MONTREAL, Aug. 08, 2019 — Knight Therapeutics Inc. (TSX: GUD) (“Knight”), a Canadian specialty pharmaceutical company, today reported financial results for its second quarter ended June 30, 2019. All dollar amounts are in thousands except for share and per share amounts. All currencies are Canadian unless otherwise specified.

Q2 2019 Highlights 

Financials

  • Revenues were $3,204, an increase of $966 or 43% versus prior period
  • Net income was $18,956, an increase of $14,937 or 372% over prior period
  • Cash, cash equivalents, and marketable securities of $745,272 as at June 30, 2019

Corporate Development

  • Shareholders elected James C. Gale, Jonathan Ross Goodman, Samira Sakhia, Robert N. Lande, Sylvie Tendler, Nancy Harrison, Michael J. Tremblay and Kevin Cameron as Directors at the Annual and Special Shareholder Meeting held on May 7, 2019

Products

  • Submitted Ibsrela™ for regulatory approval for the treatment of Irritable Bowel Syndrome with Constipation to Health Canada

Strategic Lending

  • Received US$750 for full loan repayment from Medimetriks Pharmaceuticals Inc. (“Medimetriks”)

Key Subsequent Events

  • Launched a Normal Course Issuer Bid (“NCIB”) in July 2019 and purchased 4,657,235 common shares for an aggregate cost of $34,894
  • Received regulatory approval from Health Canada for NERLYNX® for the treatment of HER2-positive breast cancer
  • Reached an agreement with the pan-Canadian Pharmaceutical Alliance (“pCPA”) regarding Probuphine® and to date have obtained reimbursement through public insurance plans administered by Alberta, Saskatchewan and the Non-insured Health Benefit Program (“NIHB”)
  • Disposed of 879,200 common shares of Crescita for total proceeds of $894,750

“We are pleased with the progress made this past quarter at building a specialty pharmaceutical company that helps both patients and shareholders. We have 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 pCPA, an important milestone in ensuring that all Canadian patients have access to Probuphine®”, said Jonathan Ross Goodman, CEO of Knight Therapeutics Inc.

Select Financial Results

      Change
        Change
  Q2-19 Q2-18 $1   %2   YTD-19   YTD-18   $1   %2  
                             
Revenues 3,204 2,238 966   43 % 6,160   5,392   768   14 %
Gross margin 2,887 1,900 987   52 % 5,158   4,220   938   22 %
Selling and marketing 1,288 892 (396 ) 44 % 2,135   1,681   (454 ) 27 %
General and administrative 3,787 1,937 (1,850 ) 96 % 7,385   4,032   (3,353 ) 83 %
Research and development 984 572 (412 ) 72 % 1,610   1,061   (549 ) 52 %
Interest income 6,160 4,746 1,414   30 % 12,050   10,034   2,016   20 %
Share of net loss (income) of associate 372 151 (221 ) 146 % (320 ) (352 ) (32 ) 9 %
Net income 18,956 4,019 14,937   372 % 24,145   10,928   13,217   121 %
Basic earnings per share 0.133 0.028 0.105   375 % 0.169   0.077   0.092   119 %

A positive variance represents a positive impact to net income and a negative variance represents a negative impact to net income
Percentage change is presented in absolute values 

Revenue: Variance for the quarter and the six-month period was mainly attributable to the timing of sales for Impavido® and growth in Movantik® sales. 

Gross margin:Change in gross margin was attributable to increase in revenues and product mix. 

Selling and marketing:Increase due to commercial activities including preparation of launch of new products. 

General and administrative: The increase is driven by legal, consulting and advisory fees (“Fees”) in relation to the activist campaign, public proxy battle and related litigations between Knight and dissident shareholder Meir Jakobsohn, Medison’s CEO.  The Fees incurred were $1,652 for the quarter and $3,267 for the six-month period and are expected to continue in 2019 but at a declining pace. 

Research and development:Increase due to submission of Ibsrela™ to Health Canada. 

Interest income:Interest income is driven by the sum of interest income on financial instruments measured at amortized costs and other interest income. Interest income for Q2-19 was $6,160, an increase of 30% or $1,414 compared to Q2-18 driven by an increase in the average cash, cash equivalents and marketable securities balances, an increase in interest rates, and a higher average loan balance. For the six-month period, interest income was $12,050, an increase of 20% or $2,016 driven by an increase in the average cash, cash equivalents and marketable securities balances, an increase in interest rates, offset by a lower average loan balance. 

