Q2 2024 Knight Therapeutics Inc Earnings Call

August 8, 2024

Samira Sakhia: Our innovative promoted portfolio delivered growth of 12% versus last year, primarily driven by the growth in Lenvima, Trellstar, Akinzeo, and Crescemba, as well as a contribution from the recent launches of Invexie and Bejuva in Canada and Minjuvi in Brazil. Furthermore, we have expanded and strengthened our pipeline with the in-licensing of John A.P.M., a novel JourneyPM complements our growing neurology portfolio along with IPX203 and CalBRI, which we have in-licensed in the last nine months. I would like to add that earlier this week, Amnil announced the FDA approval of IPX203, an expected launch in September of this year.

Good morning ladies and gentlemen, my name is Angeline and I will be your operator for today

Samira Sakhia: This allows Knight to continue with our plans for regulatory submission of this product next year. Now, moving on to our NCIB. Knight completed the NCIB launch in July 2023 and purchased a total of 6 million shares at an average price of $4.87 per share. Subsequent to the quarter, Knight launched a new NCIB program under which it can purchase for cancellation up to approximately 5.3 million common shares over the next 12 months. I will now turn the call over to Arvind to provide an update on our financial results.

Speaker Change: welcome tonight soapututic second quarter two thousand and twenty four results conference call

Speaker Change: Before turning the call over to Samira Sakhia, President and CEO of Knight, listeners are reminded that portions of today's discussion may, by their nature,

Samira Sakhia: and Samira Sakhia.

Samira Sakhia: The company considers the assumptions on which these forward-looking statements

Samira Sakhia: Our base, to be reasonable.

Samira Sakhia: At the time, they were prepared, but cautions that these assumptions regarding the future events, many of which beyond the control of the company,

Samira Sakhia: 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 a result of new information

Speaker Change: We would also like to remind you, questions during today's call will be taken from analysts only.

Speaker Change: Should there be any further questions?

Samira Sakhia: please contact nights investor relations department via e-mail to ir at night t x dot com

Samira Sakhia: our viaophone at five one four

Samira Sakhia: I would like to remind everyone that this call is being recorded today, August 8, 2024, and would now like to turn the meeting over to your host for today's call, Samira Sakhia. Please go ahead, Ms. Sakhia.

Arvind Utchanah: When speaking of our financial results, I will refer to EBITDA and adjusted EBITDA, which are non-IFRS measures, as well as adjusted EBITDA per share, which is a non-IFRS ratio. Knight defines EBITDA as operating income or loss excluding amortization and impairment of non-current assets, depreciation, purchase price, accounting adjustments, and the impact of accounting under hyperinflation, but including costs related to leases. I just said EBITDA excludes acquisition costs and non-recurring expenses. Knight defines adjusted EBITDA per share as adjusted EBITDA over the number of common shares outstanding at the end of the respective period.

Arvind Utchanah: Furthermore, my discussion of the operating results will refer to figures that exclude hyperinflation. For the second quarter of 2024, we delivered record revenues of over $94 million, an increase of $3.7 million, or 4% versus the prior year. Our oncology and hematology disease portfolio delivered approximately $36 million in revenues, a growth of $7.7 million, or 28% compared to the same period last year. This was driven by the continued growth of our key promoted products, including Lenvima, Akinzio Truster, as well as the launch of Menjuvin Brazil. Turning to our other specialty portfolios

Samira Sakhia: Thank you, Angeline. Good morning, everyone, and welcome to Knight Therapeutics' second quarter 2024 conference call. Our innovative promoted portfolio delivered growth of 12% versus last year, primarily driven by the growth in Lenvima, Trellstar, Akinzeo, and Crescemba, as well as a contribution from the recent launches of Invexian Bejuva in Canada and Minjuvi in Brazil. I would like to add that earlier this week, Amnil announced the FDA approval of IPX203, an expected launch in September of this year. This allows Knight to continue with our plans for regulatory submission of this product next year. I will now turn the call over to Arvind to provide an update on our financial results.

Samira Sakhia: Thank you, Angeline. Good morning, everyone, and welcome to Knight Therapeutics' second quarter 2024 conference call. I'm joined on today's call with Amal Khouri, our Chief Business Officer, and Arvind Utchanah, our Chief Financial Officer.

Speaker Change: i'm excited to report for the first for the first six months of the year we delivered record revenues of one hundred eighty million excluding e inflation and adjusted ebitda of over twenty nine million

Samira Sakhia: our innovative product promoted portfolio delivered growth of twelve percent versus last year

Samira Sakhia: Primarily driven by the growth in Lenvima, Trelstar, Akinzeo, Crescemba, as well as the contribution from the recent launches of Invexian Bejuva in Canada and Minjuvi in Brazil.

Samira Sakhia: Furthermore, we have expanded and strengthened our pipeline with the in-licensing of JORDAPM, a novel formulation of methylphenidate for ADHD.

Samira Sakhia: JourneyPM complements our growing neurology portfolio along with IPX203 and CalBRI, which we didn't license in the last nine months.

Speaker Change: i would like to add that earlier this week amil and monnounced the fda approval of ix two o three and expected launch in september of this year it allows night to continue on our plants for regulatory submission of this product next year

Speaker Change: Now moving on to our NCIB. Knight completed the NCIB launch in July 2023 and purchased a total of 6 million shares at an average price of $4.87 per share.

Samira Sakhia: Subsequent to the quarter, Knight launched a new NCIB under which we can purchase for cancellation up to approximately 5.3 million common shares over the next 12 months.

Samira Sakhia: I will now turn the call over to Arvind to provide an update on our financial results.

Arvind: Thank you, Samira.

Arvind: When speaking of our financial results, I will refer to EBITDA and Adjusted EBITDA, which are non-IFRS measures, as well as Adjusted EBITDA per share, which is a non-IFRS ratio.

Speaker Change: nine defines bitda as operating income or loss excluding amortization and impairment of noncurrent assets degociation purchase price accounting adjustments

Speaker Change: any backact of accounting under havebeen placation but to include costulrelated to users adjusted abitda excludes acquisition costs and nonrecurring expenses

Arvind: Knight defines adjusted EBITDA per share as adjusted EBITDA over the number of common shares outstanding at the end of the respective period. Furthermore, my discussion on the operating results will refer to figures that exclude hyperinflation.

