Knight Therapeutics Inc.

Good morning, ladies and gentlemen. My name is Elle, and I will be your operator today. Welcome to Knight Therapeutics' first quarter 2025 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 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 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 ir.knighttx.com or via phone at 514-484-4483. I would like to remind everyone that this call is being recorded today, May 8, 2025, and would now like to turn the meeting over to your host for today's call, Samira Sakia. Please go ahead, Ms. Sacchia.

Thank you, Elle. Good morning, everyone, and welcome to Knight Therapeutics' first quarter 2025 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 pleased to announce that for the three months ended March 31st, 2025, we reported revenues of $88 million and an adjusted EBITDA of over $12 million. Our revenues increased by $2 million or 3% over the same period last year. The increase was mainly driven by our promoted portfolio, which accounts for over 75% of our total revenues. During the quarter, this portfolio grew by $9 million or 16% on a constant currency basis. In addition, we continue to execute on the business development front. As previously announced, we entered into an agreement with Endo to acquire all of the assets of Paladin for $100 million plus $20 million of inventory. Furthermore, Knight may pay future contingent payments of up to US $15 million upon achievement of certain milestones. Also, we have expanded our relationship with Helsin with the addition of Onisit for certain LATAM countries. Onisit is used for the prevention of chemotherapy-induced nausea and vomiting, as well as the prevention of postoperative nausea and vomiting. Moving to our pipeline, we continue to advance our portfolio with the regulatory submission of Tavalis in Argentina and the regulatory approval of Pemezir in Mexico. In addition to the regulatory process during the quarter, we launched Minjuvi in Mexico and relaunched Onisit in Brazil and Mexico. On to the NCIB. During the quarter, we purchased 605,000 common shares under the NCIB at an average purchase price of $5.53 for aggregate cash consideration of $3.3 million. 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 adjusted EBITDA and financial results at constant currency, which are non-FRS measures. as well as adjusted EBITDA per share, which is a non-average ratio. NITE defines adjusted EBITDA as operating income or loss, excluding amortization and impairment of non-current assets, depreciation, the impact of accounting under hyperinflation, and acquisition and transaction costs, but to include costs related to leases. We define adjusted EBITDA per share as adjusted EBITDA over the number of common shares outstanding at the end of the respective period. In addition, revenues and financial results at constant currency are also non-GAAP measures. Financial results at constant currency are obtained by translating the prior period results at the average point exchange rates in effect during the current period, except for Argentina, where we only exclude hyperinflation. Furthermore, my discussion on the operating results will refer to figures that exclude hyperinflation unless otherwise indicated. For the first quarter of 2025, we delivered revenues of $88 million, representing an increase of $2 million or 3% versus Q1 last year. On a constant currency basis, revenues increased by $6.6 million or 8%, driven by the growth of our key promoted products, partly offset by declines in our mature products. In the first quarter of 2025, our oncology and hematology portfolio delivered $32 million of revenues, a growth of $1 million, or 3%. On a constant currency basis, the portfolio grew by $2 million, or 6%, compared to the same period last year. This increase was driven by the continued growth of our key promoted brands, which contributed $4 million of incremental revenues, mainly coming from Landvima, Akinzeo, 12 Star, Minjuvi, as well as the addition of Oneset. This growth was partially offset by a decline in our mature and branded generic products due to the lifecycle and the market entrance of new competitors, as well as the impact of LATAM currency depreciation. Our infectious disease portfolio delivered $36 million, a decrease of $2 million, or 4%. On a constant currency basis, the portfolio actually grew by $1 million, or 3%, compared to the same period last year. The increase was due to purchasing patterns of certain customers, including ambisomes deliveries to the Ministry of Health in Brazil or MOH. As a reminder, in January 2025, we signed a third contract with the MOH and we expect to deliver $22.4 million in 2025, of which $13 million were already delivered in Q1 compared to $9 million in Q1 2024. Turning to our other specialty therapeutics areas. The portfolio generated $20 million in revenues, representing an increase of $3 million, or 18%, mainly driven by the launch of Invexi and Bidruva in Canada, as well as purchasing patterns of certain customers. Now moving on to gross margin. We reported $41 million, or a gross margin, per set of 47% of revenues in the first quarter of 2025, remaining relatively unchanged compared to the same period last year. I will now turn to our operating expenses, excluding amortization. For the first quarter, our operating expenses were $30.2 million, an increase of $3 million, or 10% compared to the same period last year. The increase in operating expenses was driven by an increase in commercial spend and structure behind our new launches, including Minjuvi, Invexi, Bijuva, and JoinAPM, as well as transaction fees related to the acquisition of Paradigm. Moving on to adjusted EBITDA. For the first quarter of 2025, we reported $12.1 million of adjusted EBITDA, a decrease of $1.5 million, or 11%, compared to the same period last year. Our adjusted EBITDA per share was 12 cents, a decrease of 8% compared to the same period last year. I will now cover our financial assets, which were valued at $127 million. During the quarter, we recorded a total net loss of $3.8 million on our financial assets, driven by the mark-to-market revaluation of our strategic fund investments and the change in value of certain equities. As a reminder, our funds continue to be a source of cash, and for the first quarter, we received a distribution of $3 million. Moving on to our cash flows. At the end of Q1, we held $141 million in cash and marketable securities. during the quarter we generated cash inflows from operations of 3.7 million dollars and invested 11.5 million dollars in working capital driven by an increase in our accounts receivable due to the timing of collections from certain customers in addition at the end of the quarter our inventory was valued at 140 million dollars an increase of 37 million dollars compared to the end of 2024. this is investment is due to the growth of our portfolio including our recent launches as well as timing of orders and deliveries of certain products including ambison to the moh subsequent to the quarter we closed the u.s 40 million dollars working capital line of credit from citibank of which we have withdrawn u.s 35 million dollars the maturity date of the debt is at the end of september this year the proceeds from the line of credit will be used to settle the accounts available for the inventory purchase during the first quarter I will now turn the call back to Summer.

