MONTREAL, May 10, 2018 — Knight Therapeutics Inc. (TSX:GUD) (“Knight”), a leading Canadian specialty pharmaceutical company, today reported financial results for its first quarter ended March 31, 2018. All dollar amounts are in thousands except for share and per share amounts. All currencies are Canadian unless otherwise specified.
Q1 2018 Highlights
Financials
- Revenues were $3,154, an increase of $1,404 or 80% over prior period
- Net income was $6,909, an increase of $862 or 14% over prior period
- Cash flows from operations at $6,864, an increase of $2,628 or 62% over prior period
- Cash, cash equivalents and marketable securities of $802,425 as at March 31, 2018
Products
- Submitted Netildex™ for approval to Health Canada
- Entered into an exclusive Canadian licensing agreement with Ardelyx to commercialize tenapanor
Strategic Lending and Investments
- Received US$22,757 from Medimetriks Pharmaceuticals Inc. (“Medimetriks”) for partial loan repayment, interest and fees
- Received US$4,460 as a partial repayment of the 60° Pharmaceuticals LLC (“60P”) loan
- Acquired an additional 754,716 common shares of Crescita Therapeutics Inc. (“Crescita”) through a rights offering at $0.53 per share
- Exercised option to convert $500 debenture of Antibe Therapeutics Inc. into 2,489,889 common shares
Key Subsequent Events
- Received regulatory approval from Health Canada for Probuphine™
- Amended loan with 60P and committed to loan an additional amount of up to US$2,100
“This past quarter we continued on our path to building a leading specialty pharmaceutical company. We licensed tenapanor, submitted Netildex™ and received regulatory approval for Probuphine™”, said Jonathan Ross Goodman, CEO of Knight. “In the meantime, we continue to leverage our balance sheet for GUD returns as evidenced by repayments received from Medimetriks and 60P.”
| Select Financial Results | ||||||
| Change | ||||||
| Q1-18 | Q1-17 | $1 | %2 | |||
| Revenues | 3,154 | 1,750 | 1,404 | 80 | % | |
| Gross margin | 2,320 | 1,462 | 858 | 59 | % | |
| Operating expenses | 3,373 | 3,247 | (126 | ) | 4 | % |
| Interest income | 5,288 | 5,860 | (572 | ) | 10 | % |
| Share of net income of associate | 503 | 319 | 184 | 58 | % | |
| Net income | 6,909 | 6,047 | 862 | 14 | % | |
| Basic earnings per share | 0.05 | 0.04 | 0.01 | 25 | % | |
1 A positive variance represents a positive impact to net income and a negative variance represents a negative impact to net income
2 Percentage change is presented in absolute values
Revenue and gross margin: Increase is mainly attributable to timing of sales orders for Impavido® and increase in Movantik® sales. According to IQVIA data, Movantik® sales in Canada were $301 for the three-month period ended March 31, 2018 versus $168 for the same period last year.
Operating expenses: Increase in the year is explained by commercial activities including promotion of Movantik®, offset by a reduction in general and administrative expenses mainly related to lower stock based compensation expense.
Interest income: Interest income is driven by the sum of interest income and interest accretion. Interest income (excluding accretion) for Q1-18 was $5,288, an increase of 10% or $506 compared to Q1-17 driven by an increase in the average cash, cash equivalents and marketable securities balances and an increase in interest rates, offset by a lower average loan balance. As a result of the company's adoption of IFRS 9, there was no significant interest accretion in Q1-18 compared to $1,073 in prior period.
Net income: Net income for the quarter was driven by the above-mentioned items as well as: (i) other income of $1,351 (Q1-17: $308) due to the early repayment of fees on the Medimetriks loan, (ii) a net gain on revaluation of financial assets measured at fair value through profit or loss of $541 (Q1-17: nil), and (iii) a foreign exchange gain of $2,597 (Q1-17: loss of $243) from the relative gains on certain U.S. dollar denominated financial assets as Canadian dollar weakened.
Product Updates
On February 15, 2018, Health Canada accepted Knight's New Drug Submission for Netildex™ for review. Netildex™ is a fixed combination of netilmicin and dexamethasone for the treatment of inflammatory ocular conditions of the anterior segment of the eye, in presence or at risk of bacterial infection.
On March 13, 2018, Knight received a Notice of Non-Compliance regarding its submission for Iluvien® and will respond to Health Canada's issues within the prescribed 90-day window. Iluvien® is a sustained release intravitreal implant for the treatment of diabetic macular edema.
On March 16, 2018, Knight entered into an exclusive licensing agreement with Ardelyx to commercialize tenapanor in Canada. Tenapanor is a first-in-class small molecule treatment that has completed Phase 3 development for IBS-C and is being evaluated in a second Phase 3 study for hyperphosphatemia. Knight expects to submit tenapanor to Health Canada in 2019.
