Mr. Samira Sakhia reports

KNIGHT THERAPEUTICS REPORTS FIRST QUARTER 2023 RESULTS

Knight Therapeutics Inc. has released its financial results for its first quarter ended March 31, 2023. All currency amounts are in thousands except for share and per-share amounts.

Q1 2023 highlights

Financials:

• Revenues were $82,597, an increase of $18,790, or 29 per cent, over the same period in prior year;
• Gross margin of $40,762, or 49 per cent, compared with $32,477, or 51 per cent, in the same period in prior year;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $18,237, an increase of $4,925, or 37 per cent, over the same period in prior year;
• Adjusted EBITDA per share of 17 cents, an increase of five cents, or 45 per cent, over the same period in prior year;
• Net loss on financial assets measured at fair value through profit or loss of $11,847;
• Net loss was $3,937, compared with net loss of $18,811 in the same period in prior year;
• Cash inflow from operations was $3,711, compared with a cash inflow from operations of $12,879 in the same period in prior year.

Corporate developments:

• Purchased 2,243,905 common shares through Knight's NCIB (normal course issuer bid) at an average price of $4.83 for an aggregate cash consideration of $10,830.

Products:

• Submitted marketing authorization application for tafasitamab in combination with lenalidomide for the treatment of adult patients with relapsed or refractory diffuse large B-cell lymphoma (DLBCL) who are not eligible for autologous stem cell transplantation (ASCT) to ANMAT in Argentina in Q1 2023;
• Launched Palbocil (palbociclib) in Argentina in March, 2023;
• Obtained regulatory approval for Bapocil (palbociclib) in Chile in March, 2023.

Subsequent events:

• Shareholders re-elected Jonathan Ross Goodman, Samira Sakhia, James C. Gale, Robert N. Lande, Michael J. Tremblay, Nicolas Sujoy and Janice Murray on the board of directors;
• Purchased an additional 1,144,520 common shares through NCIB for an aggregate cash consideration of $5,359.

"I am excited to report impressive Q1 revenues of over $82,000, a 29-per-cent growth compared to the same period last year, and a record adjusted EBITDA of over $18,000, representing a growth of 37 per cent. This strong performance is a testament to the hard work and dedication of our team and the continued success of our portfolio and recent launches. I am also proud to announce that we acquired $16-million of shares under the normal course issuer bid this year, further demonstrating our commitment to delivering value to our shareholders," said Samira Sakhia, president and chief executive officer of Knight Therapeutics Inc.

Revenues: For the quarter ended March 31, 2023, revenues, excluding the impact of IAS 29, was $82,667 an increase of $18,833 or 30 per cent compared to the same prior year period. The revenues by therapeutic areas are as follows:

The change in revenues by therapeutic areas is explained by the following:

• Oncology/hematology: The oncology/hematology portfolio grew by approximately $7,600 due to continued growth of key promoted products, including Halaven, Lenvima and Trelstar, and the assumption of commercial activities of Akynzeo in Brazil, Argentina and Canada. This increase is offset by a reduction in revenues of our mature and branded generics products due to their life cycle, including the market entrance of new competitors.
• Infectious diseases: : The infectious disease portfolio grew by approximately $7,800, excluding the impact of the planned transition and termination of the Gilead amendment. This growth is driven by the company's key promoted products and the buying patterns of certain customers. In addition, Knight recorded revenues of $2,400 in Q1 2023 related to a one-time sales contract with the Ministry of Health in Brazil for Ambisome (2022 MOH contract). The 2022 MOH contract was signed in December, 2022, for a total value of $18,400 of which $7,000 was delivered in 2022, $2,400 in Q1 2023 and $9,000 in April, 2023. In addition to the full amount of the 2022 MOH contract of $18,400, subsequent to the quarter, Knight received an order for an additional $9,000 (2023 MOH contract) from the Ministry of Health of Brazil which was delivered in April, 2023.
• Other specialty: The other specialty portfolio grew by approximately $6,200, excluding the impact of the change in accounting treatment of Exelon from net profit transfer to revenues with related cost of sales. The increase is mainly due to advance purchases of Exelon driven by the commercial transition from Novartis to Knight in certain countries, as well as the purchasing patterns of certain customers.

Gross margin: Under IFRS (international financial reporting standards), gross margin, as a percentage of revenues, was 49 per cent in Q1 2023 and 51 per cent in Q1 2022. Excluding the impact of IAS 29, gross margin, as a percentage of revenues, was 50 per cent in Q1 2023 and 53 per cent in Q1 2022. The decrease in gross margin, as a percentage of revenues, is due to product mix, including Exelon, recorded as a net profit transfer in Q1 2022 compared with revenues with related cost of sales in Q1 2023.

Selling and marketing (S&M): For the quarter ended March 31, 2023, S&M expenses were $10,665, an increase of $975, or 10 per cent, compared with the same period in prior year. Excluding the impact of IAS 29, the increase is $1,014 or 10 per cent.

General and administrative (G&A): For the quarter ended March 31, 2023, G&A expenses were $9,106, an increase of $274, or 3 per cent, compared with the same period in prior year. Excluding the impact of IAS 29, the increase is $342, or 4 per cent.

Research and development (R&D): For the quarter ended March 31, 2023, R&D expenses were $4,187, an increase of $1,204, or 40 per cent, compared with the same period in prior year. Excluding the impact of IAS 29, the increase is $1,260, or 44 per cent. The increase is driven by compensation expense and medical initiatives related to key promoted products, including Akynzeo, in-licensed in H2 2022.

Amortization and impairment of intangible assets: For the quarter ended March 31, 2023, amortization and impairment of intangible assets was $11,171, a decrease of $117, or 1 per cent.

