MONTREAL, May 09, 2019 — Knight Therapeutics Inc. (TSX: GUD) (“Knight”), a Canadian specialty pharmaceutical company, today reported financial results for its first quarter ended March 31, 2019. All dollar amounts are in thousands except for share and per share amounts. All currencies are Canadian unless otherwise specified.

Q1 2019 Highlights

Financials

  • Revenues were $2,956, a decrease of $198 or 6% over prior period
  • Net income was $5,189, a decrease of $1,720 or 25% over prior period
  • Cash, cash equivalents and marketable securities of $748,411 as at March 31, 2019

Corporate Development

  • Received a notice of reassessment from Quebec Revenue Agency of $18,242 related to the sale of Knight’s Priority Review Voucher.

Product

  • Entered into a licensing agreement with Puma Biotechnology, Inc. (“Puma”) to commercialize NERLYNX® in Canada.

Strategic Lending and Investments

  • Entered into a strategic financing agreement with Moksha8, Inc. (“Moksha8”), a specialty pharmaceutical company operating in Brazil and Mexico, for a loan of up to US$25,000.
  • Entered into a secured loan agreement with Triumvira for US$5,000 for the development of its novelty T cell therapies and obtained the exclusive rights to commercialize Triumvira’s future products in select countries.
  • Received distributions of $676 from strategic fund investments and realized a gain of $132.
  • Received dividends ILS 11,308 of from Medison Biotech (1995) Ltd. (“Medison”).

Key Subsequent Event

  • 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.

“In the first quarter of 2019, Knight made significant progress in its mission to bring innovative drugs to patients and building a rest of world specialty pharmaceutical company. We expanded our oncology pipeline with the in-licensing of NERLYNX® and Triumvira’s early stage assets. Furthermore, we have increased our capacity to identify and evaluate opportunities in Latin America with our strategic relationship with Moksha8”, said Jonathan Ross Goodman, CEO of Knight Therapeutics Inc. “Looking ahead, the management team and myself remain fully committed on the disciplined execution of our strategy to continue building a Canadian and “rest of world” specialty pharmaceutical company.”

Select Financial Results

  Q1-19 Q1-18 Change
  $1   %2
         
Revenues 2,956 3,154 (198 ) 6 %
Gross margin 2,271 2,320 (49 ) 2 %
Operating expenses 5,071 3,373 (1,698 ) 50 %
Interest income 5,890 5,288 602   11 %
Share of net income of associate 692 503 (189 ) 38 %
Net income 5,189 6,909 (1,720 ) 25 %
Basic earnings per share 0.04 0.05 (0.01 ) 25 %

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
3 Includes the sum of ” interest income on financial instruments measured and amortized costs” and “other interest income” as presented in the Interim Consolidated Statements of Income under IFRS 9.

Revenue and gross margin: No significant variance.

Operating expenses: Of the increase, $1,615 is due to legal, consulting and advisory fees to Knight’s shareholder & communication advisor, financial advisor and lawyers in relation to shareholder activist campaign, public proxy battle and related litigations between Knight and dissident shareholder Meir Jakobsohn, Medison’s CEO. Knight expects that activist expense and legal expenses in Israel to continue in 2019 but at declining pace.

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 Q1-19 was $5,890, an increase of 11% or $602 compared to Q1-18 driven by an increase in the average cash, cash equivalents and marketable securities balances and an increase in interest rates, partially offset by a lower average loan balance.

Net income: Decrease in net income for the quarter was driven by the above-mentioned items as well as: (i) other income of $353 (Q1-18: $1,351) received from fees earned on strategic loans, (ii) a net gain on revaluation of financial assets measured at fair value through profit or loss of $4,777 (Q1-18: $541), and (iii) a foreign exchange loss of $1,653 (Q1-18: gain of $2,597) from the relative losses on certain U.S. dollar denominated financial assets as Canadian dollar strengthened.

