Knight Therapeutics Inc.

Good morning, ladies and gentlemen. My name is Angeline, and I will be your operator for today. Welcome to Knight Therapeutics' second quarter 2024 results conference call. Before turning the call over to Samira Ski, 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 in 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. 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 ir at knighttx.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 Sakiya. Please go ahead, Ms. Sakiya.

Thank you, Angeline. Good morning, everyone, and welcome to Knight Therapeutics' second quarter 2024 conference call. I'm joined on today's call with Amal Khoury, our Chief Business Officer, and Arvind Uchina, our Chief Financial Officer. I'm excited to report for the first six months of the year, we delivered record revenues of $180 million, excluding hyperinflation, and adjusted EBITDA of over $29 million. Our innovative promoted portfolio delivered growth of 12% versus last year, primarily driven by the growth in Lenvima, Trelstar, Akinzeo, Cresemba, as well as a contribution from the recent launches of Invexia and Bejuva in Canada and Minjuvi in Brazil. Furthermore, we have expanded and strengthened our pipeline with the in-licensing of JourneyPM, a novel formulation of methylphenidate for ADHD. Journey PM complements our growing neurology portfolio along with IPX203 and Calvary, which we in-licensed in the last nine months. I would like to add that earlier this week, Amniel 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 million shares at an average price of $4.87 per share. Subsequent to the quarter, Knight launched a new NCIB under which we can purchase for cancellation up to approximately 5.3 million common shares over the next 12 months. 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 measures, as well as adjusted EBITDA per share, which is a non-IFRS ratio. NINE defines EBITDA as operating income or loss, excluding amortization and impairment of non-current assets, depreciation, purchase price, accounting adjustments, 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. Furthermore, my discussion on the operating results will refer to figures that exclude high inflation. For the second quarter, we delivered record revenues of over $94 million, an increase of $3.7 million or 4% versus prior year. Our oncology and hematology disease portfolio delivered approximately $36 million of revenues, a growth of $7.7 million or 28% compared to the same period last year. This was driven by the continued growth of our key promoted products, including Lenvima, Akinzeo, Trelthor, as well as the launch of Minjuvin Brazil. Turning to our other specialty portfolio. During the quarter, the portfolio generated $20.6 million in revenues, an increase of $3.8 million or 22% compared to the same period last year. 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 second quarter of 2023 due to advanced purchases by certain customers in the first quarter of that year. Now moving to our infectious disease portfolio, we generated $37.8 million of revenues in the second quarter, a decrease of $7.7 million or 17% compared to the same period last year. This decrease was primarily due to the timing of orders for Ambisome under the contract with the Ministry of Health in Brazil, or MOH, as well as a decrease in the demand of Improvido. The decrease was partly offset by the growth of our key promoted products, including Presemba, as well as timing of orders for certain products. During the quarter, we sold a total of $8.9 million of Ambisome under our MOH contract, compared to $18 million in the same period last year. As a reminder, during the first six months of 2024, we delivered a total of $18.1 million of Ambisome to MOH, compared to $20.4 million in the same period last year. Now looking at our gross margin. We reported $45.3 million, or a gross margin of 48% of revenues in the second quarter of 2024, compared to $40.2 million or 45% of revenues in the same period last year. The increase in the 2024 gross margin as a percentage of revenues was due to product mix, including a lower proportion of ambisome sale to MOH. I will now turn to our operating expenses. Our operating expenses excluding amortization of non-current assets for the second quarter were approximately $30.1 million, an increase of $3.3 million or 12% compared to the same period last year. The increase in operating expenses was driven by an increase in our G&A costs due to our structure and higher compensation expenses, as well as development costs for our pipeline products. Moving to adjusted EBITDA. For the second quarter of 2024, we reported $15.7 million of adjusted EBITDA, an increase of $1.5 million or 10% compared to the same period last year, driven by a higher gross margin, which was partly offset by higher G&A costs and R&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, onto our cash flows. During Q2 24, Knight had cash outflows from operations of $1.1 million, driven by our operating results, offset by an increase in working capital of $11.9 million. As we had communicated at the end of Q1, the majority of this working capital increase is due to payments related to inventory that was purchased in Q1. As a reminder, on a year-to-date basis, NITE generated $29.3 million of adjusted EBITDA and $29.8 million of cash inflows from operations. I will now turn the call back to Samira for concluding remarks.