Knight Therapeutics Inc.

Thank you, Sylvie. Good morning, everyone, and welcome to Knight Therapeutics' fourth quarter and year end 2024 conference call.

I'm joined on today's call with Amal Khouri, our Chief Business Officer; and Arvind Utchanah, our Chief Financial Officer. I am proud to announce that we have delivered 11 years of consecutive record high revenues since the inception of Knight.

In 2024, we delivered revenues of over $365 million and adjusted EBITDA of approximately $58 million. Our growth was driven by our key promoted products, which account for 75% of our total revenues.

The promoted portfolio grew by 16% over the period -- over the prior year period and has delivered a three-year CAGR of more than 30%. While delivering on excellent results, we made significant progress in expanding our pipeline with five new products.

We have expanded our neurology portfolio with the licensing of Crexont from Amneal and Jornay PM from Collegium for all of our territories. In addition, we have strengthened our partnership with Helsinn with the addition of Onicit for certain LatAm countries.

With respect to our branded generic portfolio, we added two branded generic molecules in oncology and hematology for select LatAm countries. To date, we have a pipeline of 18 products, including recent launches, which is expected to generate peak sales of over $150 million.

In addition, we further advanced our pipeline with regulatory submissions of Qelbree in Canada and TAVALISSE in Brazil and Argentina. With these submissions, we now have four innovative products, namely Qelbree, TAVALISSE, Minjuvi and Pemazyre awaiting regulatory approval in multiple territories.

In addition, we have five branded generic products pending regulatory approval in multiple countries. We not only executed on regulatory submissions, we also obtained several regulatory approvals, namely Minjuvi and TAVALISSE in Mexico and Jornay PM in Canada and Pemazyre in both Mexico and Brazil.

In addition to the regulatory process, we launched two products in Canada, Bijuva and Imvexxy. The latter competes in a growing market valued at over $110 million in 2024.

Outside of Canada, we launched Minjuvi in Brazil. Moving to our NCIB.

During 2024, we purchased approximately 1.6 million common shares for $9 million. In the first quarter of 2025, we purchased approximately 600,000 common shares for $3.3 million.

I will now turn the call over to Arvind to provide a financial update on our -- financial update.

Thank you, Samira. When speaking of our financial results, I will refer to adjusted EBITDA and financial results at constant currency, which are non-IFRS measures as well as adjusted EBITDA per share, which is a non-IFRS ratio.

Knight defines adjusted EBITDA as operating income or loss, excluding amortization and impairment of noncurrent assets, depreciation, the impact of accounting under hyperinflation, acquisition costs and nonrecurring expenses, but to include costs related to leases. We define adjusted EBITDA per share as adjusted EBITDA over the number of common shares outstanding at the end of the respective period.

In addition, revenues and financial results at constant currency are also a non-GAAP measure. Financial results at constant currency are obtained by translating the prior period results at the average foreign exchange rates in effect during the current period, except for Argentina, where we only exclude hyperinflation.

Furthermore, my discussion on the operating results will refer to figures that exclude hyperinflation unless, otherwise, indicated. For the fourth quarter of 2024, we delivered revenues of over $94 million, representing an increase of $6 million or 6% versus prior year.

In 2024, as Samira mentioned, we delivered record high revenues of over $365 million, representing an increase of $22 million or 6%. On a constant currency basis, revenues increased by approximately $29 million or 9% versus prior year, driven by growth across all of our therapeutic areas.

In 2024, our oncology and hematology disease portfolio delivered approximately $137.6 million, a growth of $15 million or 12% compared to last year. This increase was driven by the continued growth of our key promoted brands, which contributed approximately $24 million of incremental revenues, mainly coming from Lenvima, Akynzeo, Trelstar as well as the launch of Minjuvi in Brazil.

This growth was partially offset by a decline in our mature and branded generic products due to their life cycle and the market entrance of new competitors as well as the impact of LatAm currencies depreciation. Our infectious diseases portfolio delivered approximately $149 million, an increase of $8.5 million or 6% compared to the same period last year.

The increase was driven by the growth of our key promoted products, including AmBisome and Cresemba, partly offset by a decrease in U.S. demand for Impavido.

As a reminder, under our sales contract with the Ministry of Health in Brazil, or MOH, in 2024, we delivered $24.8 million of AmBisome compared to $25.2 million in 2023. In January 2025, we have signed a new contract for AmBisome with the MOH, and we expect to deliver approximately $22.4 million in 2025.

