Knight Therapeutics Inc.

Good morning, ladies and gentlemen. My name is Mark, and I will be your operator today. Welcome to the Knight Therapeutics second quarter 2023 results conference call. Before turning the call over to Samira 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 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 statements, 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, further 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 nightstx.com or via phone at 514-484-4483. I would like to remind everyone that this call is being recorded today, November the 9th, 2023. And I would now like to turn the meeting over to your host for today's call, Samira Sagir. Please go ahead, Ms. Sagir.

Thank you, Mark. Good morning, everyone, and welcome to Knight Therapeutics' third 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 pleased to announce that Knight achieved record results for the nine months ended September 30th, 2023. We delivered revenues of over $254 million and adjusted EBITDA of over $48 million. a growth of 20% and 19%, respectively, over the same period last year. Moving on to an update of our product portfolio. We received the regulatory approval for Venduvia in Brazil, as well as the pricing approval from CMED, the regulatory body that establishes maximum prices allowed for drugs sold in Brazil. As a result, we expect to launch Venduvia in Brazil in the second quarter of 2024. I'm extremely proud of our team's achievements in getting the product approval faster than our expectations using the rare disease regulatory pathway available in Brazil, as well as getting optimal pricing much faster than expected. In addition, we advanced our product pipeline with the regulatory approval, regulatory submissions of Fosamatinib, also marketed as Tevalis in the U.S. in Colombia and Mexico, and Pemigatinib, marketed as Pemizirin, U.S. and Europe, in Brazil. With these submissions, we now have three innovative products awaiting regulatory approval in multiple territories. More specifically, Tepacitamab or Renjuvi in Argentina, Colombia, and Mexico, Fosnamatinib in Colombia and Mexico, and Pemigatinib in Brazil, Argentina, Colombia, and Mexico. In addition, we have four branded generic products pending regulatory approval in Colombia. As we're continuing to build our pipeline during the second quarter of 2023, we strengthened our oncology and hematology portfolio with the in-licensing of a branded generic product for Brazil. 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 smart measures, as well as adjusted EBITDA per share, which is a non-IFRS ratio. NICE 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. NIGHT 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. In the third quarter of 2023, we delivered revenues of over $81 million, representing an increase of more than $12 million, or 18%, and on a constant currency basis by more than $8 million, or 11%, versus prior year. This growth is driven by our oncology and hematology disease portfolio, which delivered over $31 million of revenues, an increase of approximately $5 million, or 19%, compared to the same period last year. Our key promoted brands, including Lendvima, Fossor, Palbosil and Akinzeo contributed approximately $7 million of incremental revenues. This increase was offset by a reduction in sales of approximately $2 million on certain Maxu and Brandon generic products due to the life cycle and the entrance of new competitors. As for our infectious diseases portfolio, our revenues were $29.2 million, a growth of approximately $2 million or 7% compared to the same period last year. This growth is driven by our key promoted products, including Cresemba and higher demand of Improvido, partially offset by the purchasing patterns for certain products. With respect to our other specialty portfolio, During the quarter, revenues were $21.1 million, an increase of $5.5 million, or 36% compared to the same period last year. The increase is primarily driven by the transition of commercial operations of Exelon from Novartis to Knight. More specifically, in Q3 2022, NICE recorded lower revenues of Exelon due to the advance customer purchases of $3 million in Brazil and Colombia in Q222. The remainder of the variance is explained by the change in accounting treatment of Exelon from net profit transferred to revenues with related cost of sales, as well as timing of purchases from certain customers. Now, moving on to gross margin. The reported $42.1 million or a gross margin of 52% of revenues in the third quarter of 2023 compared to $33.8 million or 49% of revenues in the same period last year. The increase in gross margin as a percentage of revenue is driven by the change in the product mix. I will now turn to our operating expenses. For the third quarter of 2023, Our operating expenses were approximately $39 million. Excluding the impairment of intangible assets recorded in Q3 2022, the operating expenses increased by $2.2 million, which is mainly due to an increase in compensation costs related to NITE's long-term incentive plan, higher spending on professional and consulting fees, and expansion in our product development and medical initiatives. Moving on to adjusted EBITDA. For the third quarter of 2023, we reported $15.5 million of adjusted EBITDA, an increase of $6.5 million or 72% compared to the same period last year. In addition, Knight's adjusted EBITDA per share was 15 cents, an increase of 7 cents per share or 88% over the same period last year. With respect to gains or losses on our financial assets, which are not reflected in our adjusted EBITDA, in the third quarter of 2023, we recorded $5.6 million of net unrealized gain on financial assets measured at fair value through profit or loss. This gain is made up of an unrealized gain of $12.9 million driven by the increase in the fair value of our Marks.8 warrants and the conversion of our strategic 60P loan into sales. offset by a loss of $7.3 million due to the decrease in the share prices of the publicly traded equities of our strategic fund investments. Moving on to our cash flows. During the third quarter of 2023, Knight generated cash inflows from operations of $15.2 million, including a net working capital investment of $7.2 million. The increase in the working capital is mainly due to an increase in inventory related to our key promoted products and the settlement of the corresponding accounts payable offset by a decrease in accounts receivable. I will now turn the call back to Samira for concluding remarks.