Interest income: Interest income is the sum of interest income on financial instruments measured at amortized cost and other interest income. For the quarter ended March 31, 2023, interest income was $3,352, an increase of 126 per cent, or $1,872, compared with the same period in prior year due to higher interest rates on cash and marketable securities.

Interest expense: For the quarter ended March 31, 2023, interest expense was $2,791, an increase of $1,680, or 151 per cent, compared with the same period in prior year due to higher average loan balance resulting from IFC loan received in December, 2022, and higher variable interest rates, partially offset by principal repayments of Itau Unibanco Brasil and Bancolombia bank loans in 2022.

Adjusted EBITDA: For the quarter ended March 31, 2023, adjusted EBITDA was $18,237, an increased of $4,925, or 37 per cent. The decrease in adjusted EBITDA is driven by an increase in gross margin of $8,285, offset by an increase in operating expenses.

Net loss: For the quarter ended March 31, 2023, net loss was $3,937, compared with net loss of $18,811 for the same period in prior year. The variance mainly resulted from the above-mentioned items and (1) a net loss on the revaluation of financial assets measured at fair value through profit or loss of $11,847 versus a net loss of $16,363 in the same period in prior year, mainly due to unrealized revaluations of the strategic fund investments, (2) a foreign exchange gain of $73 versus a foreign exchange loss of $6,189, and (3) the income tax recovery of $1,009 in Q1 2023 of driven by the recognition of certain deferred tax assets due to timing differences related to its financial assets, tax loss in certain jurisdictions and certain intercompany transactions, offset by current income tax expense due to operating income, compared with the income tax recovery of $3,501 in Q1 2022 driven by the recognition of certain deferred tax assets due tax losses generated and timing differences related to its financial assets.

Cash, cash equivalents and marketable securities: As at March 31, 2023, Knight had $160,469 in cash, cash equivalents and marketable securities, a decrease of $12,205, or 7 per cent, as compared with Dec. 31, 2022. The variance is primarily due to outflows certain regulatory and sales milestones on certain products, including Akynzeo and Aloxi from Helsinn, shares repurchased through NCIB, partially offset by cash inflows from operating activities, and proceeds from the disposal of Medimetriks.

Financial assets: As at March 31, 2023, financial assets were at $164,808, a decrease of $11,755, or 7 per cent, as compared with the prior year, mainly due to negative mark-to-market adjustments of $11,522 driven by the decline in the share prices of the publicly traded equities of its strategic fund investments, distributions of $509, offset by foreign exchange gains of $623. Given the nature of the fund investments, there could be significant fluctuations in the fair value of the underlying assets.

Bank loans: As at March 31, 2023, bank loans were at $75,333, an increase of $5,261, or 8 per cent, as compared with Dec. 31, 2022, due to accrued interest of $2,186 and the appreciation of BRL, COP, CLP and MXN against CAD.

Product updates

Knight launched Palbocil (palbociclib) in Argentina in March, 2023. Palbocil/Bapocil (palbociclib) is indicated for the treatment of patients with hormone receptor (HR) positive, human epidermal growth factor receptor 2 HER2-negative locally advanced or metastatic breast cancer in combination with an aromatase inhibitor as initial endocrine-based therapy in postmenopausal women; or fulvestrant in patients with disease progression after prior endocrine therapy. In addition, in March, 2023, Knight obtained regulatory approval for Bapocil (palbociclib) in Chile.

Corporate updates

NCIB

During the three-month period ended March 31, 2023, the company purchased 2,243,905 common shares at an average price of $4.83 for aggregate cash consideration of $10,830. Subsequent to quarter-end up to May 5, 2023, the company purchased an additional 1,144,520 common shares at an average purchase price of $4.68 for an aggregate cash consideration of $5,359.

Financial outlook update

Knight provides guidance on revenues on a non-GAAP (generally accepted accounting principle) basis. This is due to both the difficulty in predicting Argentinian inflation rates and its IAS 29 impact.

For fiscal 2023, Knight has updated its guidance and expects to generate $300-million to $320-million in revenue, an increase of $20-million on the lower and upper range. The adjusted EBITDA, as a percentage of revenues, is expected to be between 14 per cent to 15 per cent of revenues. The increase in the financial outlook is primarily due to an improvement in the forecasted LATAM currencies against the Canadian dollar and the 2023 MOH contract for Ambisome. The guidance is based on a number of assumptions, including, but not limited to, the following:

• No revenues for business development transactions not completed as at May 10, 2023;
• Discontinuation of certain distribution agreements;
• No interruptions in supply whether due to global supply chain disruptions or general manufacturing issues;
• No new generic entrants on our key pharmaceutical brands;
• No unforeseen changes to government mandated pricing regulations;
• Successful commercial execution on product listing arrangements with HMOs, insurers, key accounts and public payers;
• Successful execution and uptake of newly launched products;
• No significant restrictions or economic shut down due to global pandemics;
• Foreign currency exchange rates remaining within forecasted ranges.

Conference call notice

Knight will host a conference call and audio webcast to discuss its first quarter ended March 31, 2023, today at 8:30 a.m. ET. Knight cordially invites all interested parties to participate in this call.

Date:  Thursday, May 11, 2023

Time:  8:30 a.m. ET

Telephone:  toll-free at 1-855-669-9657 or international at 1-412-317-0790

Webcast:  available on-line

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 the company's website.

About Knight Therapeutics Inc.

Knight Therapeutics, headquartered in Montreal, Canada, is a specialty pharmaceutical company focused on acquiring or in-licensing and commercializing pharmaceutical products for Canada and Latin America.

We seek Safe Harbor.