Knight Therapeutics Inc.

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.

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.

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.