Knight Therapeutics : Fourth Quarter 2024 Financial Statements

Published: 2025-03-20 11:21:05 ET GUD.TO

KNIGHT THERAPEUTICS INC.

Management's Discussion and Analysis For the year ended December 31, 2024

KNIGHT THERAPEUTICS INC.

Management's Discussion and Analysis for the year ended December 31, 2024

(In thousands of Canadian dollars, except for share and per share amounts)

TABLE OF CONTENTS

OVERVIEW

Section 1 - About Knight Therapeutics Inc

Section 2 - 2024 Highlights

FINANCIAL RESULTS

Section 3 - Results of Operations

FINANCIAL CONDITION

Section 4 - Consolidated Balance Sheets

Section 5 - Notices of Reassessment

Section 6 - Liquidity and Capital Resources

Section 7 - Segment Reporting

Section 8 - Financial Results under Non-GAAPmeasures

Section 9 - Selected Quarterly Financial Information

PRODUCT ACQUISITION STRATEGY

Section 10 - Products

Section 11 - Strategic Lending

Section 12 - Strategic Investments

RISK MANAGEMENT

Section 13 - Risk Management

ADDITIONAL INFORMATION

Section 14 - Off-balanceSheet Arrangements

Section 15 - Commitments

Section 16 - Outstanding Share Data

Section 17 - Significant Accounting Estimates and Assumptions

Section 18 - Use of Proceeds from Financing

Section 19 - Payment of Dividends

Section 20 - Product Pricing Regulation on Certain Drug Products

Section 21 - Financial Instruments

Section 22 - Related Party Transaction

Section 23 - Disclosure Controls and Procedures

Section 24 - Internal Control Over Financial Reporting (ICFR)

Section 25 - Subsequent event

GLOSSARY OF ABBREVIATIONS

KNIGHT THERAPEUTICS INC.

Management's Discussion and Analysis for the year ended December 31, 2024 (In thousands of Canadian dollars, except for share and per share amounts)

The following is Management's Discussion and Analysis of the financial condition and operating results of Knight Therapeutics Inc. ("Knight" or the "Company") for the year ended December 31, 2024. This document should be read in conjunction with the audited annual consolidated financial statements and notes thereto for the year ended December 31, 2024. Knight's audited annual consolidated financial statements as at December 31, 2024 have been prepared in accordance with International Financial Reporting Standards (IFRS).

All amounts herein are expressed in thousands of Canadian dollars (unless otherwise indicated) except for share and per share amounts. All other currencies are in thousands. All positive variance represent a positive impact to net income (loss) and a negative variance represents a negative impact to net income (loss). All percentage changes are presented in absolute values. For a glossary of abbreviations used throughout this MD&A refer to section Glossary of Abbreviations.

This discussion and analysis was prepared by management from information available as of March 19, 2025. Further information about Knight Therapeutics Inc., including the Annual Information Form, is available online on SEDAR+ at www.sedarplus.ca.

Cautionary note regarding forward-looking statements

This Management's Discussion and Analysis may contain certain "forward-looking statements" and certain "forward- looking information" as defined under applicable Canadian securities laws. Forward-looking statements and information can generally be identified by the use of forward-looking terminology such as "may", "will", "expect", "intend", "estimate", "anticipate", "believe", "continue", "plans" or similar terminology. Forward-looking statements and information are subject to various known and unknown risks and uncertainties, many of which are beyond the ability of the Company to control or predict, that may cause the Company's actual results, performance, or achievements to be materially different from those expressed or implied thereby, and are developed based on assumptions about such risks, uncertainties and other factors set out herein. Factors and risks which could cause actual results to differ materially from current expectations are discussed in the Company's Annual Report and in the Company's latest Annual Information Form found on SEDAR+ at www.sedarplus.ca. The Company undertakes no obligation to update forward-looking information except as required by applicable law. Such forward-looking information represents management's best judgment based on the information currently available. No forward-looking statement can be guaranteed, and actual future results may vary materially. Accordingly, readers are advised not to place undue reliance on forward-looking statements or information.