Arvind Utchanah: Knight defines adjusted EBITDA per share as adjusted EBITDA over the number of common shares outstanding at the end of the respective period. For the second quarter of 2024, we delivered record revenues of over $94 million, an increase of $3.7 million, or 4% versus the prior year. Turning to our other specialty portfolio, during the quarter, this portfolio generated $20.6 million in revenues, an increase of $3.8 million, or 22%, compared to the same period last year.

Speaker Change: For the second quarter of 2024, we delivered record revenues of over $94 million.

Arvind: An increase of 3.7 million dollars or 4% versus prior year.

Arvind: our oncology and hematility disease portfolio delivered approximately thirty-six million dollars of revenues a growth of seven point seven million dollars o twenty-eight percent compared to the same period last year

Arvind: this was driven by the continued growth of our key promoted products including lanva akkinzo trusttor as well as the launch of manjual winin brazil

Arvind Utchanah: During the quarter, the portfolio generated $20.6 million in revenues, an increase of $3.8 million, or 22% compared to the same period last year. This increase is a result of the transition of commercial activities of Exelon from Novartis to Knight in 2023. As a reminder, the revenues of Pexallon were lower in the second quarter of 2023 due to advanced purchases by 13 customers in the first quarter of that year. Now moving to our infectious disease portfolio, we generated $37.8 million of revenues in the second quarter, a decrease of $7.7 million, or 17 percent, compared to the same period last year. This decrease was primarily due to the timing of orders for Ambisone under the contract with the Ministry of Health in Brazil, or MOH, as well as a decrease in the demand for Improvido.

Arvind Utchanah: Turning to our other specialty portfolios.

Arvind: During the quarter the portfolio generated $20.6 million in revenues, an increase of $3.8 million or 22% compared to the same period last year.

Arvind: This increase is a result of the transition of commercial activities of Exelon from Novotis to Knight in 2023.

Arvind: As a reminder, the revenues of Exelon were lower in the second quarter of 2023 due to advanced purchases by certain customers in the first quarter of that year.

Arvind Utchanah: This increase is a result of the transition of commercial activities of Exelon from Novartis to Knight in 2023. Now moving to our infectious disease portfolio, we generated $37.8 million in revenues in the second quarter, a decrease of $7.7 million, or 17 percent, compared to the same period last year. This decrease was primarily due to the timing of orders for Ambisone under the contract with the Ministry of Health in Brazil, or MOH, as well as a decrease in the demand for Improvido.

Speaker Change: now moving to our infectious dise portfolio weregenerated thirty seven point eight million dollars of revenues in the secondagron quarter a decrease of seven point seven million dollars or seventeen percent

Arvind Utchanah: compared to the same period last year. This decrease was primarily due to the timing of orders for Ambisone under the contract with the Ministry of Health in Brazil.

Arvind Utchanah: The decrease was partly offset by the growth of our key promoted products, including Crescemba, as well as the timing of orders for certain products. For example, during the quarter, we sold a total of $8.9 million of Ambisone under our MOH contract, compared to $18 million in the same period last year. As a reminder, during the first six months of 2024, we delivered a total of $18.1 million of Ambisone to MOH, compared to $20.4 million in the same period last year.

Arvind Utchanah: or MOH, as well as a decrease in the demand of Improvido. The decrease was partly offset by the growth of our key promoted products, including Prestemba, as well as timing of orders for certain products.

Arvind Utchanah: During the quarter, we sold a total of $8.9 million of Ambisome under our MOH contracts compared to $18 million in the same period last year.

Arvind: as a reminder during the first six months of two thousand and twenty four we delivered a total of eighteen point one million dollars of unbsold to emvoyage

Arvind: compared to $20.4 million in the same period last year. Now looking at our gross margin. We reported $45.3 million, or a gross margin of 48% of revenues, in the second quarter of 2024.

Arvind Utchanah: Now looking at our gross margin, we reported $45.3 million, or a gross margin of 48 percent of revenues in the second quarter of 2024, compared to $40.2 million, or 45 percent of revenues in the same period last year. The increase in the 2024 gross margin as a percentage of revenues was due to product mix, including a lower proportion of Ambisone sales to MOH.

Arvind: compared to $40.2 million or 45% of revenues in the same period last year. The increase in the 2024 gross margin as a percentage of revenues was due to product mix, including a lower proportion of Ambisom sales to MOH.

Arvind Utchanah: I will now turn to our operating expenses. Our operating expenses, excluding amortization of non-current assets, for the second quarter were approximately $30.1 million, an increase of $3.3 million or 12% compared to the same period last year. The increase in operating expenses was driven by an increase in hygiene costs due to our structure and higher compensation expenses, as well as development costs for our pipeline products.

Speaker Change: i will now turn to our operating expenses our operating expenses excluding ammotization of noncurrent asset

Arvind Utchanah: for the second quarter were approximately $30.1 million.

Arvind Utchanah: an increase of $3.3 million or 12% compared to the same period last year. The increase in operating expenses was driven by an increase in hygienic costs due to our structure and higher compensation expenses as well as development costs for our pipeline products.

Arvind Utchanah: Moving to Adjusted EBITDA. For the second quarter of 2024, we reported $15.7 million of Adjusted EBITDA, an increase of $1.5 million, or 10%, compared to the same period last year, driven by a higher gross margin, which was partly offset by higher G&A costs and R&D investments for our pipeline. While our Adjusted EBITDA increased by 10%, our Adjusted EBITDA per share increased by 23%. This additional increase in Adjusted EBITDA per share was driven by the decrease in common shares outstanding due to repurchases under our NCIB.

