Earnings call transcript: Knight Therapeutics Q1 2025 beats EPS forecast

Knight Therapeutics Inc. (GUD) reported its Q1 2025 earnings, surpassing expectations with an earnings per share (EPS) of $0.02 compared to the forecasted -$0.0007. The company also reported revenues of $88 million, slightly above the anticipated $87.98 million. According to InvestingPro analysis, Knight maintains excellent financial health with a "GREAT" overall score of 3.37 out of 5, including a perfect Piotroski Score of 9, indicating strong operational efficiency. Despite these positive results, the stock saw a slight decline of 0.33% in post-market trading, closing at $6.07, down from the previous close.

Key Takeaways

• Knight Therapeutics exceeded EPS expectations with a reported $0.02 against a forecast of -$0.0007.
• Revenue reached $88 million, marking a 3% increase year-over-year.
• The stock experienced a minor decline of 0.33% post-earnings announcement.
• The company launched several products in Latin America and Canada.
• Knight Therapeutics is preparing for a significant acquisition of Paladin expected mid-2025.

Company Performance

Knight Therapeutics demonstrated solid performance in Q1 2025, with a 3% year-over-year revenue increase to $88 million. The company continued to strengthen its presence in Canada and Latin American markets, driven by product launches and strategic partnerships. However, adjusted EBITDA saw an 11% decrease year-over-year, indicating some pressure on profitability.

Financial Highlights

• Revenue: $88 million, up 3% year-over-year
• Adjusted EBITDA: $12.1 million, down 11% year-over-year
• Adjusted EBITDA per share: $0.12, down 8%
• Gross margin: 47% of revenues
• Cash and marketable securities: $141 million

Earnings vs. Forecast

Knight Therapeutics reported an EPS of $0.02, significantly above the forecast of -$0.0007, marking a notable positive surprise. Revenue also slightly exceeded expectations, coming in at $88 million against the forecasted $87.98 million. This performance indicates a strong start to the year for the company, despite challenges in maintaining profitability.

Market Reaction

Despite beating earnings expectations, Knight Therapeutics’ stock saw a slight decline of 0.33%, closing at $6.07. This movement may reflect investor caution due to the decrease in adjusted EBITDA and broader market trends. The stock remains within its 52-week range, with a high of $6.45 and a low of $5.09.

Outlook & Guidance

Knight Therapeutics forecasts 2025 revenues between $390 million and $405 million, with adjusted EBITDA expected to be approximately 13% of revenues. The company is optimistic about its pending acquisition of Paladin, which is expected to be finalized by mid-2025, enhancing its product portfolio and cash flow generation.

Executive Commentary

CEO Samir Sakia stated, "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." He also emphasized the strategic importance of the Paladin acquisition, highlighting its potential to add critical mass and stable cash flow.

Risks and Challenges

• Decrease in adjusted EBITDA indicates potential profitability challenges.
• Market saturation and competition in key therapeutic areas could impact growth.
• Macroeconomic pressures, such as currency fluctuations, may affect financial performance.
• Regulatory hurdles in Latin American markets could delay product launches.

Q&A

During the earnings call, analysts inquired about the impact of SG&A levels and the potential effects of the Paladin acquisition. The company confirmed the acquisition is on track for mid-2025 and addressed questions about seasonal variations in different markets.

Full transcript - Knight Therapeutics Inc (GUD) Q1 2025:

Elle/Al, Conference Call Operator: Good morning, ladies and gentlemen. My name is Elle, and I will be your operator today. Welcome to Knight Therapeutics first quarter twenty twenty five results conference call. Before turning the call over to Samir Sakia, president and CEO of Knight, listeners are reminded that portions of today’s discussion may, by their nature, necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward looking statements. The company considers the assumptions on which these forward looking statements are based to be reasonable at the time they were prepared, but cautions that these assumptions regarding the future events, many of which are beyond the control of the company and its subsidiaries, may ultimately prove to be incorrect.

The company disclaims any intention or obligation to update or revise any forward looking statements whether a result of new information, future events, as required by law. We would also like to remind you questions during today’s call will be taken from analysts only. Should there be any further questions, please contact Knight’s Investor Relations department via email to ir@knighttx.com or via phone at (514) 484-4483. I would like to remind everyone that this call is being recorded today, 05/08/2025, and would now like to turn the meeting over to your host for today’s call, Samira Sakia. Please go ahead, miss Sakia.

Samir Sakia, President and CEO, Knight Therapeutics: Thank you, Al. Good morning, everyone, and welcome to Knight Therapeutics first quarter twenty twenty five conference call. I’m joined on today’s call with Amal Khoury, our Chief Business Officer, and Arvinduchina, our Chief Financial Officer. I’m pleased to announce that for the three months ended 03/31/2025, we reported revenues of $88,000,000 and an adjusted EBITDA of over $12,000,000 Our revenues increased by $2,000,000 or 3% over the same period last year. The increase was mainly driven by our promoted portfolio, which accounts for over 75% of our total revenues.