KNIGHT THERAPEUTICS INC.

Management's Discussion and Analysis for the year ended December 31, 2024 (In thousands of Canadian dollars, except for share and per share amounts)

OVERVIEW

Section 1 - About Knight Therapeutics Inc.

Knight Therapeutics Inc. is a specialty pharmaceutical company, headquartered in Montreal, Canada, and is listed on the Toronto Stock Exchange under the ticker symbol "GUD". The Company operates in Canada, Latin America and select international markets and the activities performed are as follows:

Section 2 - 2024 Highlights

Financial results

Non-GAAP measures

Corporate developments

Products

1 Adjusted Revenues, revenues at constant currency, Adjusted Gross Margin, Adjusted EBITDA and Adjusted EBITDA per share are non-GAAP measures and do not have any standardized meaning under GAAP. As a result, the information presented may not be comparable to similar measures presented by other companies. Refer to Section 8 - Financial Results under Non-GAAP measures for additional details.

KNIGHT THERAPEUTICS INC.

Management's Discussion and Analysis for the year ended December 31, 2024 (In thousands of Canadian dollars, except for share and per share amounts)

Subsequent to year-end

FINANCIAL RESULTS

Section 3 - Results of Operations

Hyperinflation

The Company applies IAS 29, Financial Reporting in Hyperinflation Economies, as the Company's Argentine subsidiaries use the Argentine Peso as their functional currency. IAS 29 requires that the financial statements of an entity whose functional currency is the currency of a hyperinflationary economy be adjusted based on an appropriate general price index to express the effects of inflation. After applying for the effects of hyperinflation, the statement of income (loss) is converted using the closing foreign exchange rate of the month.

Revenues & operating expenses in the local currency, i.e. ARS, are restated from the month of the sales or the month in which the expense was incurred to the end of the reporting period using the inflation index during that period. The restatement calculation is performed on a year to date basis based on IAS29 ("Inflation Adjusted Figures"). For the years ended December 31, 2024 and 2023, the Company applied the following inflation index for the restatement of each respective month.

January

February

March

April

May

June

July

August

September

October

November

December

2024

1.81

1.59

1.44

1.32

1.27

1.21

1.16

1.12

1.08

1.05

1.03

1.00

2023

2.94

2.75

2.56

2.36

2.19

2.07

1.94

1.73

1.53

1.42

1.25

1.00

KNIGHT THERAPEUTICS INC.

Management's Discussion and Analysis for the year ended December 31, 2024 (In thousands of Canadian dollars, except for share and per share amounts)

Under IAS 29, the translation from the local currency, to the reporting currency is performed on the Inflation Adjusted Figures using the end of period rate at the reporting date. The Inflation Adjusted Figures were converted to the CAD using the following quarter-end closing rates for each of the respective periods.

Q4-24

Q4-23

ARS

717

610

Q4-24

Q4-23

YTD-24

YTD-23

ARS Variation %1

(0.1)%

(137)%

(17)%

(368)%

In 2024 the inflation index used for the hyperinflation adjustment on revenues and operating expenses of the Company's subsidiaries in Argentina was higher than the ARS depreciation in the same period. For example, the revenues and operating expenses generated or incurred in January 2024 were restated by applying an inflation index of 81% while the ARS to CAD depreciated by only 17% in 2024. Consequently, this resulted in higher revenues and operating expenses reported under IAS 29 in CAD. Conversely in 2023, the inflation index was lower than the ARS depreciation which resulted in lower revenues and operating expenses reported under IAS 29 in CAD. As such, the hyperinflation accounting under IAS 29 resulted in an inflated variance in the reported revenues and operating expenses of the Company's subsidiaries in Argentina in CAD in both Q4-2024 and 2024 when compared to the same prior year periods ("Hyperinflation Impact").

