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 | % | ||||
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: 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 | |||||||||
