Knight Therapeutics Inc.

Good morning everyone. And welcomed to Knight Therapeutics fourth quarter and year-end 2020 conference call.

I am joined on today's call with Samira Sakhia, our President and Chief Operating Officer; Amal Khouri our newly promoted Chief Business Officer; Arvind Utchanah, our Chief Financial Officer and Jeff Martens, our VP, Commercial. The past year was a transformative year for Knight with the completion of the acquisition of Grupo Biotoscana.

Despite the challenges due to COVID-19 we continue to progress our integration while advancing on our product portfolio on both Canada and Latin America. We have received regulatory approvals from Health Canada's for Estrella IMVEXXY, BIJUVA and received regulatory approval for Lenvima and Halaven in Ecuador.

We continue to focus on -- we continue to focus on our mission to acquire and license develop and commercialize innovative medicines and high quality branded treatments to improve the health of patients in Latin America and Canada. I would now like to turn the call over to Samira who will walk through the corporate update.

Thank you, Jonathan. And good morning everyone.

First of all, I'd like to extend Amal Khouri and congratulate them all on her promotion to the Chief Business Officer. I'm all with Jonathan to first hire at Knight and during the last seven years, she has done an amazing job in leading Kinght’s corporate and business development, as well as corporate strategy.

I'm always instrumental in the diligence and negotiation of the acquisition of Biotoscana, and in 2020 led the mandatory tender offer and navigated the complexities of Brazilian securities laws to get it done. I also want to welcome Jeff to Team Knight.

Jeff has been working with us over the last year to in harmonize and commercial assets, including marketing, sales and market access throughout Latin America. Jeff has over 20 years of experience in pharmaceutical industry in marketing, market access and sales, and comes to us from Novartis where he's made several -- where he held several executive roles at Novartis in Canada, which is part of the LATAM region as well as Australia.

Thank you Samira. As previously mentioned, an important part of our BD effort in 2020 went towards completing the tender offer process in Brazil that resulted in the acquisition of 100% of GBT in the third quarter, followed by delisting in both Brazil and Luxembourg.

In parallel to completing the acquisition, we dedicated our efforts to strengthening BD capability and ensuring coverage and expertise across our expanded region. Today, our team is spread across four countries and is led by our new head of business development Stephani Saverio who's based in Sao Paulo in Brazil.

Saverio joint Knight in August of last year. He has over 20 years of experience in pharma, having spent the last 12 years at Ache, one of the largest Brazilian pharmaceutical companies.

Thank you very much Amal. It is my pleasure to provide the first update on our products as well as our commercial structure, which continued to advance in this year of integration.

Starting with our structure as Samira mentioned, we focused our efforts on integrating and regionalizing our strategic brand planning process and strengthened our teams both by promoting internal talent, as well as recruiting externally. As for our products, we continue to advance our portfolio throughout our region.

In the first quarter of 2020, we launched Cresemba in Brazil for the treatment of invasive aspergillosis and invasive mucormycosis for adults. Knight holds the race to commercialize the product in all of Latin America, and as an early launch base, and in multiple countries Argentina, Colombia, Mexico, Chile and Peru.

Knight also launched Karfib in Argentina, which is indicated for relapsed refractory multiple myeloma. During the year, Knight received regulatory approval from Health Canada for Ibsrela for the treatment of Irritable bowel syndrome with Constipation.

Ibsrela was launched earlier this month. It is now covered by most private insurance companies in Canada.

Knight also received regulatory approval for both IMVEXXY and BIJUVA. IMVEXXY and estradiol vaginal insertion has been approved for the treatment of postmenopausal moderate-to-severe dyspareunia a symptom of VVA due to menopause.

BIJUVA is a once-daily combination of estradiol and progesterone in a single oral capsule and was approved for the treatment of moderate-to-severe vasomotor symptoms due to menopause. We expect to launch both products in 2022.

Moreover, Knight has obtained regulatory approval for Lenvima and Halaven in Ecuador. Lenvima has been approved for several indications and is used to treat patients with thyroid and advanced renal cell carcinomas.

Halaven is used for the treatment of locally advanced metastatic breast cancer and unresectable soft tissue sarcoma. Lenvima and Halaven have both been launched in Brazil, Argentina, Chile and Peru.

And we are pending approval in Colombia.

Thank you, Jeff. In the course of this conference call, I will refer to EBITDA, adjusted EBITDA and adjusted earnings, which are non-IFRS measures.

