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spk03: 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 turning the call over to Samira Zakira, President and CEO of Knight, listeners are reminded that portions of today's discussion may, by their nature, necessarily involve risk 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 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 statements, whether a result of new information, future events, except as required by law. We would like to remind you that questions during today's call will be taken from analysts only. If there be any further questions, please contact Knight's Investor Relations Department via email to info at knighttx.com. or via phone at 514-484-4483. I would now like to remind everyone that this call is being recorded today, March 21st, 2024. And I would now like to turn the meeting over to your host for today's call, Samira Sakia. Please go ahead.
spk06: Thank you, Sylvie. Good morning, everyone, and welcome to Knight Therapeutics' fourth quarter and URAN 2023 conference calls. I'm joined on today's call with Amal Khoury, our Chief Business Officer, and Arvind Uchina, our Chief Financial Officer. Last month, we celebrated our 10-year anniversary, and I'm 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. a 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 regulatory filings for five products, Minjuvi, Pemezir, Tavalis, Rembray, and CARFIP, across multiple territories and received approval from Minjuvi in Brazil for Palbasil and Zetrain in Chile and Carfib in Colombia. In addition to our regulatory submissions and approvals, we launched two products in Canada, Minjuvi, as well as Invexi, which competes in a growing market of over $90 million. Outside of Canada, we launched Minjuvi in Brazil and Palbasil in Argentina. Turning now to the NCIB. 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.
spk02: Thank you, Samira. When speaking of our financial results, I will refer to EBITDA and adjusted EBITDA, which are non-AFRS measures. as well as adjusted EBITDA per share, which is a non-IFRS ratio. NITE defines EBITDA as operating income or loss, excluding amortization and impairment of non-current assets, depreciation, purchase price accounting adjustment, and the impact of accounting under hyperinflation, but to include costs related to leases. Adjusted EBITDA excludes acquisition costs and non-recurring expenses. Nine different adjusted EBITDA per share as adjusted EBITDA over the number of common outstanding shares at the end of the respective period. Furthermore, my discussion on the operating results will refer to figures that exclude high completion. For the fourth quarter of 2023, we delivered revenues of over $88 million, representing an increase of $5 million, or 5% versus prior year. In 2023, as Samira 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, driven by growth across all of our therapeutic areas. In 2023, 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 Lenvima, Trulthorpe, Palbosil, and Akinzeo, contributed approximately $27 million of incremental revenues. The increase was offset by a reduction in sales of our mature and brander general products of approximately $10 million, due to the lifecycle and the entrance of new competitors. 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, including the impact of the planned transition and termination of our Gilead agreement effective July 2022. The increase was driven by the growth of our key promoted products, including Ambisom and Cresemba, as well as higher demand for Improvido. In 2023, we sold a total of $25.2 million of Ambisom under our sales contract with the Ministry of Health in Brazil, OMOH, an incremental $18.2 million compared to the MOH sales in the prior year. In December 2023, we have signed a new contract for Ambison with the MOH in Brazil, and 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 $80 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 of Exelon from Novartis to Knight, which resulted in the change in accounting treatment from net profit transfer to revenues with related cost of sales. Now moving on to gross margins. We reported $42.4 million, or a gross margin of 48% of revenues in the fourth quarter of 2023, compared to $41.9 million, or 50% of revenues in the same period last year. For 2023, we reported $166 million, or a gross margin of 48% of revenues, compared to $150 million, or 52% of revenues last year. As a reminder, Exelon 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 Exelon instead of a net profit transfer, the adjusted 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. Our operating expenses excluding amortization and impairment of non-current assets for the fourth quarter were approximately $30.5 million, an increase of $1.3 million, or 4% compared to the same period last year. For 2023, our operating expenses excluding amortization and impairment were $108.6 million, an increase of $9.3 million, or 9% compared to last year. The increase in operating expenses was due to an increase in our compensation expenses, certain variable costs such as logistic fees, which increased as a function of higher revenues, as well as an increase in selling, marketing, and medical activities related to our key promoted products. In addition, we accelerated our development activities related