During the quarter, this portfolio grew by $9,000,000 or 16% on a constant currency basis. In addition, we continue to execute on the business development front. As previously announced, we entered into an agreement with Endo to acquire all of the assets of Paladin for $100,000,000 plus $20,000,000 of inventory. Furthermore, Knight may pay future contingent payments of up to US15 million dollars upon achievement of certain milestones. Also, we have expanded our relationship with HealthSyn with the addition of Onocit for certain Latam countries.

Onocit is used for the prevention of chemotherapy induced nausea and vomiting, as well as the prevention of postoperative nausea and vomiting. Moving to our pipeline. We continue to advance our portfolio with the regulatory submission of TAVALISSE in Argentina and the regulatory approval of PEMISER in Mexico. In addition to the regulatory process during the quarter, we launched MINJUVI in Mexico and relaunched Oneset in Brazil and Mexico. On to the NCIB.

During the quarter, we purchased 605,000 common shares under the NCIB at an average purchase price of $5.53 for aggregate cash consideration of $3,300,000 I will now turn the call over to Arvind to provide an update on our financial results.

Arvind, Chief Financial Officer, Knight Therapeutics: 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 non current assets, depreciation, the impact of accounting under hyperinflation, and acquisition and transaction costs, 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 non GAAP measures.

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 first quarter of twenty twenty five, we delivered revenues of $88,000,000 representing an increase of $2,000,000 or 3% versus Q1 last year. On a constant currency basis, revenues increased by $6,600,000 or 8%, driven by the growth of our key promoted products, partly offset by declines in our mature products. In the first quarter of twenty twenty five, our oncology and hematology portfolio delivered $32,000,000 of revenues, a growth of $1,000,000 or 3%.

On a constant currency basis, the portfolio grew by $2,000,000 or 6% compared to the same period last year. This increase was driven by the continued growth of our key promoted brands, which contributed $4,000,000 of incremental revenues, mainly coming from Lanvima, AKINZEO, Trelstar, MINJUVY, as well as the addition of Oneset. This growth was partially offset by a decline in our mature and branded generic products due to the lifecycle and the market entrance of new competitors, as well as the impact of LATAM currency depreciation. Our infectious disease portfolio delivered $36,000,000 a decrease of $2,000,000 or 4%. On a constant currency basis, the portfolio actually grew by $1,000,000 or 3% compared to the same period last year.

The increase was due to purchasing patterns of certain customers, including ambisomes deliveries to the Ministry of Health in Brazil or MOH. As a reminder, in January 2025, we signed a third contract with the MOH, and we expect to deliver 22,400,000 in 2025, of which $13,000,000 were already delivered in Q1 compared to $9,000,000 in Q1 twenty twenty four. Turning to our other specialty therapeutics areas. The portfolio generated $20,000,000 in revenues, representing an increase of $3,000,000 or 18%, mainly driven by the launch of IMVEXXY and BIJUVA in Canada as well as purchasing patterns of certain customers. Now moving on to gross margin.

We reported $41,000,000 or a gross margin percent of 47% of revenues in the first quarter of twenty twenty five, remaining relatively unchanged compared to the same period last year. I will now turn to our operating expenses excluding amortization. For the first quarter, our operating expenses were $30,200,000 an increase of $3,000,000 or 10% compared to the same period last year. The increase in operating expenses was driven by an increase in commercial spend and structure behind our new launches, including MINJUVY, IMVEXXY, BIJUVA, and JOIN APM, as well as transaction fees related to the acquisition of Paladin. Moving on to adjusted EBITDA.

For the first quarter of twenty twenty five, we reported $12,100,000 of adjusted EBITDA, a decrease of $1,500,000 or 11% compared to the same period last year. Our adjusted EBITDA per share was $0.12 a decrease of 8% compared to the same period last year. I will now cover our financial assets, which were valued at $127,000,000 During the quarter, we recorded a total net loss of $3,800,000 on our financial assets, driven by the mark to market revaluation of our strategic fund investments and the change in value of certain equities. As a reminder, our funds continue to be a source of cash and for the first quarter, we received a distribution of $3,000,000 Moving on to our cash flows. At the end of Q1, we held $141,000,000 in cash and marketable securities.

During the quarter, we generated cash inflows from operations of $3,700,000 and invested $11,500,000 in working capital, driven by an increase in our accounts receivable due to the timing of collections from certain customers. In addition, at the end of the quarter, our inventory was valued at $140,000,000 an increase of $37,000,000 compared to the end of twenty twenty four. This investment is due to the growth of our portfolio, including our recent launches, as well as timing of orders and deliveries of certain products, including Ambison to the MOH. Subsequent to the quarter, we closed a US40 million dollars working capital line of credit from Citibank, of which we have withdrawn US35 million dollars The maturity date of the debt is at the September. The proceeds from the line of credit will be used to settle the accounts payable for the inventory purchase during the first quarter.

