Knight Therapeutics Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 8, 2024

There are 7 speakers on the call.

Operator

Good morning, ladies and gentlemen. My name is Angeline, and I will be your operator for today. Welcome to Knight Therapeutics' 2nd Quarter 2024 Results Conference Call. Before turning the call over to Samira Skita, President and CEO of Knight, listeners are reminded that portions of today's discussions may, by their nature, necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward looking statement. The company considers the assumptions on which these forward looking statements are based to be reasonable at the time they were prepared, but cautions that these assumptions regarding the future events, many of which beyond the control of the company and its subsidiaries, may ultimately prove to be incorrect.

Operator

The company disclaims any intention or obligation to update or revise any forward looking statements whether as a result of new information, future events, except as required by law. We would also like to remind you questions during today's call will be taken from analysts only. Should there be any further questions, please contact Knight's Investor Relations department via email to atknighttx.com or via phone at 514-484-4483. 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 Sekia. Please go ahead, Ms.

Operator

Sekia.

Speaker 1

Thank you, Angeline. Good morning, everyone, and welcome to Knight Therapeutics' Q2 2024 Conference Call. I'm joined on today's call with Amal Khouri, our Chief Business Officer and Arvind Uchana, our Chief Financial Officer. I'm excited to report for the 1st 6 months of the year, we delivered record revenues of $180,000,000 excluding hyperinflation and adjusted EBITDA of over $29,000,000 Our innovative product promoted portfolio delivered growth of 12% versus last year, primarily driven by the growth in LENVIMA, Trellstar, AKINZIO, CRYSEBA as well as the contribution from the recent launches of IMVEXXY and BIJUVA in Canada and MINJUVY in Brazil. Furthermore, we have expanded strengthened our pipeline with the in licensing of Journay PM, a novel formulation of methylphenidate for ADHD.

Speaker 1

Jurn APM complements our growing neurology portfolio along with IPX203 and Calbri, which we've been licensed in the last 9 months. I would like to add that earlier this week, Amneal announced the FDA approval of IPX203 and expected launch in September of this year. This allows Knight to continue on 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 6,000,000 shares at an average price of $4.87 per share.

Speaker 1

Subsequent to the quarter, Knight launched a new NCIB under which we can purchase for cancellation up to approximately 5,300,000 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 2

Thank you, Samira. When speaking of our financial results, I will refer to EBITDA and Knight defines EBITDA as operating 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 to include costs related to leases. Adjusted 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. Furthermore, my discussion on the operating results will refer to figures that exclude hyperinflation.

Speaker 2

For the second quarter, we delivered record revenues of over $94,000,000 an increase of $3,700,000 or 4% versus prior year. Our oncology and hematology disease portfolio delivered approximately $36,000,000 of revenues, a growth of $7,700,000 or 28% compared to the same period last year. This was driven by the continued growth of our key promoted products, including LENVIMA, AKINZIO, TRUSTOR, as well as the launch of MINJUV in Brazil. Turning to our other specialty portfolio. During the quarter, the portfolio generated $20,600,000 in revenues, an increase of $3,800,000 or 22% compared to the same period last year.

Speaker 2

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 Exelon were lower in the Q2 of 2023 due to advanced purchases by certain customers in the Q1 of that year. Now moving to our infectious disease portfolio. We generated $37,800,000 of revenues in the 2nd quarter, a decrease of $7,700,000 or 17% compared to the same period last year. This decrease was primarily due to the timing of orders for AmbiSom under the contract with the Ministry of Health in Brazil or MOH as well as a decrease in the demand of IMPOVITO.

Speaker 2

The decrease was partly offset by the growth of our key promoted products, including cresamba, as well as timing of orders for certain products. During the quarter, we sold a total of $8,900,000 of AmbiSom under our MH contract, compared to $18,000,000 in the same period last year. As a reminder, during the 1st 6 months of 2024, we delivered a total of $18,100,000 of AmbiSOME to MYH compared to $20,400,000 in the same period last year. Now looking at our gross margin. We reported $45,300,000 or a gross margin of 48% of revenues in the Q2 of 2024 compared to $40,200,000 or 45 percent of revenues in the same period last year.

Speaker 2

The increase in the 2024 gross margin as a percentage of revenues was due to product mix, including a lower proportion of AmbiSom sale to MOH. I will now turn to our operating expenses. Our operating expenses excluding amortization of non current assets for the Q2 were approximately $30,100,000 an increase of $3,300,000 or 12% compared to the same period last year. The increase in operating expenses was driven by an increase in our organic costs due to our structure and higher compensation expenses as well as development costs for our pipeline products. Moving to adjusted EBITDA.

Speaker 2

For the Q2 of 2024, we reported $15,700,000 of adjusted EBITDA, an increase of $1,500,000 or 10% compared to the same period last year, driven by higher gross margin, which was partly offset by higher G and A costs and R and D investments for our pipeline. 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. Finally, on to our cash flows. During Q2 2024, Knight had cash outflows from operations of $1,100,000 driven by our operating results offset by an increase in working capital of $11,900,000 As we had communicated at the end of Q1, the majority of this working capital increase is due to payments related to inventory was purchased in Q1.

Speaker 2

As a reminder, on a year to date basis, Knight generated $29,300,000 of adjusted EBITDA and $29,800,000 of cash inflows from operations. I will now turn the call back to Samira for concluding remarks.

