Knight Therapeutics Inc. (GUD) Earnings Call Transcript & Summary

Thank you. Welcome to Knight Therapeutics' second quarter 2026 results conference call. After turning the call over to Samira 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, except 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 at knighttx.com or via phone at 514-484-4483. I would now like to remind everyone that this call is being recorded today, August 6, 2026, and would now like to turn the meeting over to your host for today's call, Samira Sakia. Please go ahead, Ms. Sakia.

Thank you, Matthew. Good morning, everyone, and welcome to Knight Therapeutics' second quarter 2026 conference call. I'm joined on today's call with Amal Khoury, our Chief Business Officer, and Arvind Uchanak, our Chief Financial Officer. We're pleased to announce that Knight has delivered record high performance in the first six months of 2026. We reported revenues of $293 million, adjusted EBITDA of $52 million, and cash flow from operations of $70 million. During the first six months of the year, our promoter portfolio delivered nearly $200 million in revenues, an increase of over $50 million, or 36% on a constant currency basis. This was mainly the result of our commercial execution on our promoted products, including the contribution from the 17 launches we executed over the last two and a half years. We had six launches in Canada and 11 in Latin America. In Canada, we launched Invexi, Bejuva, Journey PM, Xcopri, IFEMBRE, and Orgovix. In Latin America, we have launched Minjuvi for DLBCL in Brazil, Mexico, and Argentina, for follicular lymphoma in Brazil. We also launched PEMASIR in Brazil, Mexico, and Argentina, TAVALY in Mexico, and AKINZEO in Paraguay. In addition, we have also launched two branded generic products, Molepib in Argentina and Baposil in Colombia. In the second half of this year, we expect to launch TAVALYs in Brazil, for which we received regulatory approval earlier this Q. as well as Winsora in Canada and certain branded generics in LATAM. In addition, just yesterday we received a notice of noncompliance from Health Canada on the new drug submission for Crexant. We will be working closely with our partner to respond to Health Canada. As a reminder, Crexant was approved in the U.S. in August of 2024 and was launched in September of 2024. And in June of this year, the product received positive CHMP recommendation in Europe with an approval expected in September. On to the NCIB. In the first half of 2026, we purchased 1.5 million common shares at an average price of $6.33 for aggregate cash consideration of approximately $9.2 million. I will now turn the call over to Arvind to provide an update on our financial results.

Thank you, Samira. When speaking of our financial results, I will refer to certain non-IFRS measures, including adjusted EBITDA per share, adjusted gross margin, and constant currency results. refer to our press release and MD&A and CDAR filings for their definitions. For the second quarter of 2026, we delivered revenues of $144 million, an increase of $37 million, or 34% compared to the same period last year. On a constant currency basis, the increase in revenues was $26 million, or 22%, driven by the growth of our promoted portfolio, including our pipeline launches, as well as the addition of the mature products from the Paladin and Sumitomo transactions. Our launch pipeline portfolio delivered $18 million in revenues, an increase of $14 million or 297% on a constant currency basis, driven by the 17 launches that Samra mentioned earlier. I would like to add that according to IQGA, the sales of the Canadian launch pipeline products grew by 189% in Q2 26 compared to Q2 25. As for our promoted strategic products, they delivered $76 million in the second quarter. Excluding the sales of Ambisom to MOH, the portfolio grew by $9 million, or 16% on a constant currency basis, by the growth of our promoted brands including Crescentba, Lendema, Akinzeo and Envelsus. Finally, our mature portfolio delivered $48 million, an increase of $12 million, or 32% on a constant currency basis. The increase was driven by the addition of the mature products from the Paladin and Sumitomo portfolios. Now moving on to gross margin. We delivered adjusted gross margin of $17 million or 49% of revenues. due to 26 compared to $49 million or 46% of revenues in the same period last year. The increase in the gross margin percentage is mainly explained by the higher contribution of the Canadian business, which generates a higher gross margin as a percentage of revenues. I will now turn to our operating expenses, excluding amortization. For the second quarter, our operating expenses were $47 million, an increase of $9 million, or 25%, compared to the same period last year. The increase in operating expenses was mainly driven by the expansion in structure and spend required to support our many launches and larger mature portfolio. Moving on to adjusted EBITDA. For the second quarter of 2026, we reported over $24 million of adjusted EBITDA, an increase of $9 million or 58% compared to the same period last year. our adjusted EBITDA per share was 25 cents, an increase of 61% compared to the same period last year. The increase was mainly driven by our higher gross margin partly offset by higher operating expenses. I will now cover our financial assets, which are valued at $81 million. In the second quarter, we recorded a net loss of $12 million, driven by the mark-to-market revaluations of our strategic fund and equity investments. As a reminder, our funds continue to be a source of cash and have generated $51 million since 2020. Turning to our liquidity and cash flows. During the second quarter, our business generated operating cash inflows of $30 million and we paid $30 million on our revolving credit facility. Over the last year, our strong operating cash flows and balance sheet have supported our 17 launches, the acquisition of the Paladin and Sumitomo portfolios, as well as the full repayment of the $60 million loan used to finance the Paladin transaction within one year of closing. We ended the quarter with $110 million in cash and marketable securities and a net cash position of $87 million. In addition, with $280 million available under our credit facility, we are well positioned to fund future growth.