 

Product Updates

In 2018, Knight submitted Netildex™ for the treatment of inflammatory ocular conditions of the anterior segment of the eye for regulatory approval in Canada. In December 2018, Knight received a Notice of Non-Compliance (NON) for Netildex™ and responded to Health Canada’s issues in 2019.

On January 9, 2019, Knight entered into an exclusive license agreement with Puma for the exclusive right to commercialize NERLYNX® (neratinib) in Canada. Puma filed a NDS for NERLYNX® with Health Canada in July 2018 for the extended adjuvant treatment of adult patients with early stage HER2-overexpressed/amplified breast cancer following adjuvant trastuzumab-based therapy. Knight expects to receive regulatory approval in 2019.

On February 20, 2019 Knight entered into an exclusive license agreement with Triumvira to commercialize its future approved products for Canada, Israel, Mexico, Colombia and for TAC01-CD19 for Israel, Mexico, Brazil and Colombia. Triumvira is developing novel T cell therapies that are safer and more efficacious than current gene therapy cancer treatments, including chimeric antigen receptor (CAR) and engineered T cell receptor (TCR) therapies.

Strategic Lending Update 

On February 15, 2019, the Company announced a strategic financing agreement with Moksha8, a specialty pharmaceutical company operating in Brazil and Mexico, the two largest pharmaceutical markets in Latin America. Under the terms of the agreement, Knight is committed to loan up to US$25,000 in working capital funding and US$10,000 was issued at closing. The loan bears interest at 15% per annum and matures five years from the issuance date. The Company may issue up to an additional US$100,000 for corporate development and the acquisition of product licenses in Latin America. In conjunction with the strategic financing agreement, Knight received warrants at an exercise price of US$0.01 each representing 5% of the fully diluted shares of Moksha8.

On February 20, 2019, the Company entered into a U$5,000 secured loan agreement with Triumvira for the development of its novelty T cell technology. The loan bears interest at 15% per annum and matures on February 20, 2020. In addition, as part of this strategic financing transaction, Knight received warrants to purchase 3.5% of Triumvira’s fully diluted common shares and the commercial rights to the Triumvira Products.

Subsequent Event

On May 7, 2019, the Company held its Annual and Special Meeting of Shareholders. The results of the shareholder votes were as follows:

  • Elected James C. Gale, Jonathan Ross Goodman, Samira Sakhia, Robert N. Lande, Sylvie Tendler, Nancy Harrison, Michael J. Tremblay and Kevin Cameron as Directors.
  • Appointed Ernst & Young LLP as auditor.
  • Approved the Advanced Notice By-Law.
  • Approved the unallocated rights under the Company’s employee share purchase plan for the ensuring three years.
  • Dismissed the dissident proposed By-Law 3.

For further details on the above, refer to the management information circular dated April 4, 2019 filed on SEDAR and on Knight’s website at www.gud-knight.com.


Conference Call Notice 

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

Date: Thursday, May 9, 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/yxsk38f7
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 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 March 31, 2019 December 31, 2018
ASSETS    
     
Current    
Cash and cash equivalents 231,110 244,785
Marketable securities 390,658 445,003
Trade and other receivables 12,034 11,756
Inventories 836 1,136
Other current financial assets 16,782 14,030
Income taxes receivable 735 821
Total current assets 652,155 717,531
     
Marketable securities 126,643 97,274
Property and equipment 1,808 794
Intangible assets 19,313 17,475
Other financial assets 138,459 113,314
Investment in associate 75,402 79,145
Deferred income tax assets 2,829 2,959
Other receivable 41,582 23,340
Total assets 1,058,191 1,051,832
     
LIABILITIES AND SHAREHOLDERS’ EQUITY    
     
Current    
Accounts payable and accrued liabilities 8,323 6,100
Lease liabilities 275
Income taxes payable 11,164 10,705
Other balances payable 425 197
Deferred other income 13 183
Total current liabilities 20,200 17,185
     