Speaker Change: moving to adjusted bita for the second quarter twotwent twenty four rep fifteen point seven illion dollars of adjusted bitida and increase of one point five million dollars ten percent compared to the same period last year driven by higher brross marin which was partly offside by higher j st and r and the investment for pipeline while our adjust said big increasase by ten percent i adjusted bit de per share increased by twenty three percent this additional increase in the justed id a per share was driven by the decrease in commmon sha outstanding due to repurchasees under and

Arvind Utchanah: Finally, on to our cash flows. During Q2'24, Knight had cash outflows from operations of $1.1 million, driven by our operating results, offset by an increase in working capital of $11.9 million. As we communicated at the end of Q1, the majority of this working capital increase is due to payments related to inventory that was purchased in Q1. As a reminder, on a year-to-date basis, Knight generated $29.3 million of adjusted EBITDA and $29.8 million of cash inflows from operations. I will now turn the call back to Samira for her concluding remarks.

Speaker Change: finally onto our cash flows during q two twenty-four night high cash out flows from operations of one tron one million dollars driven by our operating results offset by an increase in working capital of eleven point nine million dollars

Arvind Utchanah: As we had communicated at the end of Q1,

Arvind Utchanah: The majority of this working capital increase is due to payments related to inventory that was purchased in Q1. As a reminder, on a year-to-date basis, Knight generated $29.3 million of adjusted EBITDA and $29.8 million of cash inflows from operations. I will now turn the call back to Samira for concluding remarks.

Samira Sakhia: Thank you, Arvind. I would like to provide an update on our financial outlook for fiscal 2024. In addition, we are updating our guidance for adjusted EBITDA, which is now expected to be approximately 16% of revenues, which in dollars remains within the previous guidance. The change in our financial outlook is primarily due to an improvement in forecasted last-time currencies against the Canadian dollar, as well as an acceleration of investments in our pipeline product.

Samira Sakhia: Thank you, Arvind. I would like to provide an update on our financial outlook for fiscal 2024. I would remind everyone that this guidance is provided on a non-GAP basis excluding hyperinflation due to the difficulty in predicting Argentinian inflation rates. We are increasing our financial guidance on revenues and expect to generate between $355 million and $365 million in revenues, up from $335 million to $350 million. In addition, we are updating our guidance for adjusted EBITDA, which is now expected to be approximately 16% of revenues, which in dollars remains within the previous guidance for EBITDA.

Samira Sakhia: Thank you, Arvind. I would like to provide an update on our financial outlook for fiscal 2024.

Speaker Change: iwould remind everyone that this guidance is provided on a that non-gaap basis excluding hyperinflation due to the difficulty in predicting argentinian inflation

Samira Sakhia: we are increasing our financial guidance on revenues and expect to generate between three hundred and fifty five million to three hundred and sixty five million dollars in revenues up from three hundred and thirty-five million to three hundred fifty million dollars

Samira Sakhia: In addition, we are updating our guidance for adjusted EBITDA, which is now expected to be approximately 16% of revenues, which in dollars remains within the previous guidance range.

Samira Sakhia: The change in our financial outlook is primarily due to an improvement in forecasted last-time currencies against the Canadian dollar, as well as an acceleration of investments in our pipeline product. In addition, this guidance is based on a number of assumptions which are described more in our press release. Should any of the other assumptions differ, the financial outlook and the actual results may vary materially.

Samira Sakhia: the changing our financial outlook is primarily due to an improvement in forecasted last time currencies against a canadian dollar as well as an acceleration of investments in our pipeline products

Samira Sakhia: in addition this guidance is based on a number of assumptions which are described more in our press release

Samira Sakhia: Should any of the other assumptions differ, the financial outlook and the actual results may vary materially. Over the last several months, we have announced three product submissions in multiple territories, two product approvals, three product launches, and we have added three pipeline assets from three new partners.

Samira Sakhia: Should any of the other assumptions differ, the financial outlook and the actual results may vary materially.

Samira Sakhia: Over the last several months, we have announced three product submissions in multiple territories, two product approvals, three product launches, and we have added three pipeline assets from three new partners. We have a pipeline of 18 products that are expected to generate over $150 million in revenues should they achieve our estimated peak sales. This demonstrates not only our commitment but also our ability to execute on our strategy. We have a profitable and cashflow-generating business with a growing portfolio of assets, and with over $150 million in cash, cash equivalents, and marketable securities at the end of the quarter, we remain well positioned to continue to execute on our strategy to in-license and acquire innovative and branded generic pharmaceuticals, as well as to develop our own branded generic portfolio. Thank you for your support and confidence in the Knight team. This concludes our formal remarks. I'd like to open up the call for questions. Now, over to you, Angeline.

Samira Sakhia: We have a pipeline of 18 products that are expected to generate over $150 million in revenues, should they achieve our estimated peak sales.

Samira Sakhia: This demonstrates not only our commitment but also our ability to execute on our strategy.

Samira Sakhia: we have a profitable and cash flow generating business

Samira Sakhia: with a growing portfolio of assets and with over $150 million in cash.

Samira Sakhia: cash equivalence and markeable securities at the end of the quarter

Samira Sakhia: we remain well positioned to continue to execute on our strategy to inlicense and acquire innovative and branded generic pharmaceuticals as well as to develop our own branded generic portfolio

Speaker Change: thank you for your support and confidence in the nineteen this concludes our formal remarks i'd like to open up the call for questions first year ange

Operator: 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 at iratknightpx.com or via phone at 514-484-4483. If you would like to ask a question, please press the star followed by the number one on your telephone keypad. If you are using a speakerphone, please lift your handset before pressing any key.

Speaker Change: thank you

Samira Sakhia: Before we begin, may I please remind you questions during today's call will be taken from analysts only.

Samira Sakhia: should there be any further questions please contact nights investor relations department via e-mail

Speaker Change: so i are at night t x dot com or viaophone at five one four four eight four four four eight three three if you would like to ask a question

Speaker Change: please press star followed by the number one on your telephoneand keep bad if you are using its picker phone please lift your handset before pressing any keya if you would like to revieal your question please press start to key one woman please for your first question

Operator: If you would like to review your question, please press the star two key. One moment, please, for your first question. Your first question comes from Michael Freeman. From Raymond James.

Speaker Change: Your first question comes from Michael Freeman from Raymond GMS.

