On May 12, 2022 Knight Therapeutics Inc. (TSX: GUD) ("Knight" or "the Company"), a leading Pan-American (ex-US) specialty pharmaceutical company, reported financial results for its first quarter ended March 31, 2022 (Press release, Knight Therapeutics, MAY 12, 2022, View Source [SID1234614408]). All currency amounts are in thousands except for share and per share amounts. All currencies are Canadian unless otherwise specified.
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Q1 2022 Highlights
Financials
Revenues were $63,807, an increase of $17,738 or 39% over the same period in prior year.
Gross margin of $32,477 or 51% compared to $20,580 or 45% in the same period in prior year.
Adjusted EBITDA1 was $13,312, an increase of $7,732 or 139% over the same period in prior year.
Net loss on financial assets measured at fair value through profit or loss of $16,363, of which $16,281 was unrealized.
Net loss was $18,811, compared to net income of $3,558 in the same period in prior year.
Cash inflow from operations was $12,879, compared to a cash inflow from operations of $17,207 in the same period in prior year.
Corporate Developments
Purchased 1,734,305 common shares through Knight’s Normal Course Issuer Bid ("NCIB") at an average price of $5.29 for an aggregate cash consideration of $9,183.
Hired Leopoldo Bosano as VP Manufacturing and Operations.
Products
Launched Lenvima (lenvatinib) and Rembre (dasatinib) in Colombia in February 2022.
Launched Halaven (eribulin mesylate) in Colombia in March 2022.
Subsequent Events
Entered into an exclusive license, distribution and supply agreement with Helsinn Healthcare SA for AKYNZEO oral/IV (netupitant/palonosetron / fosnetupitant/palonosetron) in Canada, Brazil and select LATAM countries and ALOXI oral/IV (palonosetron) in Canada.
Shareholders re-elected Jonathan Ross Goodman, Samira Sakhia, James C. Gale, Robert N. Lande, Michael J. Tremblay, Nicolás Sujoy and Janice Murray on the Board of Directors.
Purchased an additional 893,414 common shares through NCIB for an aggregate cash consideration of $4,760.
"I am excited to report that in the first quarter of 2022 Knight’s revenues increased by $17,738 or 39%. In addition to the acquisition of Exelon, we had revenue growth across all our therapeutic areas driven by market penetration of our key promoted brands and an increase in patient treatments due to reduced COVID-19 restrictions. On the business development front, we entered into an exclusive license, distribution and supply agreements with Helsinn in our key territories", said Samira Sakhia, President and Chief Executive Officer of Knight Therapeutics Inc. "As we look to the balance of 2022, we will continue to execute on revenue and EBITDA growth as well as adding new products through business development."
Revenues: For the quarter ended March 31, 2022, excluding the impact of hyperinflation, revenues increased by $17,752 or 39% compared to the same period in prior year. The growth in revenues excluding the impact of hyperinflation is explained as following:
An increase in revenues of $7,059 driven by the acquisition of Exelon.
The remainder of the increase is driven by the growth and market penetration of our key promoted brands as well as an increase in patient treatments as our markets reduce COVID-19 restrictions.
Gross margin: For the quarter ended March 31, 2022, gross margin increased from 45% to 51% explained by a change in product mix as well as the acquisition of Exelon and related revenues recorded as a net profit transfer.
Selling and marketing: For the quarter ended March 31, 2022, selling and marketing expenses increased by $2,077 or 27% driven by an increase in certain variable costs such as logistics fees, compensation as well as an increase in selling and marketing activities related to key promoted products and Exelon.
General and administrative: For the quarter ended March 31, 2022, general and administrative expenses increased by $1,750 or 25% driven by increase in compensation and certain consulting and professional fees.
Amortization of intangible assets: For the quarter ended March 31, 2022, amortization of intangible assets increased by $5,986 due to the acquisition of Exelon.
Interest income: Interest income is the sum of interest income on financial instruments measured at amortized cost and other interest income. For the quarter ended March 31, 2022, interest income was $1,480, a decrease of 26% or $518, compared to the same period in prior year due to a lower average cash and marketable securities balances and loan balance.
Interest expense: For the quarter ended March 31, 2022, interest expense was $1,111, an increase of $451 or 68%, compared to the same period in prior year due to higher interest rates.
Adjusted EBITDA: For the quarter ended March 31, 2022, adjusted EBITDA increased by $7,732 or 139%. The growth in adjusted EBITDA is driven by an increase in gross margin of $11,897, offset by an increase in operating expenses.
Net loss or income: For the quarter ended March 31, 2022, net loss was $18,811 compared to net income of $3,558 for the same period in prior year. The variance mainly resulted from the above-mentioned items and (1) a net loss on the revaluation of financial assets measured at fair value through profit or loss of $16,363 versus a net gain of $9,473 in the same period in prior year, mainly due to unrealized losses and gains on revaluation of the strategic fund investments, offset by (2) an income tax recovery of $3,501 due to the recognition of certain deferred tax assets compared to an income tax expense of $869 in the same period in prior period.
Cash, cash equivalents and marketable securities: As at March 31, 2022, Knight had $156,396 in cash, cash equivalents and marketable securities, an increase of $6,894 or 5% as compared to December 31, 2021. The variance is primarily due to cash inflows from operating activities, offset by the shares repurchased through NCIB.