Turning to our other specialty therapeutic area. The portfolio generated $79 million in revenues, remaining relatively unchanged compared to last year.

Now moving on to gross margin. We reported $44.3 million or a gross margin of 47% of revenues in the fourth quarter of 2024 compared to $42.4 million or 48% of revenues in the same period last year.

For the year ended December 31, 2024, we reported $173 million or a gross margin of 47% of revenues compared to $166 million or 48% of revenues last year. The decrease in gross margin as a percentage of revenues was due to product mix.

I will now turn to our operating expenses. Our operating expenses, excluding amortization and impairment of noncurrent assets for the fourth quarter was $31.2 million, remaining relatively unchanged compared to the same period last year.

For 2024, our operating expenses, excluding amortization and impairment of noncurrent assets, were $119.3 million, an increase of $10.8 million or 10% compared to last year. The increase in operating expenses was driven by an increase in marketing and medical initiatives behind the launches of Minjuvi, Imvexxy, Bijuva and prelaunch activities for Jornay PM in Canada.

In addition, our R&D costs increased driven by product development activities in connection with our pipeline as well as regulatory submission fees. Lastly, our G&A costs increased due to our structure and higher compensation expenses.

As a reminder, all costs related to development activities have been expensed, which typically include regulatory submission, analytical method transfers, stability studies and bioequivalent studies. Moving on to adjusted EBITDA.

For the fourth quarter of 2024, we reported $15 million, an increase of $2.9 million or 24% compared to the same period last year. For 2024, we reported $57.8 million, a decrease of $2 million or 4% compared to last year.

Our adjusted EBITDA per share was $0.58, remaining relatively unchanged compared to 2023. I will now cover our financial assets, which are valued at $134 million at the end of 2024.

During the year, we recorded a total net loss of $2.8 million on our financial assets, driven by the revaluations of our strategic fund investment, offset by the change in the value of our synergy shares. In 2024, our synergy shares were revalued at $8.3 million compared to nil in the prior year.

With respect to our strategic fund investment, we have recorded a net loss of $11.4 million, driven by mark-to-market adjustments. As a reminder, our funds continue to be a source of cash.

In 2024, we collected $14.7 million, including $5.8 million for certain contingent milestones, which were not previously recorded on the balance sheet. Moving on to our cash flows.

During 2024, Knight generated cash inflows from operations of $36 million, including a net working capital increase of $20 million. The investment in net working capital was driven by an increase in our accounts receivable due to both higher revenues and timing of collection as well as investments in our inventory due to timing of purchases and new product launches.

I will now turn the call over to Amal to provide more details on our business development activities.

Thank you, Arvind, and good morning, everyone. In the last 15 months, we grew our portfolio by adding five new products.

In January 2024, we in-licensed Crexont for Canada and Latin America. Crexont is a novel oral formulation of carbidopa/levodopa extended-release capsules designed for the treatment of Parkinson's disease.

Knight expects to submit Crexont in Canada and certain LatAm countries in 2025. According to IQVIA, the carbidopa/levodopa market is valued at $50 million in Canada and $120 million in Brazil.

The controlled release segment is valued at around $15 million in each of Canada and Brazil. In May 2024, we announced an exclusive supply and distribution agreement for Jornay PM for Canada and Latin America.

Jornay PM is an innovative extended-release formulation of methylphenidate, a highly differentiated treatment option for ADHD. In November 2024, Jornay PM was approved by Health Canada and is expected to be launched in the second half of 2025.

According to IQVIA, the Canadian ADHD market totaled approximately $1.25 billion, of which the methylphenidate segment represents $500 million and has been growing at over 14% CAGR over the last four years. In addition, during 2024, we in-licensed two branded generic molecules in oncology and hematology for certain territories in LatAm.

Furthermore, in the first quarter of 2025, we announced the addition of Onicit from Helsinn for Mexico, Brazil and certain other LatAm countries. Onicit is used for the prevention of chemotherapy-induced nausea and vomiting and the prevention of postoperative nausea and vomiting.

Onicit is sold in Canada as Aloxi, which was part of our original agreement with Helsinn. Finally, in addition to expanding our pipeline, as announced last week, we entered into an agreement with Endo to acquire all of the assets of Paladin.

In 2024, Paladin generated revenues of $70 million, excluding products that they had stopped commercializing or are in the process of discontinuing. The Paladin portfolio mainly consists of mature primarily owned assets as well as promoted licensed products.