to our product pipelines. In 2023, Knight invested $2.5 million on nine pipeline products, an increase of $2.2 million compared to the prior. All costs related to development activities have been expensed. These costs include regulatory submission, analytical method transfers, stability studies, and bioequivalent studies. Moving on to adjusted EBITDA. For the fourth quarter of 2023, we reported $12.1 million of adjusted EBITDA, a decrease of $1.8 million, or 13%, compared to the same period last year. For 2023, adjusted EBITDA increased by $6 million, or 11%, to a record $60 million, or 18% of revenues. Our adjusted EBITDA per share was $0.59, an increase of 23% compared to the prior year. Moving to impairment of non-current assets, which is not reflected in our adjusted EBITDA. For 2023, we recorded an impairment of $9.3 million. The net book value of the intangible asset of Exelon is accounted in U.S. dollars and revalued from U.S. dollars to Canadian dollars at the end of every reporting period. The appreciation of the U.S. dollar versus the Canadian dollar from the acquisition date of Exelon to the closing foreign exchange rate of 2023 has led to an increase in the value of the asset in Canadian dollars and a resulting impairment loss. Now, moving on to gains or losses on our financial assets, which are not reflected in our adjusted dividend. In 2023, we reported a net loss of $10 million, driven by an unrealized loss of $22 million, mainly due to negative mark-to-market adjustment on our strategic funds. This was partly offset by a realized gain of $12 million due to the disposal of certain equity investments, including the Moksha 8 warrants. Moving on to our cash flows. During 2023, Knight generated cash inflow from operations of $36 million, including a networking capital investment of $28 million, driven by the onboarding of Exelon and Akinzeo, as well as investment in inventory to support our new product launches and our growing promoted products. I will now turn the call over to Amal to provide more details on our product pipeline.
spk05: Thank you, Arvind. In the past year, we have expanded our product pipeline with three additional products. We have in-licensed the branded generic molecule and oncology hematology for Brazil. This is a branded generic of an innovative drug that today is estimated to have sales in Brazil of over $170 million, according to IQPM. In addition, as of today, there are no generics or branded generics that have launched against this innovative drug in Brazil. In addition, Knighton licensed Calvary for Canada. Calvary is an extended release formulation of biloxazine, a multimodal serotonergic and norepinephrine modulating agent and non-stimulant medication for the treatment of attention deficit hyperactivity disorder, or ADHD. Calgary 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 IQVIA. and that continues to have a significant unmet medical need. Knight expects to submit Calgary for regulatory approval in the second half of 2024. Subsequent to year end, we unlicensed IPX203 for Canada and Latin America. IPX203 is a novel oral formulation of carbidopa levodopa extended release capsules designed for the treatment of Parkinson's disease. IPX203 was studied in the Rice PD clinical study that showed that treatment with IPX203 demonstrated statistically significant improvement in daily good on time with fewer doses of IPX203 compared with immediate release carbidopa levodopa. In that study, IPX203 was dosed an average of three times per day versus five times per day for immediate release carbidopa levodopa. IPX203 is expected to compete in a market value that over $50 million in Canada and over $120 million in Brazil, all based on IQVIA data. These recent deals illustrate our focused approach to building on the strong platform and capabilities that we have, specifically in oncology and central nervous systems, 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 chronic diseases. In the four years since the acquisition of Grupo Villa Toscana, our team has added 13 new products to our portfolio and will 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 Samira for concluding remarks.
spk06: Thank you, Amal. Now I'll cover our financial outlook for fiscal 2024. 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 revise our foreign exchange assumptions, which may materially impact our results and forecasts. Should any of the other assumptions differ, the financial outlook and the actual results may vary materially. We expect to generate revenues between $335 million to $350 million and adjusted EBITDA of approximately 17% of revenues. On February 28, 2024, Knight celebrated its 10-year anniversary. In the past decade, we have made significant progress on our strategy of building a 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 acquired platform by adding 17 new products, 13 of which came through partnering and four through our internal development capabilities. I am incredibly proud of what we have 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 our countries. Their unwavering commitment and dedication to serving patients across all our territories have been instrumental in shaping NITE as a partner of choice for Canada and Latin America. This concludes our formal remarks. I'd now like to turn the call back for questions. Sylvie, over to you.