Knight defines EBITDA as operating loss or income, excluding amortization and impairment of intangible assets, depreciation, purchase price, accounting adjustment, and the impact of hyperinflation accounting. Adjusted EBITDA excludes acquisition costs and run recurring expenses.

We define earnings as adjusted earnings as adjusted EBITDA plus net interest income from cash, marketable securities and backlogs. I'm pleased to report that for the quarter ended December 31 2020, we reported revenues of $55.2 million, an increase of $17.9 million or 48% compared to the same period last year.

For the 12-month period we reported revenues of just under $200 million, an increase of $152 million or 220% compared to last year. The growth in revenues is explained by the consolidation of whole year’s activities results, compared to only one month in 2019.

In 2020, Knight generated revenues of $78.7 million in Brazil, $37.8 million in Argentina, $34.8 million in Colombia, and $33.9 million in the rest of Latin America. For the quarter ended December 31 2020, we reported a gross margin of $20.1 million, or 36%, compared to $18.4 million, or 49% in the same period last year.

For 2020, gross margin was at $81.7 million, or 41%, compared to $26.9 million, or 57% in 2019. Excluding the impact of hyperinflation, the gross margin would have been 40% for the quarter, and 44% for the year.

Furthermore, we recorded an inventory write-off of $3.2 million during the quarter and $10 million for the full year, mainly due to the impact of COVID-19 on certain new product launches. Our operating expenses increased by $5.8 million for the quarter, and $50 million for the year compared to the same periods in 2019.

The increase for both periods is mainly explained by the consolidation of GBT’s results, which accounted for $11.2 million of incremental expenses for the quarter and $56.4 million for the full year. The increase is partially offset by one-time costs related to the GBT acquisition and the public proxy battle incurred in 2019.

The interest earned on cash, marketable securities and strategic loans for the quarter was $2.8 million, a decrease of $2.6 million, or 48%, compared to the fourth quarter of 2019. For the 12-month period, interest income was $14.3 million, a decrease of $9.2 million, or 39% compared to last year.

Thank you, Arvind. Since the start of the pandemic last year, our focus has been on ensuring that physicians and patients continue to receive uninterrupted quality medications in all territories.

Our teams have been -- have remained focused on taking care of each other while continuing to build and grow the business. And I want to thank all our Knights for their continued dedication to building a leading pan-American ex-U.S.

specialty pharmaceutical company. Looking ahead, we remain committed on continuing to integrate and grow Knight.

And cash, cash equivalents and marketable securities of $392 million, or $3 per share we will be focused on bringing new business development opportunities. I'll now turn the call back to Jonathan for his concluding remarks.

Good morning, everyone. I was just wondering in terms of maybe you could just discuss where Canadian stock prices are in terms of both acquiring and in-licensing relative to the last few years.

Was curious…

So Andre, you want to ask about the licensing efforts or the pricing side?

The pricing side, just in terms of…

Sure. So as you as you may have seen in the papers, and over the last several years, the PMPRB has been has been on an effort to change drug pricing in Canada to reduce it.

It's really about changing the list price and not really -- not the price that most provinces pay because the provincial price is governed through pCPA. That that legislation went into or the regulations and guidelines went into effect as of Jan 1 this year.

And they're being implemented as of July 1 of this year, and the slight six month delay has been because of COVID. There is going to be drill reduction on the changes really going from that seven country basket to 11 countries, which includes more countries in Europe as well as Japan.

And it had it has impacted our ability to in-license because obviously, the price in Canada impacts prices in other countries; it also impacts our profitability that we're able to achieve. And when we set out for our kind of our global footprint, and what we looked at is kind of where the Canadian market was, where other markets are and where can we as a company achieve growth.

And that's why we positioned ourselves for Latin America, when obviously not abandoning Canada, Canada is a great market. But we need to be mindful of the level of growth we can achieve here.

And so just in terms of the wanting to acquire, for example, a legacy asset or something like that in Canada, are the prices for such an asset, have they gone up or down? Can you just comment on that as well please?

Are you -- do you mean about price in the market? Or will acquisition price of an…

Acquisition prices? Yes.

And then licensing prices as well.

So right now when we look for, for legacy asset acquisition, we're doing it not on a Canada only basis, because we have the Pan-American ex-U.S. footprint.

Amal in here and I will let her add to it some more but she and her team are looking at combinations and permutations of all of our territories, some of our territories, just Latin America. Valuations have been competitive for years.