Unnamed Analyst: Hey, good morning, Samira, Amal, and Arvind. Thanks very much for taking our questions and congratulations on some solid results. I'm glad you mentioned the approval of IPX203 by Amnil yesterday. I wonder if this approval came about in line, timing-wise, with your expectations and perhaps Amnil's expectations, and if there are any implications for perhaps an acceleration of timelines for approvals and jurisdictions in which you operate in Canada at that time. Thanks.

Michael Freeman: Hey, good morning, Samira, Amal, and Arvind. Thanks very much for taking our questions, and congratulations on some solid results. I'm glad you mentioned the approval of IPX203 by Amnil yesterday. I wonder if this approval came about in line, timing-wise, with your expectations and perhaps Amnil's expectations, and if there are any implications for perhaps an acceleration of timelines for approvals and the jurisdictions in which you operate in Canada at that time. Thanks.

Unnamed Analyst: Hey, good morning, Samira, Amal, and Arvind. Thanks very much for taking our questions and congrats on some solid results.

Unnamed Analyst: I'm glad you mentioned the approval of IPX-203 by Amnil yesterday. I wonder if there – I wonder if this approval came about in line, timing-wise, with your expectations and perhaps Amnil's expectations, and if there are –

Unnamed Analyst: Any implications for perhaps an acceleration of timelines for approvals and jurisdictions in which you operate in Canada in that time? Thanks.

Samira Sakhia: Hi, that's a great question. Actually, we knew when AMNIL submitted earlier this year, which was, I believe, sometime in February, and the FDA has a pretty standard time of review, so this is really around the time that they were expecting their approval, and it doesn't really change our timelines because we had structured our agreement to even start working on some portions of the submission while they were pending their approval.

Speaker Change: Hi, that's a great question. Actually, we knew when

Speaker Change: When Amnil had submitted earlier this year, which was, I believe, sometime in February, and the FDA has a pretty standard time of review, so this is really around the time that they were expecting their approval, and it doesn't really change our timelines, because we had...

Speaker Change: structure our agreement to even start working on some portions of the submission while they were pending their approval.

Unnamed Analyst: Gotcha. That's helpful. Now, on the escalated guidance, you mentioned there is much to do with currency here, but you also mentioned that you've been accelerating investments into your pipeline products. I wonder if you could describe what this acceleration of investment looks like.

Michael Freeman: Gotcha. That's helpful. Now, on the escalated guidance, you mentioned there is much to do with currency here, but you also mentioned that you've been accelerating investments into your pipeline products. I wonder if you could describe what this acceleration of investment looks like.

Speaker Change: got it i've got to helpful now what

Unnamed Analyst: On the escalated guidance, you mentioned there's much to do with currency here, but also mentioned that you've been accelerating investments into your pipeline products. I wonder if you could describe what this acceleration of investment looks like.

Samira Sakhia: So, as you know, we have 18 products in our pipeline. What we are really trying to do is see what we can accelerate, whether it's some development work in advance of submission, as well as launch, pre-launch activities, so really behind journey PM, which we may actually launch, which we're trying to see if we can't launch by the end of next year, as opposed to the following year. We have Minjuvi, for which we are expecting approvals in other territories. We also have Fosmatinib, or Tampalooz, also expected to be approved in certain countries next year as well.

Michael Freeman: Okay, excellent. Very helpful. Just one very last comment.

Speaker Change: So, as you know, we have 18 products in our pipeline. What we are really trying to do is see what we can accelerate, whether it's some development work in advance or submission, as well as pre-launch activities. So, we're really behind.

Speaker Change: jo a pm

Speaker Change: which we may actually launch, which we're trying to see if we can't launch.

Speaker Change: By the end of next year, as opposed to the following year, we have Minjuvi, which we are expecting approvals in other territories. We have also Trostimatnev, or Tantalus, also expected for approvals in certain countries next year as well.

Michael Freeman: I on Bouch Health's earnings call. They did mention on their international business that they are seeking to do some business development activities specifically in Latin America. I wonder if you could comment on how Bouch Health specifically figures into your competitive set across the jurisdictions in which you operate. Thank you very much.

Speaker Change: okay excellent very helpful just one very last commentthat i

Speaker Change: on thou shet

Speaker Change: They did mention for their international business that they are seeking to do some business development activities specifically in LATAM. I wonder if you could comment on how Bausch Health specifically figures into your competitive set across the jurisdictions in which you operate. Sure. I'll ask Amal to answer that.

Amal Khouri: Sure, I'll ask Amal to answer that. Hi, good morning.

Amal Khouri: So, in terms of, I think if you were asking whether we have seen them competing against us for deals, we haven't really come across them.

Speaker Change: Hi, good morning. So, in terms of, I think, if you were asking whether we have seen them competing against us for deals, we haven't really come across them.

Amal Khouri: I'm on the flip side of it in terms of, you know, depending on what they're looking for, if they just need a demo, I have a company looking to diversify assets in our regions. As you know, that's one of the areas that we focus on, which is to look at acquiring assets from companies who are looking to diversify or...

Speaker Change: i vie

Speaker Change: On the flip side of it, in terms of, you know, depending on what they're looking for, if they're looking to gamble and other companies looking to divest assets in our regions, as you know, that's one of the areas that we focus on, which is to look at acquiring assets from companies who are looking to divest or focus their portfolios.

Michael Freeman: Okay, thanks Amal, and I'll pass it on now.

Operator: Thank you. This is my call. Your next questions come from David Martin from Bloom Britain. Please go ahead.

Unnamed Analyst: your next question come from david martin from bloom bren please go ahead

Unnamed Analyst: Good morning and congratulations on the quarter and the progress. I'm wondering when you put this all together, the acceleration of the pipeline, and previously you had been expecting a dip in revenues with increased generic pressure on your legacy-branded generics. Do you see the situation as that that dip is the correct answer?

David Martin: Good morning and congratulations on the quarter and the progress. I'm wondering when you put this all together, the acceleration of the pipeline, previously you had been expecting a dip in revenues with the increased generic pressure on your legacy branded generics. Do you see the situation as that that dip won't occur anymore?

