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Knight Therapeutics Inc.

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Knight Therapeutics Reports Second Quarter 2019 Results

MONTREAL, Aug. 08, 2019 (GLOBE NEWSWIRE) -- Knight Therapeutics Inc. (TSX: GUD) ("Knight"), a Canadian specialty pharmaceutical company, today reported financial results for its second quarter ended June 30, 2019. All dollar amounts are in thousands except for share and per share amounts. All currencies are Canadian unless otherwise specified.

Q2 2019 Highlights 

Financials

  • Revenues were $3,204, an increase of $966 or 43% versus prior period
  • Net income was $18,956, an increase of $14,937 or 372% over prior period
  • Cash, cash equivalents, and marketable securities of $745,272 as at June 30, 2019

Corporate Development

  • Shareholders elected James C. Gale, Jonathan Ross Goodman, Samira Sakhia, Robert N. Lande, Sylvie Tendler, Nancy Harrison, Michael J. Tremblay and Kevin Cameron as Directors at the Annual and Special Shareholder Meeting held on May 7, 2019

Products

  • Submitted Ibsrela™ for regulatory approval for the treatment of Irritable Bowel Syndrome with Constipation to Health Canada

Strategic Lending

  • Received US$750 for full loan repayment from Medimetriks Pharmaceuticals Inc. (“Medimetriks”)

Key Subsequent Events

  • Launched a Normal Course Issuer Bid (“NCIB”) in July 2019 and purchased 4,657,235 common shares for an aggregate cost of $34,894
  • Received regulatory approval from Health Canada for NERLYNX® for the treatment of HER2-positive breast cancer
  • Reached an agreement with the pan-Canadian Pharmaceutical Alliance (“pCPA”) regarding Probuphine® and to date have obtained reimbursement through public insurance plans administered by Alberta, Saskatchewan and the Non-insured Health Benefit Program (“NIHB”)
  • Disposed of 879,200 common shares of Crescita for total proceeds of $894,750

“We are pleased with the progress made this past quarter at building a specialty pharmaceutical company that helps both patients and shareholders. We have advanced our commercial presence and product pipeline with the regulatory approval of NERLYNX® and the submission of Ibsrela™ to Health Canada. Furthermore, we reached an agreement with pCPA, an important milestone in ensuring that all Canadian patients have access to Probuphine®”, said Jonathan Ross Goodman, CEO of Knight Therapeutics Inc.

Select Financial Results

   Change
    Change
 Q2-19Q2-18$1 %2 YTD-19 YTD-18 $1 %2 
               
Revenues3,2042,238966 43%6,160 5,392 768 14%
Gross margin2,8871,900987 52%5,158 4,220 938 22%
Selling and marketing1,288892(396)44%2,135 1,681 (454)27%
General and administrative3,7871,937(1,850)96%7,385 4,032 (3,353)83%
Research and development984572(412)72%1,610 1,061 (549)52%
Interest income6,1604,7461,414 30%12,050 10,034 2,016 20%
Share of net loss (income) of associate372151(221)146%(320)(352)(32)9%
Net income18,9564,01914,937 372%24,145 10,928 13,217 121%
Basic earnings per share0.1330.0280.105 375%0.169 0.077 0.092 119%

A positive variance represents a positive impact to net income and a negative variance represents a negative impact to net income
Percentage change is presented in absolute values 

Revenue: Variance for the quarter and the six-month period was mainly attributable to the timing of sales for Impavido® and growth in Movantik® sales. 

Gross margin: Change in gross margin was attributable to increase in revenues and product mix. 

Selling and marketing: Increase due to commercial activities including preparation of launch of new products. 

General and administrative: The increase is driven by legal, consulting and advisory fees (“Fees”) in relation to the activist campaign, public proxy battle and related litigations between Knight and dissident shareholder Meir Jakobsohn, Medison’s CEO.  The Fees incurred were $1,652 for the quarter and $3,267 for the six-month period and are expected to continue in 2019 but at a declining pace. 

Research and development: Increase due to submission of Ibsrela™ to Health Canada. 

Interest income: Interest income is driven by the sum of interest income on financial instruments measured at amortized costs and other interest income. Interest income for Q2-19 was $6,160, an increase of 30% or $1,414 compared to Q2-18 driven by an increase in the average cash, cash equivalents and marketable securities balances, an increase in interest rates, and a higher average loan balance. For the six-month period, interest income was $12,050, an increase of 20% or $2,016 driven by an increase in the average cash, cash equivalents and marketable securities balances, an increase in interest rates, offset by a lower average loan balance. 

Net income: Increase in net income for the quarter was driven by the above-mentioned items as well as a net gain on the revaluation of financial assets measured at fair value through profit or loss of $19,755 (Q2-18: $2,884) and a foreign exchange loss of $1,024 (Q2-18: $49) due to relative losses on certain U.S. dollar denominated financial assets as Canadian dollar strengthened. Similarly, net income for the six-month period was impacted by (i) a net gain on revaluation of financial assets measured at fair value through profit or loss of $24,532 (ii) other income of $370 due to fees earned on strategic loans, and (iii) a foreign exchange loss of $2,677.