On April 18, 2018, Probuphine™ was approved by Health Canada for the treatment of opioid drug dependence. Probuphine™ is a subdermal implant designed to deliver buprenorphine continuously for six months following a single treatment, promoting patient compliance and retention. Knight expects to launch Probuphine™ by the end of 2018.
Strategic Lending Update
On April 24, 2018, Knight amended its loan agreement with 60P and committed to lend an additional amount of up to US$2,100, at an interest rate of 15%, to support the regulatory approval and commercialization of tafenoquine. As consideration for the amendment, 60P committed to pay Knight an additional US$3,000 plus annual interest of 9% on April 23, 2023 (“60P Commitment”). Under the terms of the 60P Commitment, Knight has the right to convert the 60P Commitment into common shares of 60P at a pre-determined exercise price at any time prior to the maturity date. Furthermore, 60P and Knight will enter into an exclusive license agreement granting Knight the right to commercialize tafenoquine in Latin America.
Conference Call Notice
Knight will host a conference call and audio webcast to discuss its first quarter results today at 8:30 am ET. Knight cordially invites all interested parties to participate in this call.
Date: Thursday, May 10, 2018
Time: 8:30 a.m. EST
Telephone: 1-877-223-4471 or 647-788-4922
Webcast: www.gudknight.com or https://bit.ly/2JM9U3o
This is a listen-only audio webcast. Media Player is required to listen to the broadcast.
Replay: An archived replay will be available for 30 days at www.gudknight.com
About Knight Therapeutics Inc.
Knight Therapeutics Inc., headquartered in Montreal, Canada, is a specialty pharmaceutical company focused on acquiring or in-licensing innovative pharmaceutical products for the Canadian and select international markets. Knight Therapeutics Inc.'s shares trade on TSX under the symbol GUD. For more information about Knight Therapeutics Inc., please visit the company's web site at www.gudknight.com or www.sedar.com.
Forward-Looking Statement
This document contains forward-looking statements for Knight Therapeutics Inc. and its subsidiaries. These forward-looking statements, by their nature, necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. Knight Therapeutics Inc. considers the assumptions on which these forward-looking statements are based to be reasonable at the time they were prepared, but cautions the reader that these assumptions regarding future events, many of which are beyond the control of Knight Therapeutics Inc. and its subsidiaries, may ultimately prove to be incorrect. Factors and risks, which could cause actual results to differ materially from current expectations are discussed in Knight Therapeutics Inc.'s Annual Report and in Knight Therapeutics Inc.'s Annual Information Form for the year ended December 31, 2017. Knight Therapeutics Inc. disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information or future events, except as required by law.
CONTACT INFORMATION:
Knight Therapeutics Inc.
Samira Sakhia
President and Chief Financial Officer
T: 514-678-8930
F: 514-481-4116
info@gudknight.com
www.gudknight.com
| INTERIM CONSOLIDATED BALANCE SHEETS | ||
| [In thousands of Canadian dollars] | ||
| [Unaudited] | ||
| As at | March 31, 2018 | December 31, 2017 |
| ASSETS | ||
| Current | ||
| Cash and cash equivalents | 583,408 | 496,460 |
| Marketable securities | 183,017 | 232,573 |
| Trade and other receivables | 10,046 | 9,176 |
| Inventories | 994 | 1,224 |
| Other current financial assets | 25,167 | 58,848 |
| Income taxes receivable | 819 | 792 |
| Total current assets | 803,451 | 799,073 |
| Marketable securities | 36,000 | 36,000 |
| Property and equipment | 675 | 633 |
| Intangible assets | 15,906 | 12,576 |
| Other financial assets | 79,669 | 76,988 |
| Investment in associate | 77,697 | 75,983 |
| Deferred income tax assets | 3,455 | 4,730 |
| Total assets | 1,016,853 | 1,005,983 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||
| Current | ||
| Accounts payable and accrued liabilities | 4,592 | 5,025 |
| Income taxes payable | 7,962 | 7,599 |
| Other balances payable | 1,394 | 1,354 |
| Deferred other income | 251 | 282 |
| Total current liabilities | 14,199 | 14,260 |