As a reminder, the purchase price for this transaction is $100 million plus an additional $20 million of inventory, all payable in cash at closing. In addition to the upfront and inventory, Knight may pay future contingent payments of up to USD 15 million upon achievement of certain sales milestones.

These recent deals illustrate our focused approach to building on the strong platform and capabilities that we have, specifically in oncology and neurology as well as our strategy to build a balanced portfolio that includes innovative growing promoted products, mature cash flow generating products as well as branded generics. I will now turn the call back to Samira.

Thank you, Amal. Now on to our financial outlook for fiscal 2025.

I would like to remind everyone that this guidance includes the assumption that we will close the Paladin transaction in the middle of 2025 and also assumes that there is no material adjustment due to hyperinflation accounting in Argentina. In addition, our guidance is based on a small -- on a number of assumptions, which are described in our press release.

Should any of these assumptions differ, the financial outlook and actual results may vary materially. We expect to generate revenues between $390 million to $405 million and adjusted EBITDA of approximately 13% of revenues.

The decrease in our adjusted EBITDA as a percent of revenues compared to 2024 is driven by investments behind new product launches such as Jornay PM in Canada and Minjuvi in Mexico as well as advancing our pipeline of 18 products through development, submission and prelaunch across our territories. Our team has been extremely successful in executing our pan-American ex-U.S.

strategy and has built a profitable business with a unique platform and a strong foundation from where to continue growing over the long term. Looking ahead, we are very excited that we can deliver to our stakeholders with the launches of Minjuvi in Mexico, Jornay PM in Canada and additional pipeline products.

In addition, we expect to close the Paladin transaction in the middle of the year. This synergistic transaction adds critical mass and significantly increases the size of our Canadian business and adds a portfolio of stable cash flow-generating products that will help fund our growth in Canada and Latin America.

We remain well positioned to continue to execute on our mission to acquire, in-license, develop and commercialize pharmaceutical products in Latin America and Canada. This concludes our remarks.

I'd like to turn the - open up the call for questions. Sylvie?

Hi. Good morning, Samira, Amal, Aravind.

Congratulations on finishing another strong year. I know we had a call on this last week, but I'll start with a question on Paladin.

I'm wondering how the -- how your acquisition of Paladin might adjust your business development approach in Canada? And also, how do you feel about the balance sheet pro forma this transaction?

Thanks.

Good morning, Michael, this is Amal. I'll start with your first question.

There is -- the acquisition doesn't really change our business development approach. It's actually very much in line with our business development approach, which, as a reminder, is really 3-pronged, right?

We look to acquire products with existing sales that will bring in profitability to help fund the second growth vertical, which is in-licensing innovative products and then bringing on branded generics. So this acquisition really is very much in line with that.

The bulk of the portfolio is products with existing sales, existing profitability that will help fund a lot of the launches and future growth that we have across all of our countries. The portfolio also has a couple of growth assets.

So it really hits -- it's well within our business development approach, and we will continue going forward with the same. If you look back at the deals that we have done in the last two years, the majority of the deals are licensing deals, so really bringing in growth assets.

And these products don't really -- these types of deals, I should say, don't really require the type of upfront and purchase prices that go with this type of acquisitions. And I think, as we said -- as Samira said on the call last week, in terms of capacity, again, we have a very strong business that with this deal is even stronger in terms of profitability and cash flow generation.

And we still have a lot of capacity on the debt side if we needed to add anything behind the current business, but also if we were to do another acquisition that would require additional funding, that acquisition would be coming with EBITDA and profitability. So we're not concerned about capacity to do more deals, so no change.

Thanks very much, Amal. Now I'll ask a question, just asking for an update on the situation with Lenvima in LatAm with a generic competitor launched.

I'm wondering if you could describe the -- I guess, the impact you're seeing on the sales. How you're seeing that generic received in the market?

What the effect is on pricing? And any legal action that you and your partners might be taking.

So the generic was introduced kind of in the second half of last year. We have -- we know that it's on the market.

Some of our -- I would say, we had a small amount of sales that were in the public market. We are seeing that as a slowdown in Brazil.

But generally, the product continues to sell well. And the legal pursuit will continue, but we expect -- we don't expect that to have a -- like even at the end of the day, if we get a positive outcome, we don't really believe that.

We think that it will have no impact on the market.

Okay. That's very helpful.

I'm just going to shoehorn one more in here. Really positive news on the new MOH contract in Brazil for AmBisome.