Product Updates

On July 16, 2019, Health Canada approved NERLYNX® for the extended adjuvant treatment of adult patients with early stage HER2-overexpressed/amplified breast cancer following adjuvant trastuzumab-based therapy. Knight plans to launch NERLYNX® in late 2019.

In August 2019, the Company announced that it had reached an agreement with the pCPA and to date has obtained reimbursement of Probuphine® through public insurance plans administered by Alberta, Saskatchewan and the NIHB. Probuphine® is indicated for the management of opioid dependence in patients clinically stabilized on no more than 8 mg of sublingual buprenorphine in combination with counseling and psychosocial support and will become an important weapon in the fight against opioid dependence. Knight’s commercial focus for the remainder of the year will be on reimbursement in additional jurisdictions and physician training.

Strategic Lending Update 

During 2016, Knight issued US$23,000 to Medimetriks in secured loans to support its acquisition of the exclusive U.S. development and commercialization rights of OPA-15406 from Otsuka. On March 7, 2018, Knight received an early repayment of principal of US$20,000 and interest and fees of US$2,757. Subsequent to the early repayment and scheduled principal repayments of US$2,250, the outstanding loan balance was US$750.  The remaining loan balance was repaid in full on June 18, 2019.

NCIB Update

On July 8, 2019, the Company announced that the Toronto Stock Exchange approved its notice of intention to make a NCIB. Under the terms of the NCIB, Knight may purchase for cancellation up to 12,053,693 common shares of the Company which represented 10% of its public float as at July 2, 2019. The NCIB commenced on July 11, 2019 and will end on the earlier of July 10, 2020 or when the Company completes its maximum purchases under the NCIB. Furthermore, Knight entered into an agreement with a broker to facilitate purchases of its common shares under the NCIB. Under Knight’s automatic share purchase plan, the broker may purchase common shares which would ordinarily not be permitted due to regulatory restrictions or self-imposed blackout periods.  As at August 6, 2019, the Company has purchased 4,657,235 common shares for an aggregate cost of $34,894. 

Conference Call Notice 

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

Date: Thursday, August 8, 2019
Time: 8:30 a.m. EST
Telephone: Toll Free 1-877-223-4471 or International 647-788-4922                                 
Webcast: www.gud-knight.com or https://tinyurl.com/y39uz8g5  
This is a listen-only audio webcast. Media Player is required to listen to the broadcast.
Replay: An archived replay will be available for 30 days at www.gud-knight.com

About Knight Therapeutics Inc.  

Knight Therapeutics Inc., headquartered in Montreal, Canada, is a specialty pharmaceutical company focused on acquiring or in-licensing and commercializing innovative pharmaceutical products for the Canadian and select international markets. Knight Therapeutics Inc.'s shares trade on TSX under the symbol GUD. For more information about Knight Therapeutics Inc., please visit the company's web site at www.gud-knight.com or www.sedar.com. 

Forward-Looking Statement

This document contains forward-looking statements for Knight Therapeutics Inc. and its subsidiaries. These forward-looking statements, by their nature, necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. Knight Therapeutics Inc. considers the assumptions on which these forward-looking statements are based to be reasonable at the time they were prepared but cautions the reader that these assumptions regarding future events, many of which are beyond the control of Knight Therapeutics Inc. and its subsidiaries, may ultimately prove to be incorrect. Factors and risks, which could cause actual results to differ materially from current expectations are discussed in Knight Therapeutics Inc.'s Annual Report and in Knight Therapeutics Inc.'s Annual Information Form for the year ended December 31, 2018. Knight Therapeutics Inc. disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information or future events, except as required by law.

CONTACT INFORMATION:

Knight Therapeutics Inc.
Samira Sakhia
President and Chief Financial Officer
T: 514-678-8930
F: 514-481-4116
info@gudknight.com
www.gud-knight.com 

INTERIM CONSOLIDATED BALANCE SHEETS
[In thousands of Canadian dollars]
[Unaudited]
 
As atJune 30, 2019December 31, 2018
ASSETS  
Current  
Cash and cash equivalents294,911244,785
Marketable securities301,829445,003
Trade and other receivables10,59211,756
Inventories8341,136
Other current financial assets17,86814,030
Income taxes receivable779821
Total current assets626,813717,531
   
Marketable securities148,53297,274
Property and equipment1,710794
Intangible assets19,97917,475
Other financial assets159,482113,314
Investment in associate74,62379,145
Deferred income tax assets1,6502,959
Other receivable41,58223,340
Total assets1,074,3711,051,832
   
