Knight Therapeutics Inc

TSX:GUD

Earnings Call Transcript 2019-Q2

[Operator]

Good morning, ladies and gentlemen. My name is Sharon, and I will be your operator today. Welcome to Knight Therapeutics Inc. 2019 Second Quarter Financial Results Conference Call.Before turning the call over to Jonathan Ross Goodman, 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 the 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 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 e-mail at [e-mail], or via phone at [phone]. I would like to remind everyone that this call is being recorded today, August 8, 2019. I would 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, Sharon. Good morning, everyone, and welcome to Knight Therapeutics Second Quarter 2019 Conference Call. I'm joined on today's call with Samira Sakhia, our President and CFO; Amal Khouri, our VP of Business Development; and Arvind Utchanah, our recently promoted VP of Finance. We're pleased to report that in the second quarter, we've progressed on our mission towards building a specialty pharmaceutical company that helps both patients and shareholders. We advanced our commercial presence and product pipeline with the regulatory approval of NERLYNX and the submission of Ibsrela to Health Canada. Furthermore, we reached an agreement with the Pan-Canadian Pharmaceutical Alliance, a critical milestone in insuring that all Canadian patients have access to Probuphine in the fight against opioid dependence. I'll now turn the call over to Samira who'll walk through the second quarter financial results.

[Samira Sakhia, President, CFO & Director]

Thank you, Jonathan. Good morning, everyone. I'm pleased to report that for the quarter ended June 30, 2019, we reported revenues of $3.2 million, an increase of just under $1 million or 43% versus the same period last year. For the 6-month period ended June 30, we reported revenues of $6.2 million, an increase of $768,000 or 14% as compared to the same period last year. For both periods, the increase is mainly attributable to the timing of sales of Impavido and the growth in Movantik sales. According to IQVIA Canada date -- IQVIA Canada data, Movantik sales were $750,000 for the 6-month period ended June 30, 2019, compared to $620,000 for the same period last year. Our operating expenses for the quarter increased $2.7 million or 78% for the second quarter of 2018 and increased $4.4 million or 64% for the 6-month period compared to the same period last year. The increase was driven by legal consulting and advisory fees of $1.7 million for the quarter and $3.3 million for the 6-month period related to Meir Jakobsohn's shareholder activist campaign. We expect that the activist and legal expenses to continue in 2019 but at a significantly declining pace. The remainder of the increase in operating expenses is due to an increase in both selling and marketing as well as R&D expenses driven by the preparation of new product launches and the submission of Ibsrela to Health Canada. We recorded interest income for the quarter of $6.2 million, an increase of 30% or $1.4 million compared to the second quarter of 2018, due to higher average cash balances, cash, cash equivalent and marketable securities balances as well as an increase in interest rates and a higher average loan balance. For the 6-month period, interest income was $12.1 million, an increase of 20% or $2 million over last year, due to higher average cash, cash equivalents and marketable securities balances as well as an increase in interest rates partially offset by a lower average loan balance. Our share of income or loss from associates relates 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 $1 million and fair value adjustments were $1.4 million. Whereas in the same period last year, our share of net income was $1.2 million and fair value adjustments were also $1.4 million. We recorded net gains on financial assets measured at fair value through profit and loss of $19.8 million and $24.5 million for the quarter and 6-month periods, respectively. The gains are mainly unrealized and are explained by revaluation to fair value of Knight's financial assets. Finally, for the second quarter of 2019, we reported net income of just under $19 million, an increase of $14.9 million or 372% versus the prior period, while for the 6-month period ended June 30, 2019, we reported net income of $24.1 million, an increase of $13.2 million or 121% versus the prior period. Now I'll turn to our product pipeline, which as Jonathan mentioned, continues to advance with the submission of Ibsrela and regulatory approval of NERLYNX. During the past quarter, we submitted Ibsrela for regulatory approval by Health Canada for the treatment of Irritable Bowel Syndrome with Constipation. Ibsrela will provide a new treatment option for IBS-C and will further strengthen our presence in gastroenterology. Furthermore, on July 16, 2019, Health Canada approved NERLYNX for the extended adjuvant treatment of adult patients with early stage HER2-overexpressed/amplified breast cancer following adjuvant Herceptin therapy. NERLYNX is a novel treatment for patients with early breast cancer. Over the next few months, we will focus on reimbursement and launch preparation in order to be able to launch NERLYNX in late-2019. Finally, we announced just 2 days ago that Knight has reached an agreement with pCPA for Probuphine, and as of today, Probuphine is listed for reimbursement through public insurance plans run by Alberta, Saskatchewan and the NIHB. Probuphine is indicated for the management of opioid dependence in patients clinically stabilized on no more than 8 milligram of sublingual buprenorphine in combination with counseling and psychosocial support and will become an important weapon in the fight against opioid dependence. For the year -- for the remainder of the year, the Knight team will continue to work with the other jurisdictions to finalize listings across -- across the country to ensure patients have public access to this novel treatment option. Now moving on to update on our Normal Course Issuer Bid, which we commenced on July 11, 2019. As a reminder, under the NCIB, Knight may purchase for cancellation just over 12 million of our common shares. As of August 6, Knight has purchased 4.6 million common shares for an aggregate cost of $34.9 million or $7.49 per common share, which represents just under 39% of the maximum purchases allowed under the NCIB. I'll now turn the call back to Jonathan for his concluding remarks.