Lease liabilities 794
Other balances payable 4,646 4,615
Total liabilities 25,640 21,800
     
Shareholders’ equity    
Share capital 761,913 761,844
Warrants 785 785
Contributed surplus 14,783 14,326
Accumulated other comprehensive income 17,759 20,955
Retained earnings 237,311 232,122
Total shareholders’ equity 1,032,551 1,030,032
Total liabilities and shareholders’ equity 1,058,191 1,051,832

INTERIM CONSOLIDATED STATEMENTS OF INCOME

[In thousands of Canadian dollars, except for share and per share amounts]

[Unaudited]        
  Three months ended March 31,
 
  2019   2018  
         
Revenues 2,956   3,154  
Cost of goods sold 685   834  
Gross margin 2,271   2,320  
         
Expenses        
Selling and marketing 847   789  
General and administrative 3,598   2,095  
Research and development 626   489  
  (2,800 ) (1,053 )
         
Depreciation of property and equipment 97    16   
Amortization of intangible assets 426    441   
Interest income on financial instruments measured at amortized cost (4,925 ) (3,436 )
Other interest income (965 ) (1,852 )
Other income (353 ) (1,351 )
Net gain on financial assets measured at fair value through profit or loss (4,777 ) (541 )
Share of net income of associate (692 ) (503 )
Foreign exchange loss (gain) 1,653   (2,597 )
Income before income taxes 6,736   8,770  
         
Income tax expense (recovery)        
Current 1,531   641  
Deferred 16   1,220  
Net income for the period 5,189   6,909  
         
Attributable to shareholders of the Company        
Basic earnings per share 0.04   0.05  
Diluted earnings per share 0.04   0.05  
         
Weighted average number of common shares outstanding        
Basic 142,852,246   142,813,358  
Diluted 143,245,443   143,220,006  

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS

[In thousands of Canadian dollars]

[Unaudited]  
  Three months ended March 31,  
  2019   2018  
OPERATING ACTIVITIES    
Net income for the period 5,189   6,909  
Adjustments reconciling net income to operating cash flows:    
Deferred income tax 16   1,220  
Share-based compensation expense 457   545  
Depreciation and amortization 523   457  
Net gain on financial instruments (4,777 ) (541 )
Foreign exchange loss (gain) 1,653   (2,597 )
Share of net income of associate (692 ) (503 )
Deferred other income (170 ) (94 )
  2,199   5,396  
Changes in non-cash working capital and other items 2,496   1,468  
Increase in other receivable (18,242 )  
Dividends from associate 4,159     
Cash (outflow) inflow from operating activities (9,388 ) 6,864   
     
INVESTING ACTIVITIES    
Purchase of marketable securities (98,893 ) (50,755 )
Purchase of intangibles (1,989 ) (3,000 )
Purchase of property and equipment   (42 )
Issuance of loans receivables (17,850 )  
Purchase of equities   (400 )
Investment in funds (7,107 ) (4,277 )
Proceeds on maturity of marketable securities 120,964   101,318  
Proceeds from repayments of loans receivable 657   33,440  
Proceeds from distribution of funds 676   343  
Cash (outflow) inflow from investing activities (3,542 ) 76,627   
       
FINANCING ACTIVITIES      
Proceeds from contributions to share purchase plan 60   49  
Principal repayment of lease liabilities (67 )  
Cash (outflow) inflow from financing activities (7 ) 49  
       
(Decrease) increase in cash and cash equivalents during the period (12,937 ) 83,540  
Cash and cash equivalents, beginning of the year 244,785   496,460  
Net foreign exchange difference (738 ) 3,408  
Cash and cash equivalents, end of the year 231,110   543,408  
       
Cash and cash equivalents 231,110   244,785  
Short-term marketable securities 340,658   445,003  
Long-term marketable securities 176,643   97,274  
Total cash, cash equivalents and marketable securities 748,411   787,062  

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