I will now turn the call back to Sandra.

Samir Sakia, President and CEO, Knight Therapeutics: Thank you, Arvind. On to our financial outlook for fiscal twenty twenty five. I would like to remind everyone that this guidance includes the assumption that we will close the Paladin acquisition in the middle of twenty twenty five and also assumes that there is no material adjustment due to hyperinflation accounting in Argentina. In addition, our guidance is based 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 are reconfirming our outlook for fiscal twenty twenty five and expect to generate revenues between $390,000,000 to $4.00 $5,000,000 and adjusted EBITDA of approximately 13% of revenues. Looking ahead, we are very excited that we can deliver to our stakeholders with our recent and upcoming launches, as well as our pipeline products. In addition, the Paladin transaction, which we expect to close in the middle of this year, will add critical mass and significantly increase the size of our Canadian business while adding a portfolio of stable cash flow generating products that will help fund our growth in Canada and Latin America. The Paladin transaction and the addition of Omnisich demonstrate our focused execution in building a balanced portfolio that includes innovative, growing promoted products and mature cash flow generating assets. We remain well positioned to continue to execute on our mission to acquire in license, develop, commercialize pharmaceutical products in Latin America and Canada.

Thank you for your support and confidence in the Knight team. This concludes our formal remarks. I’d like to open up the call for questions. Thank

Elle/Al, Conference Call Operator: we begin, may I please remind you questions during today’s call will be taken from analysts only. Should there be any further questions, please contact Knight’s investor relations department via email to ir@knightex.com or via phone at (514) 484-4483. If you would like to ask a question, please press star followed by the number one on your telephone keypad. If you are using a speakerphone, please lift your handset before pressing any key. If you would like to withdraw your question, please press star to key.

One moment, please, for your first question. Your first question comes from Michael Freeman of Raymond James. Please go ahead.

Michael Freeman, Analyst, Raymond James: Hey. Good morning, Samir, Amal, Arvind. Congratulations on a on a strong quarter. I wonder if I have a few questions here. I wonder if you could just thinking about your SG and A levels, how should we be thinking about your SG and A going forward thinking and using this quarter’s level, you know, should we be using it as a base going forward, or should it be should we expect higher or lower?

Of course, mid year, we should expect Paladin to be included in these financials. So I wonder if you could describe a bit of the SG and A contribution you might expect from that acquisition.

Samir Sakia, President and CEO, Knight Therapeutics: Sure. So as you know, we don’t provide guidance on OpEx. What we have provided in the guidance that we have is revenue and then EBITDA margin. And the guidance that we’ve provided includes closing Paladin in the middle of the year. So kind of if you and we don’t guide on a quarter by quarter basis.

So spending can be a bit lumpy. It’s fine. We’re going to end the year with three ninety to four zero five of top line and EBITDA margin of 13% and the OpEx will move to deliver on those results.

Michael Freeman, Analyst, Raymond James: Okay, all right. Thanks very much. I wonder just on the Paladin acquisition process. I wonder if you could provide any updates relating to how that deal is progressing, sort of more closing details perhaps with a finer point than midyear.

Samir Sakia, President and CEO, Knight Therapeutics: We don’t really have anything more than just kind of that midyear. There is regulatory consent as well as regular consent that would be required, standard consent that would be required on a transaction like this, and each of those is progressing to plan. And so we believe that will be in the timelines that we forecasted.

Michael Freeman, Analyst, Raymond James: Okay, that’s great. And if I could chew on just one more, I wonder if you could comment on typical seasonality across your jurisdictions. We saw a steady year over year growth, but of course, we saw quarter over quarter dip. I wonder if you could just go review the factors that affect the seasonality.

Samir Sakia, President and CEO, Knight Therapeutics: Sure, so I’m going to say the place that we have normal seasonality is Canada, where Q4 is usually a bigger quarter. We see buying patterns from wholesalers that load in advance. There’s a little bit in Brazil, and a little bit in Brazil impacts our business more given the size of that business in our business today. The rest of the markets are pretty even. So there isn’t that much seasonality.

And the reason I kind of bring this up is because as we add Paladin, we will start to see more seasonality in our business because it’s really it’ll be a bigger contributor.

Michael Freeman, Analyst, Raymond James: Okay. Thank you very much. I’ll I’ll pass it on now.

Elle/Al, Conference Call Operator: Again, if you would like to ask a question, please press star followed by the number one on your telephone keypad. There are no further questions at this time. Please continue, Ms. Saki.

Samir Sakia, President and CEO, Knight Therapeutics: Thank you. Once again, thank you for the confidence in the Knight team and for joining our Q1 twenty five conference call. Have a great morning.

Elle/Al, Conference Call Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.

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