Unnamed Analyst: Good morning, and congratulations on the quarter and the progress. I'm wondering, when you put this all together, the acceleration of the pipeline, previously you had been expecting a dip in revenues with increased generic crackdown from your legacy branded generics. Do you see the situation being that that dip won't occur anymore?

Speaker Change: Not really. As you can imagine, when we're launching new products,

Unnamed Analyst: It does take time for them to get to their peak sales, which is usually in the three- to five-year range.

Speaker Change: So even if we advance some launches by, you know, three, six months, it's not really going to have a bigger impact on what's going on in the BGX portfolio.

Samira Sakhia: It really accelerates things.

Speaker Change: it'sit really for lerate

Unnamed Analyst: Sorry, there's been a bit of feedback. What about M&A of some mature products with sales to backfill that gap? Is that still on your radar?

David Martin: Sorry, there's been a bit of feedback. What about M&A of some mature products with sales to backfill that gap? Is that still on your radar?

Unnamed Analyst: Sorry, there's a bit of feedback. What about M&A of some mature products with sales to backfill that gap? Is that still on your radar?

Samira Sakhia: Absolutely. This is one where we are always looking for assets to be able to add. As you know, we acquired Exxon a lot for that reason. We added Akinzo, which actually not only added. It was a great fit into our portfolio and is a growing asset. We are always mindful here between the quality of the asset and the valuation experience. It is a very competitive market, and we are very disappointed.

Speaker Change: Absolutely. This is one where we are always looking for assets to be able to add. As you know, we acquired Exxon a lot for that reason. We added Akinto, which actually not only added

Unnamed Analyst: It was a great fit into our portfolio and is a growing asset. We are always mindful here of the quality of the asset and the valuation experience.

Unnamed Analyst: EBIDA immediately, but really was a great fit into our portfolio and is a growing asset. We are always mindful here between the quality of the asset and the valuation expected.

Speaker Change: it is a very competitive market and we are very disciplined

David Martin: Got it. Also, I'm wondering what's driving the Brazilian Ministry of Health to establish these contracts for Ambizome. Is there an outbreak and fungal infections that might be transient, or is this something that you expect to be long-term and renewed year after year? And what is the patent protection on Ambizome in Brazil?

Speaker Change: Got it.

Speaker Change: Also, I'm wondering, what's driving the Brazilian Ministry of Health to establish these contracts for Ambizome? Is there an outbreak in fungal infections that might be transient, or is this something that you expect to be long-term and renewed year after year? And what is the patent protection on Ambizome in Brazil?

Unnamed Analyst: So Ambosom has not had patent protection for decades, and we know, for example, in the U.S., there are already two generics. Okay.

Samira Sakhia: So, Ambism has not had patent protection for decades, and we know, for example, in the U.S., there are already two genera. As for the first part of your question, Fungal infection is an issue in Brazil. It's not a transient issue. Prior to the government acquiring Ambisome, they were acquiring a competitor's product. Bye! kind of a similar molecule, but not the same formulation.

Unnamed Analyst: So Ambasym has not had patent protection for decades and we know for example in the U.S. there is already two generics.

Unnamed Analyst: as for the first part of your question

Unnamed Analyst: Fungal infection is an issue in Brazil. It's not a transient issue. Prior to the government acquiring Ambisome, they were acquiring a competitor's product.

Angelin: Good morning, ladies and gentlemen. My name is Angelin, and I will be your operator for today. Welcome to Knight Therapeutics' second quarter 2024 results conference call.

Unnamed Analyst: kind of a similar molecule but not the same formulation

Samira Sakhia: That competitor has been having supply issues for the last years, and that is really why they have switched to Amazon. And what this has been really great for us is it's actually allowed us to establish a very good relationship with the Ministry of Health. We are working with them on Amazon. You're also starting at a very small level, but still meaningful. Even on Persemba.

Unnamed Analyst: that that competitor has been

Unnamed Analyst: having supply issues for the last few years, and that is really why they have switched to Ambisone. And the, what this has been really great about for us is it's actually allowed us to establish a very good relationship.

Angelin: Before turning the call over to Samira Sakhia, President and CEO of Knight, listeners are reminded that portions of today's discussions may, by their nature, necessarily involve risk and uncertainties that could cause actual results to defer materially from those who are contemplated by the forward-looking statement. The company considers the assumptions in which this forward-looking statements are based to be reasonable, at the time they were prepared. But cautions, thusless assumptions regarding the future events, many of which beyond the control of the company and its subsidiaries may ultimately prove to be incorrect.

Unnamed Analyst: with the Ministry of Health. We are working with them on Ambosome. We're also starting at a very small level, but still meaningful, even on Crescemba.

Samira Sakhia: And really expect to be able to continue with that great relationship, even if the prop, even if our competitor comes back, and we no longer have ambosome shipments to them. The link is great. Okay.

Speaker Change: And really expect to be able to continue with that great relationship, even if our competitor comes back and we no longer have Ambisome shipments to them, the link is great.

David Martin: Okay, okay. Thank you.

Angelin: The company disclaims any invention or obligation to update or revise any forward-looking statement. Whether a result of new information, future events, except as required by law.

Unnamed Analyst: Okay. Okay. Thank you.

Operator: Thank you, David. And the next question comes from Scott McAuley from Paradigm Capital. Please go ahead.

Arvind Utchanah: Thank you, David.

Speaker Change: Thank you, David.

Speaker Change: end of the next question comes from caught a colleague from paradum cavoitalplease go ahead

Angelin: We would also like to remind you, questions during today's call will be taken from analysts only.

Scott McAuley: First, on Journey, we saw that the other week Ironshore got acquired, which I guess is positive for the potential for that product, but in terms of your agreement with Ironshore and any kind of change of control issues or questions, that doesn't affect your license agreement for that product across Canada and Latin America.

Angelin: Should there be any further questions, please contact Knight's Investor Relations Department via email to IR at KnightTX.com, or via phone at 514-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484-484[inaudible] and Arvind Uchana, our Chief Financial Officer.

Speaker Change: Thanks for taking the questions. First, on Journey, we saw that the other week, Iron Shore got acquired, which I guess is a positive.