And we don't see that changing at anytime soon, because these are always competitive processes. So Amal, I'm going to turn it over to you.

Hopefully agree from here. I would say from a purchase price perspective, it's we -- it's similar dynamics, it's really deal specific.

No, no major changes, kind of add a general comment.

And just in terms of I wanted to ask you also about your VC investments. I know you made an investment in several VCs over a few years ago for about 125 million and just wondering if maybe you tried to monetize those investments or what your plans are with those investments, if you can comment.

Sure. So we as we said, over the last couple of years, the VC investments have been, have proven to be very successful on a financial basis.

Unfortunately, the reason we did them was to be able to in-license more products. And that hasn't really shown any real traction on it.

So we're not looking to invest in new VC projects. That being said, we don't really need the cash at this point.

We have cash on the balance sheet of 392 today. So we're not really looking to divest.

And what we're seeing is that because they're performing really well, there's no need. And if we were to try and sell on the secondary market, we'd have to take a discount, and we don't need to do that right now.

And when do you think you could realize those VC gains?

We are already realizing a lot of VC gains, and we're seeing that the distributions that we're getting from the funds actually are it's now starting to exceed the capital calls. And as of the end of December, we have about a commitment; we have a commitment of just around 3 million left.

The funds are expiring between one of them as early as later this year, to about 10 years from now. And they're kind of bailing out, but we're starting we've been seeing distributions for a while.

And just one last question, if you're looking at your drug portfolio, across the board, what would be your top three growth drivers for 2021? Thank you.

Well we are growing -- so we are growing in a lot of different places. We're growing in our oncology space, we're growing in our infectious disease space, and we're growing in BGX space.

And everybody is really focused despite COVID to execute on that, so we're seeing it with in Lenvima and Halaven. We're seeing it too, and especially even as especially Cresemba, as well, we’re launching in Brazil, we are going to see growth even on Anderson, which has got really hit badly by COVID last year and in Canada on Nerlynx HER2.

Thank you.

Good morning. First question, you had quite an increase sequentially from Q3 to Q4, despite COVID still being rampant in Latin American countries.

I'm wondering what accounted mainly for that sequential increase, was it the launch of Cresemba? Was there inventory adjustments?

Or is there just seasonality in the Latin business?

Sure. I mean, I give a quick answer, and then I'll actually turn it over to Jeff.

So in Q3, we actually had the inventory adjustment happen, where we saw a little bit of a downtick because of COVID wholesalers had started to rational or to limit their the inventory that we were carrying, and there was no there was never a fundamental issue related to the products. And as we came into Q4, things normalized back because there was nothing fundamental there.

The second thing is that while COVID was rampant, or is ramping today, there was a little bit of a lift because it's the summer in Brazil, Argentina, and Chile. And similar to what we saw in our summer last year, there was a little bit of opening Jeff?

I really don't know if there's much more of it as I guess other than, it's so hard to predict with COVID, the movement quarter-on-quarter. But I mean, to Samira’s point, we did see oncology treatments increase in Q4 versus Q3 which I think helped.

And, and I think that drove some of what you're seeing in Q4.

The destocking in Q3 I mean normalizing in Q4 is much of Q4 stocking back up like did sales exceeds use of the drugs? Or did it largely reflect use of the drugs?

It was largely reflected to use because the the destocking that happens, and then when you're not -- when they continue to purchase for what they need? If let's say they went from 90 to 60 days, it was a month less that happened in Q3, but Q4, it's still it's now full three months.

Okay. Okay.

Next question. I think you're the profile of the drugs that you acquire in licensing Canada, are different from the profile of the type of drugs you knew in license for Latin America?

Are you able to rationalize that? And will we see drugs that you acquire in license for both Canada and Latin America?

I'm going to let Amal answer that question.

Thanks Samira. So I would say maybe just a correction to the statement that that you made, there will be drugs with the same profile that we will be looking to license for the entire territory, so for both Canada and Latin America.

So for example, if you look at legacy assets that we that we look to acquire, products with existing sales, those, that's the type of product that we acquire across our territory. Same goes for in-licensing of innovative assets.

Again, if rights are available, we'll, we'll go after those types of products for the entire territory, where there is a difference, potentially on price of products, or anything that's more on the branded generic side. That's the type of products that has an opportunity in LATAM rather than in Canada.

