Knight Therapeutics Inc

TSX:GUD

Earnings Call Transcript 2019-Q1

[Operator]

Good morning, ladies and gentlemen. My name is Julie, and I will be your operator today. Welcome to Knight Therapeutics Inc. 2019 First Quarter Financial Results Conference Call.Before turning the call over to Jonathan Ross Goodman, CEO of Knight, listeners are reminded that portion of today's discussion may, by their nature, necessarily involve risk and uncertainties that cause actual results to differ materially from those contemplated by the forward-looking statements.The company considers the assumptions of 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 statement whether as 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 [e-mail] or via phone at [phone].I would like to remind everyone that this call is being recorded today, May 9, 2019, and will now like to turn the meeting over to your host for today's call, Jonathan Ross Goodman. Please go ahead, Mr. Goodman.

[Jonathan Ross Goodman, Founder, CEO & Director]

Thank you, Julie. Good morning, everyone, and welcome to Knight Therapeutics's First Quarter 2019 Conference Call. I am joined on today's call with Samira Sakhia, our President and CEO; and Amal Khouri, our VP of Business Development.We are pleased to report that in the first quarter, we continued to make healthy progress in our mission to bring innovative drugs to patients and to build a rest of the world pharmaceuticals company. This quarter, we expanded our oncology pipeline with the in-licensing of Puma's NERLYNX and Triumvira's early-stage assets. Furthermore, we have increased our capacity to identify and evaluate opportunities in Latin America with our strategic relationship with Moksha8.I will now turn the call over to Samira, who will walk through the first quarter financial results.

[Samira Sakhia, President, CFO & Director]

Thank you, Jonathan, and good morning, everyone. I'm pleased to report that for the quarter ended March 31, 2019, we reported revenues of just under $3 million, a decrease of 6% over the prior period. According to IQVIA Canada data, Movantik sales were $358,000 for the period compared to $301,000 for the same period last year.Our operating expenses for the year increased by $1.7 million or 50% over the first quarter of 2018. Of this increase, $1.6 million is due to legal, consulting and advisory fees incurred in relation to the shareholder activist campaign and related litigation between Knight and dissident shareholder, Meir Jakobsohn, Medison's CEO. Excluding those fees, operating expenses remained relatively flat over the prior period. We expect that activist and legal expenses in Israel to continue in 2019 but at a declining pace.We reported interest income for the quarter of $5.9 million, an increase of 11% or $602,000 compared to Q1 2018 due to higher average cash and cash equivalents and marketable security balances as well as an increase in interest rates partially offset by a lower average loan balance.Our share of income of associate related to our investment in Medison and is driven by our share of Medison's net income, net of fair value adjustments of intangibles. For the quarter, our share of Medison's net income was $2.1 million, and fair value adjustments were $1.4 million, whereas in the prior period, our share of net income was $1.9 million and fair value adjustments were $1.4 million.For the quarter, we recorded a net gain on financial assets measured at fair value through profit or loss of $4.8 million. This gain is mainly unrealized and is explained by the revaluation to fair value of Knight's financial assets.Finally, we reported net income for the quarter of $5.2 million, a decrease of $1.7 million or 25% versus the prior period last year.I will now turn the call to Amal, who will provide you an update on our business development activities for the first quarter.

[Amal Khouri, Former Vice President of Business Development]