| Deferred other income | 104 | 167 |
| Other balances payable | 1,067 | 348 |
| Total liabilities | 15,370 | 14,775 |
| Shareholders' equity | ||
| Share capital | 761,546 | 761,490 |
| Warrants | 785 | 785 |
| Contributed surplus | 12,741 | 12,196 |
| Accumulated other comprehensive income | 11,459 | 20,907 |
| Retained earnings | 214,952 | 195,830 |
| Total shareholders' equity | 1,001,483 | 991,208 |
| Total liabilities and shareholders' equity | 1,016,853 | 1,005,983 |
| INTERIM CONSOLIDATED STATEMENTS OF INCOME | ||||||
| [In thousands of Canadian dollars, except for share and per share amounts] | ||||||
| [Unaudited] | ||||||
| Three months ended March 31, |
||||||
| 2018 | 2017 | |||||
| Revenues | 3,154 | 1,750 | ||||
| Cost of goods sold | 834 | 288 | ||||
| Gross margin | 2,320 | 1,462 | ||||
| Expenses | ||||||
| Selling and marketing | 789 | 363 | ||||
| General and administrative | 2,095 | 2,468 | ||||
| Research and development | 489 | 416 | ||||
| (1,053 | ) | (1,785 | ) | |||
| Depreciation of property and equipment | 16 | – | ||||
| Amortization of intangible assets | 441 | 326 | ||||
| Interest income | (5,288 | ) | (5,860 | ) | ||
| Other income | (1,351 | ) | (308 | ) | ||
| Net gain on financial assets | – | (3,375 | ) | |||
| Net gain on financial assets measured at fair value through profit or loss | (541 | ) | – | |||
| Share of net income of associate | (503 | ) | (319 | ) | ||
| Foreign exchange (gain) loss | (2,597 | ) | 243 | |||
| Income before income taxes | 8,770 | 7,508 | ||||
| Income tax expense | ||||||
| Current | 641 | 480 | ||||
| Deferred | 1,220 | 981 | ||||
| Net income for the period | 6,909 | 6,047 | ||||
| Attributable to shareholders of the Company | ||||||
| Basic earnings per share | 0.05 | 0.04 | ||||
| Diluted earnings per share | .05 | 0.04 | ||||
| Weighted average number of common shares outstanding | ||||||
| Basic | 142,813,358 | 142,720,536 | ||||
| Diluted | 143,220,006 | 143,526,773 | ||||
| INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS | |||||
| [In thousands of Canadian dollars] | |||||
| [Unaudited] | |||||
| Three-months ended March 31, |
|||||
| 2018 | 2017 | ||||
| OPERATING ACTIVITIES | |||||
| Net income for the period | 6,909 | 6,047 | |||
| Adjustments reconciling net income to operating cash flows: | |||||
| Deferred tax | 1,220 | 981 | |||
| Share-based compensation expense | 545 | 846 | |||
| Depreciation and amortization | 457 | 326 | |||
| Accretion of interest | – | (1,078 | ) | ||
| Realized gain on financial assets | – | (976 | ) | ||
| Unrealized gain on financial assets | (541 | ) | (2,399 | ) | |
| Foreign exchange (gain) loss | (2,597 | ) | 204 | ||
| Share of net income of associate | (503 | ) | (319 | ) | |
| Other income | – | (155 | ) | ||
| Deferred other income | (94 | ) | (146 | ) | |
| 5,396 | 3,331 | ||||
| Changes in non-cash working capital related to operations | 1,468 | 905 | |||
| Cash inflow from operating activities | 6,864 | 4,236 | |||
| INVESTING ACTIVITIES | |||||
| Purchase of marketable securities | (50,755 | ) | (44,291 | ) | |
| Purchase of intangible | (3,000 | ) | – | ||
| Purchase of property and equipment | (42 | ) | – | ||
| Purchase of equities | (400 | ) | (2,819 | ) | |
| Investment in funds | (4,277 | ) | (4,141 | ) | |
| Proceeds on maturity of marketable securities | 101,318 | 20,486 | |||
| Proceeds from repayments of loans receivable | 33,440 | 28,058 | |||
| Proceeds from disposal of equities | – | 709 | |||
| Proceeds from distribution of funds | 343 | 2,154 | |||
| Cash inflow from investing activities | 76,627 | 156 | |||
| FINANCING ACTIVITIES | |||||
| Proceeds from exercise of stock options | – | 345 | |||
| Proceeds from contributions to share purchase plan | 49 | 43 | |||
| Cash inflow from financing activities | 49 | 388 | |||
| Increase in cash during the period | 83,540 | 4,780 | |||
| Cash and cash equivalents, beginning of the period | 496,460 | 514,942 | |||
| Net foreign exchange difference | 3,408 | (200 | ) | ||
| Cash and cash equivalents, end of the period | 583,408 | 519,522 | |||
| Marketable securities, end of the period | 219,017 | 244,256 | |||
| Cash, cash equivalents and marketable securities, end of the period | 802,425 | 763,778 | |||