spk03: 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 at knighttx.com or via phone at 514-484-4484. 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 speakerphone, 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. Once again, ladies and gentlemen, if you do have any questions at this time, please press star followed by one on your touchstone phone. And your first question will be from Doug Meham at RBC Capital Markets. Please go ahead.
spk00: Yeah, good morning, Samir and Amal. First question for me just has to do with the pipeline of opportunities that you're looking at right now. You've been quite successful, I'd say, over the last year in licensing some unique products. Could you tell us what things look like for 2024 at this point?
spk05: Good morning, Doug. Yes, so in terms of what we're looking for, nothing has changed. We continue to look to acquire products. products with existing sales. We look to unlicense innovative and branded generic products in our TAs. And we look also to identify additional internal development opportunities. The outlook is, again, we never had an issue in terms of deal flow. I think there is a lot of opportunities out there for all of our markets. So that continues to be, we continue to look at a healthy pipeline of deals It's just a question, as you know, of the regular frequency of DD is not something that could be scheduled, but the deal flow is very healthy, and we're really looking to accelerate going forward.
spk00: Okay, that's great. And then, Samira, on the guidance, when you look at the potential headwinds that you may see, whether it be with Exelon or perhaps some other generic Is the strength in the outlook simply a function of delays in this competition, or are you seeing, I'd say, stronger operations from the existing portfolio and new launches?
spk06: Well, it's a bit of both. I think the headwinds, we do continue to expect headwinds on our branded generic portfolio. As we had outlined during the beginning of 23, we expected headwinds coming in Colombia. Some of that came, not all of it came, and we expect it to come this year. The agency had been slower in approvals. We expect that to come. When it comes to Exelon, we're expecting it to remain flattish. This was a base business type of acquisition. Yes, we know that there's other branded generic competition, but we continue to promote and have been holding. And then they're offsetting some of the branded generics and very mature product declines is really the new product launches. And the variance between the low end and the top end is when it comes to the decline of some of those generics is how fast or how slow is the erosion going to be.
spk00: And can you, I know it's very early days, but some of the most recent launches, perhaps in Brazil, can you tell or give us any information on, if you can't tell yet how they're going, if there's been anecdotal evidence in terms of how some of these may do in 2024? I'll leave it there.
spk06: For both Invexi and Bujuva, as well as for Minjuvi, it really is too early to tell. What I can tell you, going back to it's anecdotal, in the case of Minjuvi, 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 Invexi, 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 all Canada. So we have expectations that it'll do well, but it's really too early to tell.
spk00: Perfect. Thank you.
spk03: Thank you. Next question will be from David Martin at Bloombergton. Please go ahead.
spk01: Good morning. This is Galish. I'm for David. We had a question about your specialty portfolio. Could you provide any clarity into what you guys claim were just differences in purchasing patterns of certain customers driving that slight decrease? And does Exelon start to have any impact on this portfolio given the generics in Brazil?
spk06: So what you have is some customers will place big purchase orders depending on the time of year. So that's really what is driving it. What we are seeing, for example, a couple of years post-COVID, some normalization, I'm going to say seasonality in some buying patterns in Q4. We used to normally see that in Canada. It stopped during COVID. In Canada, it's come back. In Brazil, it's come back. In the case of Exelon, as I said earlier, it is a brand that we expect to stay flattish, and it stayed flat between 22 and 23.
spk01: Oh, thank you. And just turning to the recent product launches, mainly on Vexxy, Since the market is largely controlled by one product, could you just give us any insight on some advantages of Invexi or how you might take some of that market share?