Speaker Change: the potential for that product. In terms of your agreement with Ironshore and any kind of changing of control issues or questions, that doesn't affect your license agreement for that product across Canada and Latin America?

Amal Khouri: Hi, it's Amal. Yeah, no, it doesn't affect it. I mean, as you know, this is a very common thing. It is something that we have to consider as a common possibility in all of our deals. And it's something that we do consider so that the acquisition does not affect us.

Arvind Utchanah: yeah

Arvind Utchanah: Hi, it's Amal. Yeah, no, it doesn't affect it. I mean, I do, I'm sure you're, you know, this is a very common, this is something that we have to consider as a common possibility in all of our deals and it's something that we do consider so that the acquisition does not affect our rights.

Scott McAuley: That's great. And on Amazon, the Ministry of Health contract, maybe you said before, I don't recall, but how much is left on that contract for 2024? Obviously, there's some good news. I think it's over $8 million this quarter. Do you have a sense of how much we can expect left on that contract for 2024? And so right now...

Samira Sakhia: I'm excited to report for the first six months of the year. We delivered record revenues of 180 million, excluding Iburn Flation, and adjusted EBITDA of over 29 million. Our innovative promoted portfolio delivered growth of 12% versus last year, primarily driven by the growth in Lenzima, Trelstar, Akinzeo, Krasemba, as well as a contribution from the recent launches of Invexian-Bajua in Canada and Minjuvi in Brazil.

Speaker Change: that's great and on the amazon the ministrative of health contract just maybe yousaid before i don't recall but how much is left done on that contract for two thousand and twenty four obviously there are some some good think it'sover eight million this quarter you give a sense of how much we can expect left on that put that contr for two andtwentyfour

Amal Khouri: So, right now, from what we have confirmed, there is only a small amount left. That being said, they do have the option to be able to acquire more than that, but we won't be knowing that until later into the second half.

Speaker Change: So right now, from what we have confirmed, there is only a small amount left. That being said, they do have an option to be able to acquire more than that, but we won't be knowing that until later into the second half.

Samira Sakhia: Furthermore, we have expanded and strengthened our pipeline with the in-licensing of GERNA-PM, a novel formulation of NASA-Sanadate for ADHD. GERNA-PM complements our growing neurology portfolio, along with IPX-203 and Calbury, which re-inlicensed in the last nine months.

Scott McAuley: Lastly, on working capital, big inventory, and big swing this quarter. Do you expect that to level out for the rest of the year?

Speaker Change: Lastly, on the working capital, some big inventory and big swing this quarter. Do you expect that to level out for the rest of the year?

Samira Sakhia: I would like to add that earlier this week, Amnil announced the FDA approval of IPX-203 and expected launch in September of this year. This allows us to move on to our NCIB. Night completed, the NCIB launched in July 2023 and purchased a total of six million shares at an average price of $4.87 per share.

Arvind Utchanah: I'm going to ask Arvind to take that question.

Speaker Change: i'm going to ask arvvent to take that question

Unnamed Analyst: So the working capital was really an expectation that we had from Q1 related to payment of invoices for inventory we purchased in Q1. I would say our working capital is lumpy in a quarter, in any given quarter, depending on the purchases of inventory. So you really have to look at it on a year-to-date basis. And if you look at our cash flows on a year-to-date basis, we do have a solid cash flow to EBITDA conversion ratio. And it's really because of the solid business that we built, and that does very well.

Arvind Utchanah: So the working capital was really an expectation that we had from Q1 related to the amount of invoices when we purchased in Q1. I would say our working capital is lumpy in a quarter, in the event quarter, depending on purchases of inventory. So we really have to look at it on a year-to-date basis. And if you look at our cash flows on a year-to-date basis, we do have a solid cash flow to debit that conversion ratio. And it's really because of the solid business that we built and that there's a...

Unnamed Analyst: So the working capital was really an expectation that we had from Q1 related to payment of invoices for inventory we purchased in Q1. I would say our working capital is lumpy in a quarter, in any given quarter depending on purchases of inventory. So you really have to look at it on a year-to-date basis. And if you look at our cash flows on a year-to-date basis, we do have a solid cash flow.

Samira Sakhia: Subsequent to the quarter, Knight launched a new NCIB under which we can purchase for cancellation up to approximately 5.3 million common shares over the next 12 months.

Arvind Utchanah: I will now turn the call over to Arvind to provide an update on our financial results. Thank you, Samira. When speaking of our financial results, I will refer to EBITDA and adjusted EBITDA, which are non-IFRS measures, as well as adjusted EBITDA per share which is a non-IFRS ratio. Knight defines EBITDA as operating income or loss, excluding amortization and impairment of non-current assets, depreciation, purchase price accounting adjustments, and impact of accounting under high inflation, but to include cost-related to users.

Unnamed Analyst: And that's really because of the solid business that we built and that does very well.

Scott McAuley: Great. So yeah, continue to kind of expect some potential lumpy quarters and swings quarter after quarter, but longer term, you know, trending in the right direction. Absolutely. That's exactly right. That's all for me this morning. Thank you very much.

Speaker Change: Great, so yeah, continue to kind of expect some potential lumpy quarters and swings quarter quarter, but longer term, you know, trending in the right direction.

Unnamed Analyst: That's all for me this morning. Thank you very much.

Speaker Change: Absolutely correct. That's exactly right.

Speaker Change: yes great that's all for me just want to think very much

Operator: Thank you, Scott.

Scott: Thank you, Scott.

Samira Sakhia: There are no further questions at this time. I am now handing the conference over to Samira Sakhia.

Unnamed Analyst: There are no further questions at this time. I am now handing the conference over to Samira Sakhia.

Arvind Utchanah: I just said EBITDA excludes acquisition costs and non-recurring expenses. Knight defines adjusted EBITDA per share as I just said EBITDA over the number of common shares outstanding at the end of the respective period. Furthermore, my discussion on the operating results will refer to figures that exclude high inflation.

Samira Sakhia: Once again, thank you for your confidence in the Knight team and for joining our Q2 2024 conference call. Have a great morning.