I wonder -- like is there opportunity to -- I recognize this is the single drug that you sell into the MOH, like is there an opportunity to secure further contracts with that organization?

Actually, that's one of the things that I'm actually really proud of, of our Brazilian team. We're not only selling AmBisome, but we have been able to introduce Cresemba because of this relationship.

And over the last year, we've seen some expansion of their purchasing of Cresemba as well.

Fantastic. Okay, I'll hand the call over.

Thank you

Good morning. Thanks for taking my call.

Just on the 18 products that are in the early launch phase, mentioned in the outlook, how should we look at that as far as contributing to financials in 2025, 2026 and beyond?

So the -- of the 18 products that are in the pipeline, three of them are in early launch today. So that's Minjuvi, Bijuva and Imvexxy.

And Minjuvi is going to be launched in Mexico in this Q. We're also adding Jornay PM, that launches in Canada later this year.

And we're expecting to launch TAVALISSE in Mexico and Brazil next year. So they're all stepping up.

And then the rest kind of come on between, and it's in our MD&A, kind of the launch dates that we expect for the rest of them. And they all step up over time.

So the $150 million, or at least $150 million, is their peak potential.

So that's combined $150 million. I assume that's Canadian dollars.

And...

Yes.

Of the 15 to be launched, is that in the next couple of years or some of these still very early stage assets, in trials or regulatory review?

They go from launching as early as '26, like I mentioned, to as late as 2030.

Okay. So some real early assets within that.

And just as the Paladin starts to contribute, I realize there's a number of sales reps already in Canada. How should we look at that -- I guess, a platform in Canada?

Like how much additional revenue could that support? Will you need to have some additional hire for some new launches?

Or how should we be looking at that?

So as I said last -- in our call last week, one of the things is our Canadian business today is about -- the Knight Canadian business today is about 60 people, one-fourth of them actually are in global functions. So it really leaves about 45.

We do have a lot of open positions as we prepare for the launch of Jornay PM this year, Qelbree early next year, and we're going to look to optimize our structure between the two companies. And as I said also in last week's call, the $70 million that we're really providing for the business, that is Paladin, we expect that to stay flattish over the next couple of years.

The Paladin acquisition is majority non-promoted legacy assets.

Okay. Thank you.

And then just finally, on the $130 million of financial assets, any -- are there any liquidity events in the near term to anticipate?

One of the things that we have seen with the investment funds is that they are a source of cash. We only have capital calls of about $5 million left on that, and we do expect them to be cash flow generating.

Our loans are going to be -- they're also starting to pay back as well. Nothing material, though.

Okay. Thank you for taking my questions.

Good morning, Samira. A couple of questions with respect to the business over the longer term.

When you think about the mix of Canadian versus rest of world/South America, would you expect it to remain in the 20% to 25% level for Canada post the Paladin deal? Or is it just going to be based on opportunities and execution, pricing of those opportunities?

Good morning, Doug, this is Amal. It's really the latter.

So our -- again, our approach is -- and our goal is really to grow our business across all of the countries that we have, whether it's acquiring products or portfolios with existing sales or growth assets. And we're going to be looking at doing that across our markets, and it's really going to be -- we're going to continue to do with the same level of discipline of looking opportunity by opportunity to see what makes the most sense to grow our business across the board.

Right. But is there a chance that based on the opportunities in Canada we could see something in the range of 35% to 50% over the next year or two based on potential acquisitions?

Or should we not think about it that way?

What I would say, Doug, we're going to be opportunistic when it comes to asset acquisitions. So whether they're in Canada or somewhere else.

That being said, if I look at our portfolio in Canada with the Paladin acquisition, with Jornay PM, with Qelbree, with Crexont launching, Canada is going to start -- like with the product business today, where we will be getting to kind of that 20-ish percentage, but as these products grow, it will rise as a percentage without us doing any more transactions in Canada.

Okay. Perfect.

And then just to wrap up, when you think about all these launches over the next, let's just say, two years, when you think about the expense that is typically required to launch products, number one, these are likely going to be profitable until the third year is my guess, but maybe second year, you can correct me there. But can you sort of frame how large those investments are that you're spending on all these drugs over the next while?

So you're right, you don't really hit profitability until the third year, where you're closer to breakeven and really profitability. You're seeing that in our -- as to the level of spend, you're really seeing that in our guidance, right, where you see even with the Paladin acquisition, our EBITDA is declining, and it's declining in the range of about $8 million to $10 million because of that investment that we're making.