So that's where you'll see that distinction. So overall, we're still we're still looking for a product across our territories.

But we want to, of course, remain flexible and adapt to specific market needs. If there is an opportunity that works for one part of the territory rather than the other.

Okay, thank you. And my last question is, with the cash that you have on the balance sheet now, is it?

Is it going to be blocking and tackling your way to a bigger portfolio? Would you look at buying something like GBT again?

And are you focused now just on Canada and LATAM or could you buy something, something someplace else in the world?

I'm going to let Amal answer that as well.

So we're focused on Canada and LATAM. We need to, complete our integration.

We need to start building on the platform that we have. So the focus geographically is going to be Canada, LATAM.

In terms of acquisitions, the focus is going to be products and product portfolios on the M&A side potentially bolt on. For, if we see a good opportunity for an acquisition that really bring something specific that complements the business, whether it's in terms of footprints or capabilities or portfolio.

Okay, that's it for me. Thank you.

Good morning, and thank you for taking my call. I just had a question on the inventory write down and I believe this occurred in a couple quarters in a row.

And I'm just wondering what the dynamic is there and if you can give some additional color and do you expect that the write downs to maybe normalize so going forward? Thank you.

Well Justin, I can tell you we don't like to have inventory write-downs, but I'm going to let Arvind answer this question.

Thank you Samira. So I mean, as we've said before in previous quarters, we've been impacted by COVID and especially on the new launches.

We continuously continue to monitor our launches. But at this point, we can't really predict what's going to be happening in the future, because we're really trying to balance the new launches, as well as the limitation of our supply chain, which is in certain cases is limited shelf life on our products as well as long lead time.

But as Samira mentioned, we're really working how to minimize any future impact in terms of write-down.

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We'd appreciate that color. And is there like some type of ERP systems that's being implemented to manage it?

Or the use of technology? Or just better forecasting?

Hi, Justin. All of the above.

So there is a lot of work being done on forecasting on assets local level and at the global level. And Arvind and his team are now in the process of implementing a global ERP system, because that never existed before.

It was all manual.

And global ERP system, is that still in the early stages of being implemented? I know these projects can be quite comprehensive.

Or is that well underway?

It's underway. And so, let me just actually speak to integration.

So one of the things is we are -- it's not just integration of people and companies, we're integrating systems, whether it's ERP, whether it's learning HR, pharmacovigilance. And we expect integration to continue for the next year or so.

Okay. Appreciate that additional color.

And then I just had a broader question on M&A. I know, there's already been a few questions around this.

But I'm just wondering on timing. Obviously, there's a few headwinds in the near term, but it does seem like the business remains profitable.

And maybe characterized kind of this as the bottom level. Is there -- like I'm just wondering, can we get a sense of timing when there may be some M&A in bolting-on to the LATAM platform?

Or would you prefer to just kind of manage the business and maybe integrate some of the ERP systems in the interim just to make sure that the platform is well under hand to then pursue some further M&A?

Sure. I'm going to answer one half, and then I'm going to turn it over to Amal for timing.

Our team has been focused on multiple prongs. And one is integration.

One is continuing, and making sure that we're running the business properly. And the third is in-licensing and acquisition.

So we have been doing that since we did this transaction. The focus last year was the second half of the transaction, because if you recall, we only bought 50% of Biotoscana and then we had to buy the second half.

And in the meantime, we will also pursuing other activities. But it's not a one or the other proposition here.

We're doing it all. So sorry, Amal, you could just answer on timing.

Yes. I mean, timing, I can comment on the timing of the effort, which is where we are working in parallel integration as Samira said..

I said, commenting on timing of a future acquisition is not something that we can comment on. As you know, there's a lot of factors that play into that, including when the opportunities are available.

But we are pursuing. We're not -- we haven't taken a break to say kind of let's integrate first.

We're doing all of that efforts in parallel. And we have to be focused and selective as to the type of M&A opportunities that come our way to make sure that we're doing right deals at the right time.

Okay. Appreciate that.

Thank you for taking my questions.

Hi, good morning. Thanks for taking my questions.

Sorry to get on the inventory question again. But just a couple quick ones there, if I may.

You mentioned that in Q4, I mean, the situation was more or less balanced. But Q1, I mean, you've seen a lot of cases in Brazil or certain parts of Brazil or other.

I mean, would you say that there -- would that Q4 situation continue into Q1? Or have you seen any kind of shifts or differences there?