Financial assets: As at March 31, 2022, financial assets were at $169,392, a decrease of $23,051 or 12%, as compared to the prior year, mainly due to negative mark-to-market adjustments of $16,660 driven mainly by the decline in the share prices of the publicly-traded equities of our strategic fund investments. Given the nature of the fund investments there could be significant fluctuations in the fair value of the underlying assets.
Bank Loans: As at March 31, 2022, bank loans were at $41,025, an increase of $5,098 or 14% as compared to the prior period, due to appreciation of the Brazilian Real and Colombian Peso versus Canadian Dollar.
Product Updates
Knight obtained regulatory approval and launched Lenvima, Halaven and Rembre in Colombia during the first quarter of 2022. Lenvima, the orally available multiple receptor tyrosine kinase inhibitor developed by Eisai, is indicated for the treatment of radioiodine refractory differentiated thyroid cancer ("RR-DTC") and unresectable hepatocellular carcinoma ("u-HCC") and was launched in February 2022. Halaven injection is indicated for the treatment of adult patients with locally advanced or metastatic breast cancer which has continued to spread after at least two previous treatments for advanced cancer. Previous treatment should have included anthracyclines and a taxane in either the adjuvant or metastatic setting, unless these treatments were not suitable. Halaven is also used to treat patients with advanced or metastatic liposarcoma that cannot be surgically removed and who have already been treated with an anthracycline, unless deemed unsuitable. Knight launched Halaven in Colombia in March 2022. In addition, Rembre is indicated for treatment of chronic myeloid leukemia with positive Philadelphia chromosome (Ph+) and was launched in February 2022.
Subsequent to the quarter Knight entered into an exclusive license, distribution and supply agreement with Helsinn Healthcare SA for AKYNZEO oral/IV (netupitant/palonosetron / fosnetupitant/palonosetron) in Canada, Brazil and select LATAM countries and ALOXI oral/IV (palonosetron) in Canada. AKYNZEO oral is approved and marketed in Canada for the prevention of acute and delayed nausea and vomiting associated with highly emetogenic cancer chemotherapy and the prevention of acute nausea and vomiting associated with moderately emetogenic cancer therapy that is uncontrolled by a 5-HT3 receptor antagonist alone in adults. AKYNZEO oral is also approved and marketed in Argentina and Brazil for the prevention of acute and delayed nausea and vomiting associated with highly emetogenic cisplatin-based cancer chemotherapy and prevention of acute and delayed nausea and vomiting associated with moderately emetogenic cancer chemotherapy in adults. ALOXI solution for injection is approved and marketed in Canada for the prevention of acute and delayed nausea and vomiting associated with moderately emetogenic cancer chemotherapy and highly emetogenic cancer chemotherapy, including high dose cisplatin in adults. In Canada, the product is also indicated in pediatric patients aged 2 to 17 years for the prevention of acute nausea and vomiting associated with moderately and highly emetogenic cancer chemotherapy. ALOXI oral is approved in Canada for use in adults for the prevention of acute nausea and vomiting associated with moderately emetogenic cancer chemotherapy.
NCIB
For the three-month period ended March 31, 2022, the Company purchased 1,734,305 common shares at an average price of $5.29 for an aggregate cash consideration of $9,183 of which $2,520 remains to be settled as at March 31, 2022. Subsequent to quarter-end up to May 10, 2022, the Company purchased an additional 893,414 common shares at an average purchase price of $5.33 for an aggregate cash consideration of $4,760.
Financial Outlook Update
Knight provides guidance on revenues1 on a non-GAAP basis. This is due to both the difficulty in predicting Argentinian inflation rates and its IAS 29 impact.
For fiscal 2022, Knight has updated its guidance and expects to generate $260 to $270 million in revenue, an increase of $5 million on the upper end of the range. The guidance is based on a number of assumptions, including but not limited to the following:
no revenues for business development transactions not completed as at May 11, 2022
discontinuation of certain distribution agreements
Exelon marketing authorization transfer to Knight in May 2022 in Colombia and in June 2022 in Brazil
recording revenue related to Akynzeo and Aloxi following transition period from Helsinn’s current licensees
no interruptions in supply whether due to global supply chain disruptions or general manufacturing issues
no new generic entrants on our key pharmaceutical brands
no unforeseen changes to government mandated pricing regulations
successful commercial execution on product listing arrangements with HMOs, insurers, key accounts, and public payers
successful execution and uptake of newly launched products
no significant restrictions or economic shut down due to the COVID-19 pandemic
foreign currency exchange rates remaining within forecasted ranges
Should any of the assumptions differ, the financial outlook and the actual results may vary materially. Refer to the risks and assumptions referred to in the Forward-Looking Statements section of this news release for further details.
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1 Revenues excluding the impact of IAS 29 is a non-GAAP measure, refer to the definitions in section "Non-GAAP measures" for additional details
Conference Call Notice
Knight will host a conference call and audio webcast to discuss its first quarter ended March 31, 2022, today at 8:30 am ET. Knight cordially invites all interested parties to participate in this call.