Speaker Change: Once again, thank you for your confidence in the Knight team and for joining our Q2 2024 conference call. Have a great morning.

Operator: Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Arvind Utchanah: For the second quarter of 2024, we delivered record revenues of over $94 million and increased of $3.7 million or 4% versus prior year. Our oncology and hematology disease portfolio delivered approximately $36 million of revenues, a growth of $7.7 million or 28% compared to the same period last year. This was driven by the continued growth of our key promoted products, including LandWima, Akinzeo, Trashtar, as well as the launch of Minjuvin Bergel, turning to our other specialty portfolio.

Arvind Utchanah: During the quarter, the portfolio generated $20.6 million in revenues and increased of $3.8 million or 22% compared to the same period last year. This increase is a result of the transition of commercial activities of Exalon from Novotis tonight in 2023. As a reminder, the revenues of Exalon were lower in the second quarter of 2023 due to advanced purchases by certain customers in the first quarter of that year.

Arvind Utchanah: Now moving to our infectious disease portfolio, we generated $37.8 million of revenues in the second quarter, a decrease of $7.7 million or 17% compared to the same period last year. This decrease was primarily due to the timing of orders for ambison under the contract with the Ministry of Health in Brazil or MOH, as well as a decrease in the demand of impoverished. The decrease was partly offset by the growth of our key promoted products, including press and bar, as well as timing of orders for certain products.

Arvind Utchanah: During the quarter, we sold a total of $8.9 million of ambison under our MOH contracts compared to $18 million in the same period last year. As a reminder, during the first six months of 2024, we delivered a total of $18.1 million of ambison to MOH compared to $20.4 million in the same period last year.

Arvind Utchanah: Now looking at our growth margin, we reported $45.3 million or a growth margin of 48% of revenues in the second quarter of 2024 compared to $40.2 million or 45% of revenues in the same period last year. The increase in the 2024 growth margin as a percentage of revenues was due to product mix, including a lower proportion of ambison to MOH.

Arvind Utchanah: I will now turn to our operating expenses. Our operating expenses, excluding amortization of non-current assets, for the second quarter, were approximately $3.1 million, an increase of $3.3 million or 12% compared to the same period last year. The increase in operating expenses was driven by an increase in our genetic cost through to our structure and higher compensation expenses, as well as development costs for our pipeline products. Moving to adjusted EBITDA, for the second quarter of 2024, were put to $15.7 million of adjusted EBITDA, an increase of $1.5 million or 10% compared to the same period last year, given by a higher gross margin, which was partly offset by higher genetic cost and R&D investments for our pipeline.

Arvind Utchanah: While our adjusted EBITDA increased by 10%, our adjusted EBITDA per share increased by 23%. This additional increase in the adjusted EBITDA per share was driven by the decrease in common shares outstanding due to repurchases under our NCIB.

Arvind Utchanah: Finally, onto our cash flows. During Q224, Knight had cash flows from operations of $1.1 million, driven by our operating results offset by an increase in working capital of $11.9 million. As we had communicated at the end of Q1, the majority of this working capital increase is due to payments related to inventory that was purchased in Q1.

Arvind Utchanah: As a reminder, on a year-to-date basis, Knight generated $29.3 million of adjusted EBITDA and $29.8 million of cash inflows from operations.

Samira Sakhia: I will now turn the call back to Sam Ruffo for concluding remarks. Thank you, Arvind.

Samira Sakhia: I would like to provide an update on our financial outlook for fiscal 2024. I would remind everyone that this guidance is provided on a non-gap basis excluding hyperinflation due to the difficulty in predicting Argentinian inflation rates. We are increasing our financial guidance on revenues and expected to generate between $355 million to $365 million in revenues, up from $335 million to $350 million. In addition, we are updating our guidance for adjusted EBITDA, which is now expected to be approximately 16% of revenues, which in dollars remains within the previous guidance range.

Samira Sakhia: Not really. As you can imagine, when we're launching new products, it does take time for them to get to their peak sales, which is usually in the three to five year range. So even if we advance some launches by, you know, three, six months, it's not really going to have a bigger impact on what's going on in the BGX portfolio.

Samira Sakhia: The change in our financial outlook is primarily due to an improvement in forecasted last-hand currencies against the Canadian dollar as well as an acceleration of investments in our pipeline products. In addition, this guidance is based on a number of assumptions which are described more in our press release. Should any of the other assumptions differ, the financial outlook and the actual results may vary materially. Over the last several months, we have announced three product submissions in multiple territories, two product approvals, three product launches, and we have added three pipeline assets from three new partners.

Samira Sakhia: We have a pipeline of 18 products that are expected to generate over $150 million in revenues. Should they achieve our estimated peak sales? This demonstrates not only our commitment, but also our ability to execute on our strategy. We have a profitable and cash flow generating business with a growing portfolio of assets and with over $150 million in cash equivalents and marketable securities at the end of the quarter, we remain well positioned to continue to execute on our strategy to in-license and acquire innovative and branded generic pharmaceuticals as well as to develop our own branded generic portfolio. Thank you for your support and confidence in the 19.

Samira Sakhia: This concludes our formal remarks.

Samira Sakhia: I'd like to open up the call for questions. I wish you were, Angelina. Thank you.

Angelin: Before we begin, Mayal, 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 iratnightpx.com or via phone at 514-484-4483. If you would like to ask a question, please press star followed by the number one on your telephone keypad. If you are using a speaker phone, please lift your handset before pressing any key. If you would like to read your question, please press star 2 key. One moment, please, for your first question.

Michael Freeman: Your first question comes from Michael Freeman from Raymond James. Hey, good morning, Samira. I'm all in. Thanks very much for taking our questions and congrats on some solid results. I'm glad you mentioned the approval of IPX-2-3 by Amnely yesterday. I wonder if this approval came out in line timing-wise with your expectations and correct Daniel's expectations. And if there are any implications for perhaps an acceleration of timelines for approvals and jurisdictions in the next few operate, I'm glad to have you. Thanks.

