Knight Therapeutics Inc.

Good morning, ladies and gentlemen. My name is Eric and I will be your operator today. Welcome to Knight Therapeutics' second quarter 2023 results conference call. Before turning the call over to Samir Sakia, President and CEO of Knight, listeners are reminded that portions of today's discussion may, by their nature, necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. The company considers these 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 are beyond the control of the company 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 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 info at knighttx.com or via phone at 514-484-4483. I would like to remind everyone that this call is being recorded today, August 10th, 2023. and would now like to turn the meeting over to your host for today's call, Samir Sakia. Please go ahead, Ms. Sakia.

Thank you, Eric. Good morning, everyone, and welcome to Knight Therapeutics' second quarter 2023 conference call. I'm joined on today's call with Amal Khoury, our Chief Business Officer, and Arvind Ujjana, our Chief Financial Officer. I'm excited to report that Knight achieved record revenues of over $90 million for this quarter. Furthermore, during the first six months of the year, Knight has delivered revenues of over $172 million and adjusted EBITDA of over $32 million, a growth of 24% and 4% respectively compared to the same period last year. This strong performance is a testament to the hard work and dedication of our team and continued success of our portfolio. In addition, our team continues to focus on advancing our pipeline with the approval and submission of innovative and branded generic products across our territories. During the quarter, Knight submitted the marketing authorization for two innovative products, Minjuvi in Mexico and Pemezir in both Argentina and Mexico. In addition, we advanced our branded generics portfolio, particularly in Chile, with the submission of marketing authorizations for Rembre or Dasatinib and Carfilzomib, and obtaining regulatory approval of Zetrain or pomalidomide. Subsequent to the quarter, we submitted Fosamatinib for regulatory approval in Mexico and Colombia, and obtained regulatory approval in Brazil from Injuvi. Upon obtaining a visa approval from Injuvi in Brazil, we submitted an application for pricing approval to CMED. CMED is the regulatory body that establishes maximum prices allowed for drugs sold in Brazil. In Brazil, prior to being able to launch, we do need CMAT approval of pricing. The timing and outcome of this pricing approval process is uncertain and could take up to two years. The commercial launch of Minjuvi is dependent upon obtaining a favorable CMAT price. I will turn the call now over to Arvind to provide an update on our financial results.

Thank you, Sandra. 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. I define EBITDA as operating income or loss, excluding amortization and impairment of non-current assets, depreciation, purchase price accounting adjustment, and 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. In the second quarter of 2023, as Samra mentioned, we delivered record revenues of over $90 million. Our revenues, excluding hyperinflation, grew by more than $15 million, or 20%, and on a currency basis, by more than $13 million, or 17%, versus prior year. This growth is mainly driven by our infectious disease portfolio, which delivered $45.6 million of revenues. Excluding the impact of the planned transition and termination agreement with Gilead effective July 1, 2022, The portfolio grew by $19 million, or 71%, compared to the same period in the prior year. This growth is driven by our key promoted products, including the previously announced Ambison contract with the Brazilian Ministry of Health for $18 million. As for our oncology and hematology portfolio, our revenues, excluding hyperinflation, were $27.9 million, a growth of $1.9 million or 7% compared to the same period last year. Our key promoted brands, including Landvima and 12 Star, as well as the addition of Akinzeo, contributed $5.9 million of incremental revenues. This was partially offset by a reduction in sales of approximately $4 million on certain natural and brand-degenerate products, due to their lifecycle and entrance of new competitors. Now moving to our other specialty portfolio. During the quarter, revenues excluding hyperinflation was $16.9 million. The portfolio declined by approximately $7.5 million, excluding the change in the accounting treatment for Exelon. The decline is due to advanced purchases of Exelon in the first quarter of 2023 and the second quarter of 2022, related to the commercial transition from Novartis to Knight. As a result of the advanced purchases, we had recorded higher revenues in the first quarter of 2023 due to the transition for Mexico and in the second quarter of 2022 due to the transition of Brazil and Colombia. Now moving to gross margin. Excluding the impact of hyperinflation, we reported $40.2 million or 45% of revenue in the second quarter of 2023. compared to $40.8 million or 54% of revenue in the same period last year. The decline in gross margin as a percentage of revenue is partially explained by the change in the accounting treatment related to Exelon. I would like to remind everyone that in the second quarter of 2022, Exelon was quoted as a net profit transfer from Novartis. If Knight had reported revenues and related costs of sales for Exelon, instead of a net profit transfer, the adjusted gross margin would have been 50% for Q222. The decrease in the adjusted gross margin of 50% in Q222 to 45% in Q223 is due to the product mix of our revenue. Now moving on to our operating expense, excluding high compensation. For the second quarter, our operating expenses were approximately $38 million, an increase of $3.9 million compared to the same prior year period. The increase is mainly due to our expanded self-structure, promotion and medical activities, and certain variable costs, such as logistics expenses, which rose as a function of higher sales. Moving on to adjusted EBITDA. For the second quarter of 2023, we reported $14.3 million of adjusted EBITDA, a decrease of $3.6 million, or 20% compared to the same period last year. In addition, NYX adjusted EBITDA per share was $0.13, a decrease of $0.02 per share, or 15% over the same period last year. Now moving on to gains or losses on our financial assets, which are not reflected in our adjusted EBITDA. In the second quarter, we recorded $3.9 million of net unrealized gain on financial assets measured at fair value to profit or loss. This gain is driven by positive mark-to-market adjustment as a result of the increase in the share price of the publicly traded equities held by our strategic fund investments. Moving on to our cash flows. During the second quarter of 2023, Knight had cash outflows from operations of approximately $1.5 million, compared to cash inflows from operations of $13.2 million in the same period last year. The cash outflows from operations during the second quarter of 2023 is due to the settlement of our accounts payable, mainly related to inventory purchases of our key promoted products, and the planned transition and termination of our Gilead The transfer of inventory under the Gilead transition led to an increase of $6 million in our accounts receivable, which will be collected in Q3. I will now turn the call back to Samira for concluding remarks.