And there's a second part of the question. Is their any opportunity to, for example, moving inventory from one country to another, right?

Because some of them are moving at different speeds, like for from Brazil, to Argentina, or to Chile, and so on?

Right. Thank you, Endri.

I'm going to ask Arvind to answer this question.

Thank you, Endri. So in terms of the movement between Q4 and Q1, it's really hard to predict, because there's also a bit of seasonality coming into play.

So the other point I wanted to mention under Q4, improvement was also like -- in LATAM, like this was also the beginning of December for LATAM. And as you know, there was a leak down on certain restriction, which also helped our initiatives in LATAM.

Whether that continues into Q1 remains to be seen, especially given the recent lockdowns and third wave in certain countries in LATAM. And in terms of inventory, the question of inventory, so we continuously assess moving inventory between the different countries, especially to avoid write-downs.

In some cases we have certain products where we have a unique skew with where it can be moved across different jurisdiction in LATAM. But in other cases we have restriction depending on the regulatory approval or even shelf life, which really mitigates how much we can move around.

Great. Thank you for that answer.

I just wanted to ask on actually question, because it has come up as potentially as the source of growth going forward. I mean, how is it doing at this point in terms of the launch, when you compare it to your modified expectations, versus given the situation of the pandemic?

Hi, Endri. I'm going to let Jeff answer this question.

Yes. So on Cresemba, I think what we've seen is launches is going well and its underway in multiple countries.

The launch is particularly in Brazil. As you can imagine, launching a medicine during a pandemic is extremely difficult and hard to predict.

So that I think has got us to a point now where we're adapting to that situation. We have seen nice traction with Cresemba due to our promotional efforts in Q4.

Although, we're cautious because Brazil is going back down into a lockdown. So again, these things are hard to predict.

But so far, I'd say, things are going to plan.

I just wanted to add -- sorry, I just wanted to add end markets where we had an earlier launch, especially a market like Mexico, where they had launched in 2019. The product is performing much better than expected because a third of patients, COVID patients actually do that.

Invasive fungal infections where Cresemba can be very helpful. But unfortunately -- so it's kind of a balancing on overall.

It's doing okay. But in one market, it's doing really well.

And in the other one, where we have a lot of headwinds to be able to launch during the pandemic.

Okay. Thank you.

That's a great color actually. The last question for me is that, I mean, we've heard some cases anecdotally and some cases not.

That there has been a delay in care because of COVID. And sort of a pent-up demand, especially when it comes to even cancer treatments.

I mean, have you seen something like that? Or do you -- have you seen any evidence of that particularly in Brazil like that has being most impacted for now?

Or any of the other countries in Latin America? Thank you.

Hi, Endri. We're actually seeing that in all of our markets, that diagnosing patients are not going to get tested or diagnosed and diagnoses are taking a little bit longer.

Just like Jeff mentioned earlier, one of the upticks are a small uptick that we saw in Q4 was treatment in oncology where patients started to go back. Do we believe that there's going to be some sort of uptick in demand?

There may be. And it'll really depend on the product where we'll see it.

Okay, great. That's it for me.

Thank you very much.

Thanks Endri.

Yes. Good morning.

First off, congratulations, Amal. Second, one of these questions I've been asked, but one of the things I am curious about is that, I know previously, Mexico was a focus for the company and as a bolt-on and are trying to identify products that you could license in or purchase.

Could you tell us how that markets been developing for you if there's anything on the horizon that we could talk about?

Thanks, Doug. I'm not going to talk about anything that's on the horizon.

But I'm going to let Amal answer the rest of the question.

Thanks Samira, and thank you, Doug. Yes.

Mexico continues to be a priority, for the same reason that we mentioned earlier, which is we have a young affiliates and really need to build. So we are continuing to look at opportunities for the entire territory, including Mexico, but also specifically to see if there are opportunities, even if it's only for Mexico, that's also something that we're considering.

The Mexico itself is going through some challenges with relatively recent government and whatever impact that has on their health authority. But everyone in the industry is dealing with that.

And we're -- again, we're looking at that to see if there are any specific opportunities, but also say, we continue to, it continues to be a priority and a focus for us to build in Mexico, whether it's through products or portfolios or even M&A.

Okay, great. And the second one is more general, has to do with the expected returns or hurdle rates that the company's willing to accept between Canada and LATAM, given the changes in Canada, we are seeing.

Are you prepared to look for lower returns out of Canadian acquisitions or purchases? Or you're not seeing that.