Samira Sakhia: Hi, that's a great question. Actually we knew when Amnely had submitted earlier this year, which was I believe sometime in February, and the FDA has a pretty standard time of review. So this is really around the time that they were expecting their approval. And it doesn't really change our timelines because we had structured our agreements and start working on some portions of the submission while they were pending their approval. Gotcha. I've got to helpful.

Samira Sakhia: Now on the escalated guidance, you mentioned there's as much with currency here, but also mentioned that there that you've been accelerating investments into your pipeline products. I wonder if you can describe what this acceleration and investment looks like. So as you know, we have 18 products in our pipeline. What we are really trying to do is see what we can accelerate, whether it's some development work in advance of submission, as well as launch pre-launch activities, which we're trying to see if we can't launch by the end of next year, as opposed to the following year.

Samira Sakhia: We have Minjoovi, which we are expecting approval from other territories. We have also, also Matt Mead, or Talilis, also expected for approval in certain countries next year as well. Okay, excellent. Very helpful. Just one very last comment. I on Bouch Health's earnings call. They did mention for their international business that they are seeking to do some business development activities, specifically in Latin. I wonder if you could comment on how Bouch Health specifically figures into your competitive set across the jurisdictions in which you operate.

Amal Khouri: Sure, I'll ask them all to answer that.

Amal Khouri: Hi, good morning. So in terms of, I think if you were asking whether we have seen and competing against us for deals, we haven't really come across them. On the flip side of it in terms of, you know, depending on what they're looking for, if they just need a demo, I have a company looking to diverse assets in our regions. As you know, that's one of the areas that we focus on, which is to look at acquiring assets from companies who are looking to diverse or focused at the point. Okay, thanks, Amal. I'll pass it on now. Okay, thank you.

Michael Freeman: My call.

David Martin: Your next question? Come from David Martin from Bloom, Britain. Please go ahead.

Samira Sakhia: Good morning and congratulations on the quarter and the progress. I'm wondering when you put the salty drop of acceleration of the pipeline, previously you would be expecting a dip in revenues with increased genera factor on some of your legacy branded generics. I see you see this being the exact difference for any more. Not really. As you can imagine, when we're launching new products, it does take time for them to get to their peak sales, which is usually in the three to five year range.

Samira Sakhia: So even if we advance some launches by, you know, three, six months, it's not really going to be a bigger impact on what's going on in the BGX portfolio. It's really. Sorry, there's a bit of feedback.

Samira Sakhia: What about M&A of some mature products with sales to like back to that gap? Is that still on your radar? Absolutely. This is one where we are always looking for assets to be able to add. As you know, we acquired Exxon a lot for that reason. We added a kinzo, which actually not only added epidimedically, but really was a great fit into our portfolio and is a growing asset. We are always mindful here between the quality of the asset and the valuation. It is a very competitive market, and we are very disciplined. Got it.

Samira Sakhia: Also, I'm wondering what's driving the Brazilian Ministry of Health to establish these contracts for Amazon? Is there an outbreak and fungal infractions that might be transient, or is this something that you expect to be long term and renewed year after year? And what is the patent protection on Amazon and Brazil? So, Amazon has not had patent protection for decades, and we know, for example, in the US, there is already two generics.

Samira Sakhia: As for the first part of your question, fungal infraction is an issue in Brazil. It's not a transient issue. Prior to the government acquiring Amazon, they were acquiring a competitor's product, kind of a similar molecule, but not the same formulation. That competitor has been having supply issues for the last years, and that is really why they have switched to Amazon. And what this has been really great about for us is it's actually allowed us to establish a very good relationship with the Ministry of Health.

Samira Sakhia: We are working with them on Amazon. We're also starting at a very small level, but still meaningful, even on Krasemba. And really expect to be able to continue with that great relationship, even if our competitor comes back, and we no longer have Amazon shipments to them, the link is great.

David Martin: Okay. Thank you.

David Martin: Thank you, David.

Scott McAuley: And of the next question comes from Scott McCully from Paradeum, Capitol. Please go ahead.

Samira Sakhia: Good morning, everybody. Thanks for taking the question. First on Jornet, and we saw that the other week, Ironshore got acquired, which I guess is a positive for the potential for that product, but in terms of your agreement with Ironshore and a kind of changing of control issues or questions, that doesn't affect your license agreement for that product. You know, Canada and Latin America. Hi, Sam. I'll, you know, it doesn't affect it.

Samira Sakhia: I mean, I do. I'm sure you're, you know, this is a very common, something that we have to consider as a common possibility in all of our deals, and it's something that we do consider. So that's the opposite. That's great.

Samira Sakhia: And on the Amazon, the Ministry of Health contract, just maybe you said before I don't recall, but how much is left on that contract for 2024? Obviously, there was some, some good, you know, I think is over 8 million this quarter. Do you have a sense of how much we can expect left on that contract for 2024? So right now, from what we have confirmed, there's only a small amount left. That being said, they do have an option to be able to acquire more than that, but we won't be knowing that until later into the second half. That's great.

Arvind Utchanah: And I guess, especially on the, obviously, the working capital, you know, some big inventory and big swing, this quarter, to expect that to kind of level out for the rest of the year.

Arvind Utchanah: I'm going to ask Arvind to take that question. So, the working capital was really an expectation that we had from Q1 related to same amount of invoices when we purchased in Q1. I would say our working capital is lumpy in a quarter, in any event quarter depending on purchases of inventory. So you really have to look at it on a year-to-date basis. And if you look at our cash flows on a year-to-date basis, we do have a solid cash flow to evade that conversion ratio, and it's really because of the solid business that we built, and that does very well.

Arvind Utchanah: Great. So yeah, continue to kind of expect some potential lumpy quarters and swing is quarter quarter, but longer term trending in the right direction. Absolutely. That's exactly right.

Scott McAuley: Yeah, great.

Scott McAuley: That's all for me this morning.

Scott McAuley: Thank you very much. Thank you, Scott.

Angelin: There are no further questions at this time.

Samira Sakhia: I am now handing the conference over to Samira Sikia. Once again, thank you for your confidence in the night team, and for joining our Q2 2024 conference call. Have a great morning. Thank you.

Angelin: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Q2 2024 Knight Therapeutics Inc Earnings Call

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