spk06: Sure. So Invexi is a soft gel pill that is inserted in the vagina without any devices. The Vagifem, which is the large competing product, is a tablet. It does need a device. In the case of Invexi, we don't have patient complaints in the studies related to any discharge or anything like that. In the case of Vagifem, 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 second end, it too is fully reimbursed across Canada.
spk01: 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 in the following year?
spk06: What we are expecting is each of Minjuvi and Invexi will be driving growth. Bijuva is in a smaller category of products. It too is a good product, but it's a smaller category.
spk01: Okay, thank you very much for that.
spk03: Thank you. Once again, ladies and gentlemen, if you have any questions, please press star followed by one on your touch-tone phone. And your next question will be from Raoul Sogster at Raymond James. Please go ahead, Raoul.
spk04: Good morning, Samira. I'm Raoul Arvin. So, looking forward, as you've recently said, peak estimate from the pipeline to $120 million. Do you have a sense for approximately when in what year that peak would likely happen, so essentially the duration on the assets? And as a part B to that question, are there any specific individual or one or two assets that we see representing 10% or more of those peak years?
spk06: Hi, I'm going to repeat your question because it was cutting in and out. So you're looking at our pipeline that is now 120 to 150, and when is that actually going to land and which products is that coming from? Is that right?
spk04: Yes. Yes, please.
spk06: Okay. So we don't guide to any one product revenue. What you see in there is there are some products that are in oncology, some of them that are in CNS, some of them are in very big markets. So if you look at a product like Calvary, a product like IPX, a product like Benjuvi, these are big contributors. I'm not going to get into the ones that are BGX because that would be providing a lot of information. As far as timing, it's really coming on a phased – it'll come over those years. Some of these products are launched – Minju, the Invexi 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, 29. So this is really over all of those years.
spk04: Terrific. That's very helpful. Yep. clearer now. So my second question is on the competitive landscape. So given part of our compliance and controls that Knight has, how are you seeing your peers or competitors in LATAM performing with respect to winning bids on in-licensing high-value drugs? And or how are you seeing the pharma players who are out-licensing these assets and their appetite to out-license versus set up themselves in terms of their own sales and marketing.
spk05: Good morning, Raul. This is Amal. And again, I think you're cutting in and out, so I think your question is related to compliance and how does Knight position itself to winning deals based on compliance. I think that was your first question. Did I hear that correctly?
spk04: Close enough. Thank you. Okay.
spk05: So, yes, compliance is extremely top of mind and very important across the industry. And we see it in most deals that we look at, that companies are not just kind of looking at anybody for any type of bid. They're also performing diligences 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, you know, 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 is evident to whatever prospective licensor is doing their diligence. So we are seeing that as a very important aspect that prospective licensors are looking at. And it's kind of hard to imagine them finding someone else with better standards than what we have in our markets. I think your second question was... looking at big pharma outlicensing products or other companies setting themselves in our markets. Was that correct?
spk04: Yes.
spk05: Yeah, so it's really, it's a mixed bag where you see companies looking to set up themselves. I think you can, again, it's hard to generalize, but I'll still give you generally speaking, if a company has a really kind of super rare orphan drug that is kind of, you know, they can, you can have a very, very small number of patients in, you know, one, you know, like 10 patients in one country, a few more patients in another country, then they could consider either not so much setting up themselves, but maybe having kind of one person as a representative in the country and just, you know, helping with the import. So that's, again, hard to generalize, but this should give you a sense of who would be considering going kind of a direct market entry model. On the other end of the spectrum, when you're looking at big pharma who already have presence in those markets, in terms of our licensing, it's, again, it depends on the company, the country. We see some companies, for example, some big pharma giving up their part of their portfolio to a distributor, we're not seeing a massive exodus, 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 outsource means different things.
spk04: Great. That's very helpful. I'll get back in the queue.
spk03: 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.
spk06: Thank you, Sylvie. And once again, this is the end of our call. Thank you for your confidence in the NITE team and for joining our Q4 and URN 23 conference call. Have a great morning.
spk03: 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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