[Jonathan Ross Goodman, Founder, CEO & Director]

Thank you, Samira. As we embark on the second half of 2019, I'm excited with the progress on expanding our commercial presence and maturing product pipeline. We proudly contribute to making people better, and now, 3 products on the market, 2 more to be launched later this year and 2 more under Health Canada review. We're very excited. Looking ahead, we remain fully committed to building a Canadian and rest of the world specialty pharmaceutical company by executing on discipline -- on our disciplined strategy of acquiring and end-licensing specialty pharmaceutical products for Canada and select international markets, in addition to pursuing corporate acquisitions or partnership opportunities in Canada and Europe. 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 to questions. Operator?

[Operator]

[Operator Instructions] And we have a question from Andre Uddin with Mackie Research.

[Andre Uddin, Managing Director of Healthcare Research]

Just actually wanted to ask a couple updates on some products. Just looking at the TX-004HR and TX-001HR, just wondering if you have filed an NDS with those? And if not, when you'd expect that filing?

[Samira Sakhia, President, CFO & Director]

Andre, that's a great question. As we've always -- we've announced earlier, we expect to be filing these this year, and our teams are working through both of those submissions at this time.

[Andre Uddin, Managing Director of Healthcare Research]

Okay. And in terms of Iluvien, I know that was approved last year. Just wondering if you have started to launch? And If not, when you think that would be? And how many reps you think you'd put on that product?

[Samira Sakhia, President, CFO & Director]

So -- you're right. Iluvien was approved -- has been approved, and we were actually working through -- the team is working through the reimbursements of this product, which is part of the critical activity. We're also working with Alimera on supply and expect to launch it later this year. As far as commercial footprint, we've guided to somewhere between 5 and 8 people across Canada.

[Andre Uddin, Managing Director of Healthcare Research]

And also just looking at Profound's TULSA-PRO, are you going to file for approval of that product as well in Canada?

[Jonathan Ross Goodman, Founder, CEO & Director]

That's certainly our expectation, but we need to first meet with Profound and wait until their complete Phase III data is ready.

[Operator]

[Operator Instructions] And we have a question from Stephen Kwai with National Banks Financial.

[Stephen Kwai, Associate]

I'm just calling in for Endri. I just have a couple of questions, mainly on the product front. So just on Probuphine and following the recent announcement with pCPA, what do you guys expect for the remaining provinces? Is there a time line on when you think you get that reimbursement for those other remaining provinces?

[Samira Sakhia, President, CFO & Director]

That's a great question. Unfortunately, the predictability is very -- is actually unpredictable. This is one of the things that the industry continues to struggle with. And what I would advise is patients who need this product to reach out to their ministers of health to get on reimbursing this as soon as possible.

[Stephen Kwai, Associate]

Okay. Great. And I know you mentioned a little bit on NERLYNX and Iluvien that were approved. Is there just more a concrete time line regarding those launches? I know you said later on this year, but is there anything more concrete?

[Samira Sakhia, President, CFO & Director]

Sure. Actually, it's later this year. So we really thought -- what we're talking about is kind of in that mid- to late-Q4 period, where we're actually going to start the wave, but the actual effects will be really felt next year.

[Stephen Kwai, Associate]

Okay, great. And have you guys heard anything back from Health Canada regarding Netildex? I know you guys resubmitted, I believe?

[Samira Sakhia, President, CFO & Director]

Right. So we did response the NON. We don't expect a response until later this year.

[Stephen Kwai, Associate]

Okay. And I guess moving a little bit away from the products. For the legal consulting and advisory fees that you guys incurred this quarter, I know it's going to be declining throughout the year, but can we expect at like 1/2 or 1/3 or 1/4 of that?

[Samira Sakhia, President, CFO & Director]

I'm expecting that it's a lot less. Unfortunately, it's one of those things we cannot predict simply because we don't -- we cannot predict how [ Meir ] will behave.

[Stephen Kwai, Associate]

And just my last question here, I guess, kind of on the M&A front and also on Moksha8. How is that been tracking since you guys invested in it? Have you guys seen growth? Or any insight on that would be great.

[Amal Khouri, Vice President of Business Development]

This is Amal Khouri. They've been doing well. I mean it's still -- we're still in the early stages of the deal. So as you know, we have -- we participate through their Board meetings. So we're happy with how the management team is performing and how the business is going, but it's still early days.

[Operator]

[Operator Instructions] And we have a question from Tania Gonsalves with Cormark Securities.

[Tania Rae Gonsalves, Analyst of Institutional Equity Research]

Just a couple of quick ones for me. Firstly, on BURINEX. I'm wondering if you can give us an idea of how material, if at all, that distribution fee is going to be?

[Samira Sakhia, President, CFO & Director]

Tania, it's a great question because it's completely immaterial, it's a nominal number. We really did it for the relationship with the company that we have the agreement with to try to kind of put this in place so that we could be their partner of choice for Canada.

[Tania Rae Gonsalves, Analyst of Institutional Equity Research]

All right. Good. And then on sales and marketing, again, some people have asked this already, but approaching the NERLYNX launch. Can you give us an idea of how many sales people, if any, you've already hired? And how many you anticipate hiring over the next months?

[Samira Sakhia, President, CFO & Director]

Sure. At this point, again, just because we just start -- just received approval, one of the things that our team's focus has really been on is launch preparedness, but also reimbursements. And over the next couple of Qs, we're going to be beginning the request -- beginning the recruitment process. And similar to Iluvien, we think that the people footprint will be somewhere between kind of 5 to 10.

[Operator]

[Operator Instructions] And we do not have any questions at this time. I will turn the call over to the presenters.

[Jonathan Ross Goodman, Founder, CEO & Director]

Thank you for your support and confidence in the Knight team. Again, thank you for joining our second quarter call. Have a good day.

[Operator]

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