And we expect that over the next couple of years, this year and next year, then these brands start to feed into that top line and profitability as we launch more.

Perfect. Okay.

So the next several years should have some good growth and then accelerating profitability as well. Okay.

Thank you.

Absolutely.

Good morning. This is a follow-up to Doug's question.

So the SG&A, the sales and marketing expenses, is going to increase in '25 based on the guidance you've given for revenues and EBITDA margin. Beyond '25, will you see stabilization of operating expenses?

Or will they continue to grow? Once you've built out your infrastructure, will it need to grow in line with the revenue growth as the new products launch?

Or will you reach a point of stability by the end of '25?

The infrastructure is probably going to be rightsized. There still will be more A&P that will be brand-specific given the launches that are there, but that's not going to be a significant increase.

And as you roll from one launch product to the next launch product, will you be able to redeploy the investment to the new products and ease off on the ones that were previously launched?

So what I would say is like I'll give you an example, in the case of Jornay PM, we're launching that this year. We're going to have a lot of investment behind it this year.

We're going to have a lot of investment behind it next year, and we're going to expand that same team as we add Qelbree. Going into '26, there's not going to be that much more incremental, but there will be continued investment.

But we're going to be launching IPX at the same time. That's going to require more money.

But hopefully, by the time I'm getting into '27, the investments behind Imvexxy and Bijuva will start to come off, as we are investing in IPX. And that's because by that time, Imvexxy and Bijuva have been promoted for 3-plus years.

And that's how we're really cycling. You do need investment and promotion -- significant investment and promotion for the first three years, and then, you can start pulling back.

And what about in Latin America? I know you're building out in Mexico, but is there a build-out in other countries in anticipation of launches?

Or are you rightsized there?

Majority of our territories are rightsized when it comes to hematology and oncology. They're rightsized on neurology, but more on the Alzheimer's and the -- so the Alzheimer's team can support Crexont.

As we look to invest in ADHD, we may have some expansion of our teams.

Okay. Great.

Thank you.

Good morning. Just a couple of questions for me.

So congrats on re-signing that Brazil MOH contract. And just wondering if you can speak to the quarterly impact of that $22.4 million in revenue.

Should we expect it all to come early in the year, back half of the year?

Tania, I think we're going to start with -- from what I have from the Brazilian team, we're going to start in this Q. I'm not really sure if it's actually even already shipped or not.

We're a couple of weeks left in the queue and probably be done by Q3, but it's really unpredictable with the MOH.

Okay. Okay.

That's fair. And then just secondly for me, with Jornay PM launching this year, could you give us an idea of peak sales expected for that drug?

Sure. So we haven't really guided on the product itself.

What -- as Amal said in her comments, the methylphenidate market is over $0.5 billion and growing at a rate of 14% CAGR. The one thing that I would give you as an example is Foquest, which was the last launch in this category, prior to getting public reimbursement, had sales of $30 million.

The one thing I would note there, we don't expect to get to that number because Foquest was for people over six years. Jornay PM is indicated for children, so six to 12.

But what you need to know and what we have from the U.S. market is 85% of the Jornay PM sales are pediatric.

That's good insight. And then maybe on the $150 million in potential peak sales that you outlined in the MD&A, could you give us a sense of how much of that is attributable to products that are in the early launch phase or expected to launch in the near term?

So I guess, Minjuvi, Bijuva, Imvexxy, Jornay PM and TAVALISSE?

I would say more than half is coming from the near-term launches.

Perfect. Okay.

That's all from me. Thank you so much.

Hi, everyone. I realize you usually don't discuss gross [technical difficulty] Can you hear me?

Yes.

Hello.

Good morning, everyone. I just realized I usually don't discuss gross margins.

But if we look at your 18 pipeline products -[technical difficulty]. Can you hear me now?

I realize you usually don't discuss gross margins. But if you look at your 18 pipeline products, so basically, you have $150 million of peak sales in your pipeline products, do you expect that to move the needle on your gross margins?

Any color there would be appreciated.

We don't really guide to gross margins, but we don't really expect the margins really to change. They will change over - they may grow over time, but not that significantly.

That's appreciated. Thanks.

That's all for me.

Thank you, Sylvie. Thank you for joining Knight's Q4 and year-end 2024 call.

Once again, thank you for your confidence in the Knight team and for joining our call. Have a great morning.