Speaker 1

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 GAAP basis excluding hyperinflation due to the predicting Argentinian inflation rates. We are increasing our financial guidance on revenues and expect to generate between $355,000,000 to $365,000,000 in revenues, up from $335,000,000 to $350,000,000 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. 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 products.

Speaker 1

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 3 product submissions in multiple territories, 2 product approvals, 3 product launches, and we have added 3 pipeline assets from 3 new partners. We have a pipeline of 18 products that are expected to generate over $150,000,000 in revenues should they achieve our estimated peak sales. This demonstrates not only our commitment, but also our ability to execute on our strategy.

Speaker 1

We have a profitable and cash flow generating business with a growing portfolio of assets and with over $150,000,000 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. Over to you, Angeline.

Operator

Thank you. Before we begin, may I please remind you questions during today's call will be taken from analysts only. Should there be any further questions, please contact Knight's Investor Relations department via email to tx.com or via phone at 514-484-4483. Your first question comes from Michael Freeman from Raymond James.

Speaker 3

Hey, good morning, Sameer, Amal and Narbeh. Thanks very much for taking our questions and congrats on some solid results. I'm glad you mentioned the approval of IPX203 by Amneal yesterday. I wonder if this approval came about in line timing wise with your expectations and perhaps Amneal's expectations. And if there are any implications for perhaps an acceleration of timelines for approvals and jurisdictions in which we operate in last time?

Speaker 3

Thanks.

Speaker 1

Hi. That's a great question. Actually, we knew when Amneal had submitted earlier this year, which is 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 3

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

Speaker 1

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 we will be buying Jornay PM, which we may actually 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 MINJUVY, which we are expecting approvals in other territories. We have also tafamatinib or TAHALISSE also expected for approvals in certain countries next year as well.

Speaker 3

Okay. Excellent. Very helpful. Just one very last comment. On Bausch Health's earnings call, they did mention for their international business that they are seeking to do some business development activities, specifically in LatAm.

Speaker 3

I wonder if you could comment on how Bausch Health specifically figures into your competitive set across the jurisdictions in which you operate?

Speaker 1

Sure. I'll ask Amol to answer that. Hi, good morning.

Speaker 4

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, I guess, the competitive view. On the flip side of it, in terms of depending on what they're looking for, if they would see again or another company is looking to divest 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.

Speaker 3

Okay. Thanks, Amol. And I'll pass it on now.

Operator

Okay. Thank you. My call. Your next question comes from David Martin from Bloom Burton. Please go ahead.

Speaker 5

Good morning and congratulations on the quarter and the progress. I'm wondering when you put the salty drop acceleration of the pipeline, previously you had been expecting a dip in revenues with the increased generic pressure on some of your legacy branded generics. Do you see the situation being that that difficult to procure anymore?

Speaker 1

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 3 to 5 year range. So even if we advance some launches by 3, 6 months, it's not really going to have a bigger impact on what's going on in the BGX portfolio. It really accelerates.

Speaker 3

Sorry, there's a bit

Speaker 5

of feedback. What about M and A of some mature products with sales to like backfill that gap. Is that still on your radar?

Speaker 1

Absolutely. This is one where we are always looking for assets to be able to add. As you know, we acquired Exelon a lot for that reason. We added Akinzio, which actually not only added EBITDA 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 1

It is a very competitive market and we are very disciplined.

Speaker 5

Got it. Also, I'm wondering what's driving the Brazilian Ministry of Health to establish these contracts for Ambasome, 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 Ambozoma in Brazil?

Speaker 1

So Ambozom has not had patent protection for decades. And we know, for example, in the U. S, there is already 2 generics. As for the first part of your question, fungal infection is a issue in Brazil. It's not a transient issue.

Speaker 1

Prior to the government acquiring Ambasome, 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 few years. And that is really why they have switched to Ambasome. And the 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. We are working with them on ambosome. We're also starting at a very small level, but still meaningful even on Cresemba and really even if our Even if our competitor comes back and we no longer have amboisome shipments to them, the link is great.

Operator

Thank you, David. And the next question comes from Scott Macaulay from Pareteum Capital. Please go ahead.

Speaker 6

Good morning, everybody. Thanks for taking my questions. First on Jornay 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, any kind of changing of control issues or questions, that doesn't affect your license agreement for that product across Canada and Latin America?

Speaker 4

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

Speaker 3

That's great.

Speaker 6

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's some good I think it's over $8,000,000 this quarter.

Speaker 2

Do you have a

Speaker 6

sense of how much we can expect left on that contract for 2024? So

Speaker 1

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.

Speaker 6

That's great. And I guess lastly on the obviously the working capital, some big inventory and big swing this quarter. Do you expect that to kind of level out for the rest of the year?

Speaker 1

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

Speaker 2

So the working capital was really an expectation that we had from Q1 related to payment of invoices when rent we repurchased 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 to EBITDA conversion ratio and it's really because of the solid business that we built and that does very well.

Speaker 6

Great. So yes, continue to kind of expect some potential lumpy quarters and swings quarter to quarter, but longer term trending in the right direction.

Speaker 2

Absolutely. That's

Operator

exactly right.

Speaker 6

Yes. Great. That's all for me this morning. Thank you very much.

Operator

Thank you, Scott. There are no further questions at this time. I am now handing the conference over to Samira Sikia.

Speaker 1

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.

Remove Ads
Powered by Quartr
Earnings Conference Call
Knight Therapeutics Q2 2024
00:00 / 00:00
Remove Ads