market share.
Sure. So in vaccine is a soft gel pills.
That is inserted into the China without any devices.
The <unk>, which is the large competing product is a tablet it does need a device.
Hum.
The case.
In the case of in fact Z there is never there.
Don't have patient complaints in the studies related to any.
Discharge or anything like that in the case of <unk> found there there are some patient complaints about that so we think it's a better product just from a patient comfort and ease of use and on the secondhand. It too is fully reimbursed across Canada.
Okay and last question on that.
Given the recent product launches do you have any insight into which ones would be the main drivers for revenue growth.
Of those three.
Phone here.
Well, we are expecting is each of men juvie and in vaccine will be driving growth did you guys in that smaller category of products.
It too is a good product, but it's a smaller category.
Speaker Change: Okay. Thank you very much for that.
Yeah.
Speaker Change: Thank you once again, ladies and gentlemen, if you have any questions. Please press star followed by one on you touched on from and your next question will be from <unk>.
At Raymond James Please go ahead Robert.
Robert: Good morning.
Hello.
Thank you for question.
So looking forward.
Robert: Recently.
Peak sales.
Estimates from the pipeline to $120 million.
Do you have a sense for approximately when.
What your that Pete would likely happen, so again, which is the duration on the asset and as a part b to that question. You know are there any specific individual or one or two assets that we see representing 10% or more.
All of those features.
Okay.
Hi.
Repeat your question because it was cutting in and out so youre looking at our pipeline that is now 120 to 160 and when is that actually going to land and which products is that coming from that.
Alright, yes, yes, okay.
The.
We don't guide to any one product.
Robert: Revenue.
What you see in there is there are some products that are in the U.
In oncology some of them that are in CNS. Some of them are in very big markets. So if you look at it.
A product like Calgary, a product like <unk> a product like in Juvie. These are baked into <unk>.
Not going to get into the ones that are <unk>, because that would be providing a lot of information.
The as far as timing.
It's really coming on a phase it'll come over those years. Some of these products are launched.
<unk> are launching this year, we are expecting launches starting more launches next year the year after and it's going all the way to 28 2009. So this is really over all of those years.
Terrific that's very helpful.
Fair enough.
My second question is.
On the competitive landscape, so given part of IP.
Robert: Compliance and controls that night had how are you seeing your peers or competitors in Latam performing with respect to winning bids on in licensing high value drugs.
Or how are you seeing the pharma players who are out licensing these assets.
And their appetite to out license versus set.
Robert: Set up themselves in terms of their own sales and marketing.
Yeah.
Good morning. This is amount and again I think where you are cutting in and out. So I think your question is related to compliance and how this night.
Amir: Positioned itself to two two winning deals based on compliance I think that was your first question did I hear that correctly.
Close enough. Thank you.
Okay.
Amir: So yes, so compliance is Ah is extremely.
Top of mind, and very important across the industry and we see it in most deals that we look at.
Amir: That companies are not just kind of you know.
Amir: Looking at anybody too for any type of thing they're also performing.
Performing diligence is on who they would be partnering with.
So the fact that we are a Canadian publicly listed company, but also operating in Canada. We are members of the pharmaceutical industry associations. So IMC here in Canada and equivalent associations across our markets and of course.
We have a quite a.
Sturdy compliance program up to global standards, that's all something that that is evident to whomever whatever perspective license or is doing their diligence.
So that is we are seeing that as a very important aspect that prospective licensed stores are looking at.
And it's kind of.
Hard to imagine finding someone else with better standards and what we have in our markets I think your second question was.
Looking at our big pharma of licensing our products and or <unk> or other companies setting themselves and in our markets was that correct.
Yes.
Yes so.
So it's really it's a mixed bag.
Amir: Where you see companies looking to set up themselves I think he can again, it's hard to generalize, but that still gives you generally speaking.
The company has a really kind of super rare orphan drug that is kind of you know they can you can have.
Have a very very small number of patients and you know one like.
Like 10 patients in one country a few more patients another country then they could consider.
Either not so much setting up themselves, that's maybe having kind of one person as a representative in the country and just how things would be important.
Amir: So that's again hard to generalize, but just to give you a sense of who would be considering going kind of indirect market entry model.
On the other end of the spectrum when Youre looking at Big pharma, who already have a presence in those markets.
In terms of out licensing it's again, it's a.
It depends on the company the country, we see some companies for example, some big pharma, giving after their part of their portfolio.
Amir: Distributor.
We're not seeing a massive exit this let's say, we're just seeing kind of in general some level of refocus where they choose which part of the portfolio. They want to continue investing in and which part of the portfolio they'd rather quote unquote outsource and outsourced means different things.
Great. That's very helpful I'll get back in the queue.
Thank you.
Thank you and at this time, we have no other questions registered so I would like to turn the call back over to Samira.
Thank you Sylvie and once again I think this is the end of our call. Thank you for your confidence in the 19 and for joining our Q4 and your own 23 conference call have a great morning.
Thank you, ladies and gentlemen that does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines.
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