Net income:Increase in net income for the quarter was driven by the above-mentioned items as well as a net gain on the revaluation of financial assets measured at fair value through profit or loss of $19,755 (Q2-18: $2,884) and a foreign exchange loss of $1,024 (Q2-18: $49) due to relative losses on certain U.S. dollar denominated financial assets as Canadian dollar strengthened. Similarly, net income for the six-month period was impacted by (i) a net gain on revaluation of financial assets measured at fair value through profit or loss of $24,532 (ii) other income of $370 due to fees earned on strategic loans, and (iii) a foreign exchange loss of $2,677.

Product Updates

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 trastuzumab-based therapy. Knight plans to launch NERLYNX® in late 2019.

In August 2019, the Company announced that it had reached an agreement with the pCPA and to date has obtained reimbursement of Probuphine® through public insurance plans administered by Alberta, Saskatchewan and the NIHB. Probuphine® is indicated for the management of opioid dependence in patients clinically stabilized on no more than 8 mg of sublingual buprenorphine in combination with counseling and psychosocial support and will become an important weapon in the fight against opioid dependence. Knight’s commercial focus for the remainder of the year will be on reimbursement in additional jurisdictions and physician training.

Strategic Lending Update 

During 2016, Knight issued US$23,000 to Medimetriks in secured loans to support its acquisition of the exclusive U.S. development and commercialization rights of OPA-15406 from Otsuka. On March 7, 2018, Knight received an early repayment of principal of US$20,000 and interest and fees of US$2,757. Subsequent to the early repayment and scheduled principal repayments of US$2,250, the outstanding loan balance was US$750.  The remaining loan balance was repaid in full on June 18, 2019.

NCIB Update

On July 8, 2019, the Company announced that the Toronto Stock Exchange approved its notice of intention to make a NCIB. Under the terms of the NCIB, Knight may purchase for cancellation up to 12,053,693 common shares of the Company which represented 10% of its public float as at July 2, 2019. The NCIB commenced on July 11, 2019 and will end on the earlier of July 10, 2020 or when the Company completes its maximum purchases under the NCIB. Furthermore, Knight entered into an agreement with a broker to facilitate purchases of its common shares under the NCIB. Under Knight’s automatic share purchase plan, the broker may purchase common shares which would ordinarily not be permitted due to regulatory restrictions or self-imposed blackout periods.  As at August 6, 2019, the Company has purchased 4,657,235 common shares for an aggregate cost of $34,894. 

Conference Call Notice 

Knight will host a conference call and audio webcast to discuss its second quarter results today at 8:30 am ET. Knight cordially invites all interested parties to participate in this call.

Date: Thursday, August 8, 2019
Time: 8:30 a.m. EST
Telephone: Toll Free 1-877-223-4471 or International 647-788-4922                                 
Webcast: www.gud-knight.com or https://tinyurl.com/y39uz8g5  
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.gud-knight.com

About Knight Therapeutics Inc.  

Knight Therapeutics Inc., headquartered in Montreal, Canada, is a specialty pharmaceutical company focused on acquiring or in-licensing and commercializing 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.gud-knight.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, 2018. 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.gud-knight.com 

INTERIM CONSOLIDATED BALANCE SHEETS
[In thousands of Canadian dollars]
[Unaudited]
 
As at June 30, 2019 December 31, 2018
ASSETS    
Current    
Cash and cash equivalents 294,911 244,785
Marketable securities 301,829 445,003
Trade and other receivables 10,592 11,756
Inventories 834 1,136
Other current financial assets 17,868 14,030
Income taxes receivable 779 821
Total current assets 626,813 717,531
     
Marketable securities 148,532 97,274
Property and equipment 1,710 794
Intangible assets 19,979 17,475
Other financial assets 159,482 113,314
Investment in associate 74,623 79,145
Deferred income tax assets 1,650 2,959
Other receivable 41,582 23,340
Total assets 1,074,371 1,051,832
     
LIABILITIES AND SHAREHOLDERS’ EQUITY    
     
Current    
Accounts payable and accrued liabilities 7,481 6,100
Lease liabilities 277
Income taxes payable 11,638 10,705
Other balances payable 516 197
Deferred other income 183
Total current liabilities 19,912 17,185
     
Lease liabilities 731
Other balances payable 5,608 4,615
Total liabilities 26,251 21,800
     
Shareholders’ equity    
Share capital 761,982 761,844
Warrants 785 785
Contributed surplus 15,481 14,326
Accumulated other comprehensive income 13,605 20,955
Retained earnings 256,267 232,122
Total shareholders’ equity 1,048,120 1,030,032
Total liabilities and shareholders’ equity 1,074,371 1,051,832