And LATAM is still your first choice?

No. Sorry, go ahead, Samira.

Sorry, go ahead, Amal, go ahead.

No. I was just going to say kind of in terms of the focus, again, we're looking at our entire territory.

Rate of return is really an opportunity specific. So it depends on the risk profile that comes with the specific acquisition or in-licensing opportunity that we're looking at.

But we are looking across our territory. And again, I would say it's more opportunity specific, rather than a general territory return rate.

And one thing of that, we also look at it on a portfolio basis. We may take a little bit of a lower return, if we know that this is going to set us up for something bigger later.

Yes, great. Thank you.

Thank you.

Sorry about that. I was also on mute.

Good morning. Thanks for taking my questions.

And also congratulations to them all. And I really just have one broad industry question this morning.

And there's been a fair bit of noise recently from the FTC and its counterparts in other countries, which seems to reflect the move to a tougher M&A regulatory environment in major jurisdictions. Just wondering if you could share some insight into how is it all you view this impacting your BD pipeline going forward?

Do you see this impacting your licensees willingness out license specific assets, for example, or what are the broader implications as you see it?

I don't think we're really seeing much of that, but I let Amal who's closer to it answer that question.

Yes. I agree.

And thank you, David. I agree, we're not really seeing yet a direct impact of that on the availability for licensing opportunities or activities.

But we'll continue to monitor to see if we start seeing any direct impact.

Great. Thanks so much.

I'll hop back in the queue.

Yes. Just a follow up question related to the inventory management of the wholesalers.

You've mentioned and we've seen in the news that they're going back into lockdown. Are you seeing the wholesalers running down their stock again?

Or that's not happening this time?

So right now, we are not seeing a shift in that. I think there was that one blip that we saw in Q3.

You have to also remember in these markets, things like transportation, movement of goods is a little bit more difficult than what you see in Canada, getting a product from Montreal to Vancouver takes us -- it's safe and it's easy to do, and it takes a couple of days. When you're going from a warehouse in a location in Brazil to Northern Brazil, it may be more complex.

So the wholesalers do like to have more safety than what you would normally see in the channel. And we're not -- we don't expect there to be much further reduction even if there is some reduction.

Okay. Thanks.

Hi, guys. Thanks for taking my question.

Just really want to zero in there on Canada for a second. Probably going to ask some ignorant questions here.

But when you look at the Patented Medicine Prices Review Board, kind of what they're talking about, you mentioned that earlier. You said that, it's more of a list price thing, but then also it's going to impact you.

Can you just give me a little bit more clarity on what you mean by that? And kind of what you expect the hit could be in terms of revenue going forward?

There's like a percentage like, are you seeing your drug prices drop 5% or 10%. Or like, if you can give any kind of number, they're kind of how many zero in on that be great?

Okay. So the way PMRRB works is, first of all, it only regulates patented medicines, they don't regulate broader than that.

They also -- they have visibility when it comes to the patent -- just the list price. They don't look at if we have a discount that we work with at the provincial level.

So a great example of that is a product like Probuphine, which is a patented product. We sell it across Canada.

We have an agreement with the provinces. Pretty much everyone except British, Columbia, where there is a price for them.

That price is going to be compared to what it's being sold for in several European countries. And we know what our price is.

We know what the European price is. And in this specific case, we're not going to see a reduction.

In the Knight portfolio. The fact that we are so young and we don't have a very big portfolio, we're really not going to see much of an impact on a lot of our business, because we've only got a few products out there.

But we will see comparable prices in Canada, two products that we may want to bring to Canada drop. So you have a -- there may be a product that we want to have in oncology or CNS or GI that we want to bring to Canada.

And it's no longer feasible because as a licensor, we have a profit kind of sharing with our partner. And if you have a low price for Canada, it's just not financially feasible either for the partner for ourselves to launch that product in Canada.

Yes. That's super helpful.

Thanks so much. Just a quick follow-up like that.

There's -- when I think about the kind of business model you guys are running and looking back to the Paladin days. And this is obviously an operating leverage business.

You guys have had a lot of M&A questions on the call already. So I won't do that again.

But I guess the question is, you talked about -- you looking at your portfolio more broadly. But I don't know that that's necessarily fair, because there'll be some areas of your portfolio that would be already hitting that operating leverage that we saw -- that we see with these types of business models.