LIABILITIES AND SHAREHOLDERS’ EQUITY  
   
Current  
Accounts payable and accrued liabilities7,4816,100
Lease liabilities277
Income taxes payable11,63810,705
Other balances payable516197
Deferred other income183
Total current liabilities19,91217,185
   
Lease liabilities731
Other balances payable5,6084,615
Total liabilities26,25121,800
   
Shareholders’ equity  
Share capital761,982761,844
Warrants785785
Contributed surplus15,48114,326
Accumulated other comprehensive income13,60520,955
Retained earnings256,267232,122
Total shareholders’ equity1,048,1201,030,032
Total liabilities and shareholders’ equity1,074,3711,051,832


INTERIM CONSOLIDATED STATEMENTS OF INCOME
[In thousands of Canadian dollars, except for share and per share amounts]
[Unaudited]
 
 Three months ended June 30,
 Six months ended June 30,
 
 2019 2018 2019 2018 
     
Revenues3,204 2,238 6,160 5,392 
Cost of goods sold317 338 1,002 1,172 
Gross margin2,887 1,900  5,158 4,220 
     
Expenses    
Selling and marketing1,288 892 2,135 1,681 
General and administrative3,787 1,937 7,385 4,032 
Research and development984 572 1,610 1,061 
 (3,172)(1,501)(5,972)(2,554)
     
Depreciation of property and equipment96 19 193 35 
Amortization of intangible assets423 445 849 886 
Interest income on financial instruments measured at amortized cost(4,901
)
(3,656
)
(9,826
)
(7,092
)
Other interest income(1,259)(1,090)(2,224)(2,942)
Other income(17)(37)(370)(1,388)
Net gain on financial assets measured at fair value through profit or loss(19,755
)
(2,884
)
(24,532
)
(3,425
)
Share of net loss (income) of associate372 151 (320)(352)
Foreign exchange loss (gain)1,024 49 2,677 (2,548)
Income before income taxes20,845 5,502 27,581 14,272 
     
Income tax expense    
Current638 911 2,169 1,552 
Deferred1,251 572 1,267 1,792 
Net income for the period18,956 4,019 24,145 10,928 
     
Basic earnings per share0.133 0.028 0.169 0.077 
Diluted earnings per share0.132 0.028 0.169 0.076 
     
Basic142,861,274 142,819,960 142,856,785 142,816,677 
Diluted143,215,379 143,270,324 143,230,442 143,247,377 


INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
[In thousands of Canadian dollars]
[Unaudited]
 
 Three months ended June 30,
 Six months ended June 30,
 
 2019 2018 2019 2018 
OPERATING ACTIVITIES    
Net income for the period18,956 4,019 24,145 10,928 
Adjustments reconciling net income to operating cash flows:    
Deferred tax1,251 572 1,267 1,792 
Share-based compensation expense698 642 1,155 1,187 
Depreciation and amortization519 464 1,042 921 
Net gain on financial assets(19,755)(2,884)(24,53)(3,425)
Foreign exchange loss (gain)1,024 49  2,677 (2,548)
Share of net loss (income) of associate372 151  (320)(352)
Deferred other income(13)(45)(183)(139)
 3,052 2,968 5,251 8,364 
Changes in non-cash working capital and other items(600)1,091 1,896 2,559 
Increase in other receivable  (18,242) 
Dividends from associate —  4,159  
Cash inflow (outflow) from operating activities2,452 4,059 (6,936)10,923 
     
INVESTING ACTIVITIES    
Purchase of marketable securities(84,252)(232,762)(183,145)(283,517)
Purchase of intangible  (1,989)(3,000)
Purchase of property and equipment(4)(44)(4)(86)
Issuance of loans receivables(201)(831)(18,051)(831)
Purchase of equities(6)(310)(6)(710)
Investment in funds(5,463)(9,925)(12,570)(14,202)
Proceeds on maturity of marketable securities150,584 64,091 271,548 165,409 
Proceeds from repayments of loans receivable2,044 1,594 2,701 35,034 
Proceeds from disposal of equities 1,015  1,015 
Proceeds from distribution of funds1 5,756 677 6,099 
Cash inflow (outflow) from investing activities62,703 (171,416)59,161 (94,789)
     
FINANCING ACTIVITIES    
Proceeds from contributions to share purchase plan56 42 116 91 
Principal repayment of lease liabilities(70)—  (137) 
Cash (outflow) inflow from financing activities(14)42 (21)91 
     
Increase (decrease) in cash and cash equivalents during the period65,141 (167,315)52,204 (83,775)
Cash and cash equivalents, beginning of the period231,110 583,408 244,785 496,460 
Net foreign exchange difference(1,340)2,265 (2,078)5,673 
Cash and cash equivalents, end of the period294,911 418,358 294,911 418,358 
  
Cash and cash equivalents     294,911 418,358 
Short-term marketable securities    301,829 318,388 
Long-term marketable securities     148,532 70,000 
Total cash, cash equivalents and marketable securities  
   745,272 806,746 

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