and I'll turn the call back to Summer. Thank you, Arvind. Now onto our financial outlook for fiscal 2026. I would like to remind everyone that this guidance is based on the assumption 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 the actual results may vary materially. We are increasing our outlook for 2026 and now expect to generate revenues between 540 million and $560 million, representing top line growth of at least 20% versus 2025. We also expect 2026 adjusted EBITDA to be at least 15% of revenue. revenues representing EBITDA growth of at least 10% versus 2025. The increase in our financial outlook is driven primarily by the stronger performance of our promoted products across multiple countries, as well as the benefit of select LATAM currencies performing better versus the Canadian dollar than previously anticipated. I'm proud of the profitable business that we have built through the disciplined execution of our Pan American XUS strategy of in-licensing and acquiring innovative and mature products, obtaining regulatory approval across our territories, and launching and growing these products in each of our markets. The 17 launches over the last two and a half years are a clear demonstration of the execution of the strategy and the strength of our platform. The momentum of our promoted products, the strength of our diversified portfolio and healthy cash flows from operations position us well to continue executing on our mission of acquiring in licensing, and commercializing pharmaceutical products in Latin America and Canada. Thank you for your support and confidence in the NITE team. This concludes our formal remarks. I would now like to open up the call for questions.

Thank you. Before 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 at 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 leave your handset before pressing any keys. would like to withdraw your question, please press star 2. One moment please for your first question. And your first question comes from Douglas Mime of RBC Capital Markets. Please go ahead. Your line is open.

Good morning everyone. A few questions for you, Samira. Number one, on EBITDA margins, obviously stronger than anticipated during the quarter and above the guidance that you provide of 15%. Now you reaffirm the 15% for fiscal year 2026 Are there any specific H2 items we have to consider that would hold those margins back or is there really potential upside to that guide that you've provided as we think to the second half of the year?.

Hello? Hello? Ladies and gentlemen, please stand by as we connect the speaker line. Thank you. Thank you. Again, we apologize for the technical difficulty. We will resume momentarily. PC connected. PC disconnected. I'm back in the conference. Are we back on?.

Yes, you are back now. Okay, so let me finish answering Doug's question. So as I mentioned, we are launching and our spend is ramping back up. It will be ramping up in the back half of the year. The second thing is that there is a significant amount of ambasone in the first half of the year.

which is also bringing up our EBITDA. Okay. So we should expect that to moderate slightly in the second half of the year. Excellent. And then just to follow up, Could you perhaps expand on the Lendvima price controls in Colombia and what the impact of those may be for the remainder of this year and into next year? And then on Crexon, could you maybe elaborate? I know it was just yesterday, but perhaps the reason. for the NOC and I'll leave it there. Thank you.

Sure. So Columbia has a price, regulated price system. They review products over along the way after launch. Lendema was selected, was picked up most recently. We do expect the price to decrease materially. We will hit, with that decrease, we do expect some increase in volume because it will become cheaper. prefer use we also announced that we see a generic or a branded generic approved also this order of whom which we expect to will be launched either by the end of the year or early next so that too will have an impact on this product both of the the generic was expected and it is in our forecast and in the guidance that we just provided, the pricing impact in Colombia is also included. As for Crexant and the NON, you're right, it was just yesterday afternoon. We're going to be working with our partner to respond. What I can say is the product is approved in the US. going to get approval very shortly in Europe and we are seeing that Health Canada is issuing more NONs and we expect that to continue with the way they are.

Okay, Thank you. And your next question comes from Michael Freeman of Raymond James. Please go ahead. Your line is open.

Hey, good morning, Samir, Arvind, Amal. Congratulations on another strong quarter. I wonder if, you know, excluding the positive impact of the ampersand this quarter, I wonder if you could point to areas of your promoted product portfolio that has driven the significant growth. This is another significant beat. of consensus. I wonder if you could zero in on areas that are growing faster than our expectations and your expectations.

Michael, I really can't hear all of the questions. I'm going to try and rephrase. You're trying to understand what is driving growth after ambasome or what growth, due because of ambus... without ambusome in this queue or in the future?.

Talking about this quarter, excluding Ambizome.

So excluding Ambersone, we are seeing growth across our portfolio. So we saw growth in our oncology portfolio. Lendema was growing. Orbovix was growing. My friend Bray was growing. At Inzeo, where Invexi, so all of our launch pipeline is growing and that's where you really see a significant amount. If you look at the IQVIA data, the results are that those products, the IQVIA Canada data, those products grew by 200%. And in LATAM, you've got Minjuvi, Tavalis, Lenvima, Crescemba, all of them growing across the board.

Okay, well, thank you. Now, I'm curious, the balance sheet is looking very strong. I'm curious how you're thinking about capital allocation and how you might prioritize capital.

different uses of capital heading into the future? So, as you know, we're a licensing and acquiring company. The use of cash is really for the acquisition of new products, and that's really what we're focused on. If there is an opportunity to continue to acquire our shares, we will also execute on that front.

Okay, thank you very much. I'm going to pass it on.

Thank you. And your next question comes from David Martin of Lumberton. Please go ahead. Your line is open.

Good morning and congratulations on the quarter. Regarding Kelbury, you had mentioned in previous quarters withdrawing the NDS and it was mentioned again this quarter. Has anything changed on that front since last quarter?.

No, we're working with our partner to prepare the material for resubmission.

Okay, and then on Crexant, going a little deeper again, acknowledging you just got that news, does it look like the information that Health Canada wants exists, or is there a possibility that another trial would be needed?.

Can you talk about that? Right now, I'm waiting for our team. The product is approved in the US and is getting approval in Europe. So the team is just going through it. So it's a little early for me to comment on that. Okay. And then last question.

How much did Ambizome sales to Brazil MOH contribute to this quarter and does your guidance anticipate any more sales to MOH, the Brazilian MOH for the remainder of the year?.