And other areas that would be still being a drag, Canada being one of them. So if you're kind of saying that Canada is going to be a tougher place to have more licenses.

Is it going to be -- is it going to continue to be a drag on earnings for the foreseeable future? Or do you see it reaching profitability?

And how does that work? I guess, the broader question is like, what's going to be the cadence of margin going forward?

Are we going to start seeing more operating leverage come through over the next five years? Or is it going to be more of we got to wait for 10 years before we start to see that?

And that's really where the question is going? Is when does the operating leverage show up?

And how do you treat Canada if it's a drag on earnings now, if you can't really book it up, necessarily? And that would be the same for other Latin American regions as well, where the same would be true?

How do you guys approach that where some areas would have better density and some areas wouldn't?

Sure. So it's very complicated.

When we look at -- when we look in at an acquisition of a product, it's really that is, we don't look at it just on a region basis, that it's bulking up the -- its bulking up Brazil. It's more that it's bulking up our organization and making us able to afford the launches that we have to do.

So we're excited about the portfolio that we have in Canada, and that does grow and it gets us to profitability. The issue that we have is that we need to have similar to most pharmaceutical companies, a balanced portfolio of products that are generating steady cash flows and products that we're investing in.

So the priority for Amal and her team is to really strike that balance for us. And when it comes to the products that generate cash flows, we're not going to stay wholly to.

It has to be for Canada or it has to be for Mexico, because it's shoring up the entire business.

I guess sorry. I'll just ask a clarification before I let it go here.

But if you don't necessarily -- do you need candidates that help you the negotiation table to also negotiate for Canada, even if Canada is a drag on earnings? I guess that's the problem.

I guess what I'm saying is, it feels like, why would you be in Canada? Why wouldn't you actually just almost eliminate that portfolio and move on, if it's not going to be a great place for you guys anymore?

Or, or if you're saying that like no, actually having this kind of scale helps us negotiate? I guess I'll leave it at that.

Sure. I'm going actually let Amal answer, how Canada factors into her negotiations.

Sure. So I mean, as Samir said, Canada continues to be an important market.

And when it comes to negotiation on territories, there's of course, our preference to in license or acquire products for our entire territory, but we're only one of two parties, usually in a transaction. So also, a lot of it depends on what the seller or relations store is looking for.

So really have to balance kind of what we're looking for versus what the license or seller is looking for balance that flexibility and look at what makes sense for the portfolio.

That's great. Thanks.

I'll follow up on the margin with the IR team. Thanks.

Okay.

Good morning, guys. Thanks for taking my question.

Just one for me here. Amal, I think you mentioned that you're focused on completing the integration of GBT right now.

Could you provide some more color on exactly what else remains to be done? And I guess the timeline of when this will be completed?

And whether it could benefit the OpEx line in any way?

Hi, Tania. I'm going to take that.

Amal will of focus on building. There's a whole bunch of us that are focused on integrating.

So when it comes to integration, we've made a lot of sides on our commercial side, on the BD side. We're well on our way with finances, especially with the talent across the organization.

We're going to continue to sharpen that a little bit more. Now my focus is really on the scientific affairs side.

So that's R&D, quality, regulatory, medical team, and we really -- this year is going to be a push on that as well as on the manufacturing side. And underneath all of that is systems and processes, so that we work as one company, and ensuring efficiencies, ensuring compliance.

And really having the platform from which we can facilitate and quickly brand a product, launch a product, track the inventory, report our numbers and analyze. And you have to remember our industry is heavily regulated.

So when it comes to quality control, when it comes to pharmacovigilance, we want to be able to pass through without any big issues when it comes to audits from various agencies and whatever, because that's always work. And that's really where were we are.

So we're about halfway through and there's another year of integration.

Perfect. And then when you talk about bulking up on your spend, is it safe to say that we're not necessarily going to see OpEx synergies that may see may see a rise as you build out a pins and optimize performance?

I think it's -- what I'm hoping to do is kind of balance between systems and people that we achieved some efficiencies. And people are doing less manual exercise, and more analytical exercise.

Perfect. That's all for me.

Thanks, Samira.

Thank you.

It's Jonathan speaking. As you know that I am Burgoo .

Some say cheap. And we have purchased in queue.

In 2021, we have purchased year to date 2.9 million shares at $5.25 a share. And I'll just I'll just leave it at that.

Thank you for your confidence in the Knight team and joining our Q4 2020 conference call. Please stay healthy and stay safe.