Thank you, Arvind. On to our financial outlook for fiscal 2025. I would like to remind everyone that this guidance includes the assumption that we will close the Paladin acquisition in the middle of 2025 and also assumes that there is no material adjustment due to hyperinflation accounting in Argentina. In addition, our guidance is based on a number of assumptions which are described in our press release. Should any of these assumptions differ, the financial outlook and actual results may vary materially. We are reconfirming our outlook for fiscal 2025 and expect to generate revenues between $390 million to $405 million and adjusted EBITDA of approximately 13% of revenues. Looking ahead, we are very excited that we can deliver to our stakeholders with our recent and upcoming launches, as well as our pipeline products. In addition, the Paladin transaction, which we expect to close in the middle of this year, will add critical mass and significantly increase the size of our Canadian business, while adding a portfolio of stable cash flow generating products that will help fund our growth in Canada and Latin America. The piloting transaction and the addition of Omnisich demonstrate a focused execution in building a balanced portfolio that includes innovative, growing, promoted products and mature cash flow generating assets. We remain well-positioned to continue to execute on our mission to acquire, in-license, develop, and commercialize pharmaceutical products in Latin America and Canada. Thank you for your support and confidence in the NAIT team. This concludes our formal remarks. I'd like to open up the call for questions. Over to you, Al.

Before we begin, may I please 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.knightx.com or via phone at 514-484-4483. If you would like to ask a question, please press star followed by the number one on your telephone keypad. If you are using a speakerphone, please lift your handset before pressing any key. If you would like to withdraw your question, please press star to key. One moment please for your first question. Your first question comes from Michael Freeman of Raymond James. Please go ahead.

Hey, good morning, Samira, Amal, Arvind. Congratulations on a strong quarter. I have a few questions here. I wonder if you could, just thinking about your SD&A levels, how should we be thinking about your SD&A going forward and using this quarter's level? Should we be using it as a base going forward? or should we expect higher or lower? Of course, mid-year, we should expect Paladin to be included in these financials, so I wonder if you could describe a bit of the SG&A contribution you might expect from that acquisition.

Sure. So as you know, we don't provide guidance on OPEX. What we have provided in the guidance that we have is revenue and then EBITDA margin. And the guidance that we've provided includes closing Paladin in the middle of the year. And we don't guide on a quarter by quarter basis. So spending can be a bit lumpy. It's fine. We're going to end the year with 390 to 405 of top line and EBITDA margin of 13%. And the OpEx will move to deliver on those results.

Okay. All right. Thanks very much. I wonder, just on the Paladin acquisition process, I wonder if you could provide any updates relating to how that deal is progressing, sort of more closing details, perhaps with a finer point than mid-year.

We don't really have anything more than just kind of that mid-year. There is regulatory consents as well as regular consents that would be required, standard consents that would be required on a transaction like this. And each of those is progressing to plan. And so we believe that will be in the timelines that we forecasted.

Okay, that's great. And if I could shoehorn just one more, I wonder if you could comment on, you know, typical seasonality across your jurisdictions. You know, we saw a steady year-over-year growth, but of course we saw a quarter-over-quarter dip. I wonder if you could just go review the factors that impact the seasonality.

Sure. So I'm going to say the place that we have normal seasonality is is canada where q4 is usually a bigger quarter we see buying patterns from wholesalers that load in advance there's a little bit in brazil and a little bit in brazil impacts our business more given the size of that business in our business today the rest of the markets are pretty even so there isn't there isn't that much seasonality. And the reason I kind of bring this up is because as we add Paladin, we will start to see more seasonality in our business because it's really, it'll be a bigger contributor.

Okay, thank you very much. I'll pass it on now.

Again, if you would like to ask a question, please press star followed by the number one on your telephone keypad. there are no further questions at this time please continue miss sakia thank you once again uh thank you for the confidence in the night team and for joining our q125 conference call have a great morning ladies and gentlemen this concludes today's conference call thank you for your participation you may now disconnect