INTERIM CONSOLIDATED STATEMENTS OF INCOME
[In thousands of Canadian dollars, except for share and per share amounts]
[Unaudited]
 
  Three months ended June 30,
  Six months ended June 30,
 
  2019   2018   2019   2018  
         
Revenues 3,204   2,238   6,160   5,392  
Cost of goods sold 317   338   1,002   1,172  
Gross margin 2,887   1,900    5,158   4,220  
         
Expenses        
Selling and marketing 1,288   892   2,135   1,681  
General and administrative 3,787   1,937   7,385   4,032  
Research and development 984   572   1,610   1,061  
  (3,172 ) (1,501 ) (5,972 ) (2,554 )
         
Depreciation of property and equipment 96   19   193   35  
Amortization of intangible assets 423   445   849   886  
Interest income on financial instruments measured at amortized cost (4,901 ) (3,656 ) (9,826 ) (7,092 )
Other interest income (1,259 ) (1,090 ) (2,224 ) (2,942 )
Other income (17 ) (37 ) (370 ) (1,388 )
Net gain on financial assets measured at fair value through profit or loss (19,755 ) (2,884 ) (24,532 ) (3,425 )
Share of net loss (income) of associate 372   151   (320 ) (352 )
Foreign exchange loss (gain) 1,024   49   2,677   (2,548 )
Income before income taxes 20,845   5,502   27,581   14,272  
         
Income tax expense        
Current 638   911   2,169   1,552  
Deferred 1,251   572   1,267   1,792  
Net income for the period 18,956   4,019   24,145   10,928  
         
Basic earnings per share 0.133   0.028   0.169   0.077  
Diluted earnings per share 0.132   0.028   0.169   0.076  
         
Basic 142,861,274   142,819,960   142,856,785   142,816,677  
Diluted 143,215,379   143,270,324   143,230,442   143,247,377  

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
[In thousands of Canadian dollars]
[Unaudited]
 
  Three months ended June 30,
  Six months ended June 30,
 
  2019   2018   2019   2018  
OPERATING ACTIVITIES        
Net income for the period 18,956   4,019   24,145   10,928  
Adjustments reconciling net income to operating cash flows:        
Deferred tax 1,251   572   1,267   1,792  
Share-based compensation expense 698   642   1,155   1,187  
Depreciation and amortization 519   464   1,042   921  
Net gain on financial assets (19,755 ) (2,884 ) (24,53 ) (3,425 )
Foreign exchange loss (gain) 1,024   49    2,677   (2,548 )
Share of net loss (income) of associate 372   151    (320 ) (352 )
Deferred other income (13 ) (45 ) (183 ) (139 )
  3,052   2,968   5,251   8,364  
Changes in non-cash working capital and other items (600 ) 1,091   1,896   2,559  
Increase in other receivable     (18,242 )  
Dividends from associate     4,159    
Cash inflow (outflow) from operating activities 2,452   4,059   (6,936 ) 10,923  
         
INVESTING ACTIVITIES        
Purchase of marketable securities (84,252 ) (232,762 ) (183,145 ) (283,517 )
Purchase of intangible     (1,989 ) (3,000 )
Purchase of property and equipment (4 ) (44 ) (4 ) (86 )
Issuance of loans receivables (201 ) (831 ) (18,051 ) (831 )
Purchase of equities (6 ) (310 ) (6 ) (710 )
Investment in funds (5,463 ) (9,925 ) (12,570 ) (14,202 )
Proceeds on maturity of marketable securities 150,584   64,091   271,548   165,409  
Proceeds from repayments of loans receivable 2,044   1,594   2,701   35,034  
Proceeds from disposal of equities   1,015     1,015  
Proceeds from distribution of funds 1   5,756   677   6,099  
Cash inflow (outflow) from investing activities 62,703   (171,416 ) 59,161   (94,789 )
         
FINANCING ACTIVITIES        
Proceeds from contributions to share purchase plan 56   42   116   91  
Principal repayment of lease liabilities (70 )   (137 )  
Cash (outflow) inflow from financing activities (14 ) 42   (21 ) 91  
         
Increase (decrease) in cash and cash equivalents during the period 65,141   (167,315 ) 52,204   (83,775 )
Cash and cash equivalents, beginning of the period 231,110   583,408   244,785   496,460  
Net foreign exchange difference (1,340 ) 2,265   (2,078 ) 5,673  
Cash and cash equivalents, end of the period 294,911   418,358   294,911   418,358  
  
Cash and cash equivalents          294,911   418,358  
Short-term marketable securities         301,829   318,388  
Long-term marketable securities          148,532   70,000  
Total cash, cash equivalents and marketable securities   
      745,272   806,746  

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