Thank you, Samira, and good morning, everyone.On January 9, 2019, Knight advanced its pathology portfolio by securing the exclusive Canadian rights to commercialize neratinib, a novel treatment for breast cancer. Neratinib is marketed as NERLYNX for the extended adjuvant treatment of adult patients with early-stage HER2-overexpressed/amplified breast cancer following adjuvant herceptin therapy. NERLYNX has already been submitted to Health Canada for regulatory approval, which is expected in 2019.On February 20, 2019, the company entered into a USD 5 million strategic loan agreement with Triumvira Immunologic Inc. for the development of its model novelty T cell technology. This loan bears an annual interest of 15% and matures on February 20, 2020. As consideration for the strategic loan, Knight entered into an exclusive license agreement with Triumvira to commercialize its future approved products for Canada, Israel, Mexico, Colombia and for TAC01-CD19 for Israel, Mexico, Brazil and Colombia. Triumvera is developing novel T cell therapies that are safer and more efficacious than current gene therapy cancer treatments, including chimeric antigen receptor and engineered T cell receptor therapies. In addition to the access to this early-stage pipeline, Knight also received warrants to purchase 3.5% of Triumvira's fully diluted common shares.Finally, Knight expanded its international footprint with a strategic financing agreement signed with Moksha8 Inc., a specialty pharmaceutical company operating in Brazil and Mexico, the 2 largest markets in Latin America. Under the terms of the agreement, Knight may loan up to USD 25 million in working capital funding, of which USD 10 million was issued. The loan bears an interest rate of 15% and matures 5 years from the date of issuance. Knight may also issue up to an additional USD 100 million for corporate development and the acquisition of product licenses in Latin America. In conjunction with the strategic financing agreement, Knight received warrants at a nominal price, representing 5% of the fully diluted shares of Moksha8. Furthermore, as part of the agreement, Knight also have to observe receipts on Moksha8's Board, allowing us to better understand the company, the management team and the region.I will now turn the call back to Samira, who will provide an operational update for the first quarter.

[Samira Sakhia, President, CFO & Director]

Thank you, Amal. We're pleased to report that Probuphine, a new treatment in the fight against opioid addiction, is now being implanted in patients from coast to coast in Canada. Probuphine is the only subdermal implant designed to deliver buprenorphine continuously for 6 months following a single treatment. The product must be inserted and removed by a health care professional who has successfully completed a live training program.As of today, we have ensured that physicians have been trained on implanting in all major Canadian cities, and our territory managers are working with addiction specialists to identify patients that fit the profile for Probuphine. During the rest of 2019, we will continue to focus our commercial efforts on working on patient identification, physician training as well as public reimbursement to ensure that all Canadian patients have access to this novel therapy.In addition, as previously reported, Knight had submitted Netildex for the treatment of inflammatory ocular conditions of the anterior segment of the eye for regulatory approval in Canada in 2018. In December 2018, Knight received a Notice of Non-Compliance of Netildex, and we have already responded to the issues raised by Health Canada.Finally, we're pleased to announce the advancement of our near-term Canadian pipeline with Iluvien in launch preparation, NERLYNX and Netildex under Health Canada review as well as Ibsrela and the 2 TherapeuticsMD's product -- women's health products being prepared for regulatory submission. Such activities require substantial financial investments, therefore, it's expected that our selling and marketing and research and development expenses will increase in the future.I'll now turn the call back over to Jonathan for his concluding remarks.

[Jonathan Ross Goodman, Founder, CEO & Director]

Thank you, Samira. I want to thank shareholders for their overwhelming support and clear endorsement of management's disciplined investment strategy at the Annual General Meeting held on Tuesday.We are fully committed to building a Canadian and rest of the world specialty pharmaceutical company by acquiring and in-licensing a diversified portfolio of specialty pharmaceutical products for Canada and select international markets. This will be achieved through in-licensing innovative pharmaceuticals like NERLYNX, corporate acquisitions or partnerships in Canada and abroad like Moksha8, all done at fair prices and with people committed to making people better and making money in the process.Thank you for your support and confidence in the Knight team. This concludes my formal remarks. So now I would like to open the call up for questions. Julie?

[Operator]

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 [e-mail] or via phone at [phone]. [Operator Instructions] There are no questions at this time.

[Jonathan Ross Goodman, Founder, CEO & Director]

Thank you for your confidence in the Knight team and for joining our Q1 2019 conference call, and please have a good G-U-D day. Thank you.

[Operator]

This concludes today's conference call. You may now disconnect.