Under hyperinflation accounting, the cost of goods sold in the local currency, i.e. ARS, are restated using the inflation index from the purchase date to the end of the reporting period. The restatement calculation is performed on a year-to-date basis based on IAS29 ("Cost of goods sold adjusted Figures").

Under IAS 29, the Cost of goods sold adjusted Figures were converted to CAD using the quarter-end closing rates of the respective periods. In 2024 the inflation index used for the hyperinflation adjustment over cost of goods sold of the Company´s subsidiaries in Argentina were higher than the ARS depreciation in the same period. Therefore this led to higher cost of goods sold reported under IAS 29 in CAD and consequently a lower gross margin. Conversely, in 2023, the inflation index was lower than the ARS depreciation which resulted in lower cost of goods sold and consequently higher gross margin. As such, the hyperinflation accounting under IAS 29 resulted in an inflated variance in the reported cost of goods sold and a decrease in the gross margin related to Company´s subsidiaries in Argentina in CAD in both Q4-2024 and 2024 compared to the same prior year periods ("Gross Margin Hyperinflation Impact").

Foreign exchange

The Company records its transactions and balances in the respective functional currencies of its subsidiaries. Generally, for the LATAM subsidiaries, the functional currency is the local currency in the country where the entity operates. In order to convert a foreign-denominated transaction to the functional currency, the exchange rate prevailing at the date of the transaction is used. Furthermore, upon consolidation, for all subsidiaries with a functional currency other than CAD, the respective statements of income are translated using the average exchange rates for the period.

Exchange rate fluctuations of foreign currencies impact the Company's results in two ways:

For further details on the foreign currency rates used for the conversion of selected LATAM currencies to the CAD refer to Section 9 - Selected Quarterly Financial Information.

KNIGHT THERAPEUTICS INC.

Management's Discussion and Analysis for the year ended December 31, 2024 (In thousands of Canadian dollars, except for share and per share amounts)

The table below summarizes the functional currency of the subsidiaries of Knight:

Subsidiary

Country

Functional currency

Biotoscana Farma S.A.

Argentina

ARS

Laboratorio LKM S.A.

Argentina

ARS

Laboratorio LKM Bolivia S.A.

Bolivia

BOB

UM - Industria e Distribuidora de Medicamentos Ltda.

Brazil

BRL

United Medical Ltda.

Brazil

BRL

11718991 Canada Inc.

Canada

CAD

Laboratorio Biotoscana Farma S.p.A.

Chile

CLP

Laboratorio LKM Chile S.p. A.

Chile

CLP

Biotoscana Farma S.A.

Colombia

COP

Biotoscana Colveh 1 S.A.S

Colombia

COP

Biotoscana Colveh 2 S.A.S

Colombia

COP

Biotoscana Colveh 3 S.A.S

Colombia

COP

Biotoscana Colveh 4 S.A.S

Colombia

COP

Biotoscana Ecuador S.A.

Ecuador

USD

LKM Laboratorios Ecuador S.A.

Ecuador

USD

Knight Therapeutics Europe S.A.

Luxembourg

USD

Grupo Biotoscana de Especialidad S.A. de C.V.

Mexico

MXN

Grupo Biotoscana Panamá S.A.

Panama

USD

Laboratorio LKM Paraguay S.A.

Paraguay

PYG

Biotoscana Farma de Perú S.A.C.

Peru

PEN

Grupo Biotoscana S.L.U.

Spain

USD

Latin American Pharma Company ETVE S.L.U.

Spain

USD

Knight Therapeutics USA Inc.

U.S.

USD

Knight Therapeutics International S.A.

Uruguay

USD

Biotoscana Uruguay S.A.

Uruguay

UYU

GBT - Grupo Biotoscana S.A.

Uruguay

USD

KNIGHT THERAPEUTICS INC.

Management's Discussion and Analysis for the year ended December 31, 2024 (In thousands of Canadian dollars, except for share and per share amounts)

3.1 Consolidated statement of Income (Loss)

Change

Q4-24

Q4-23

YTD-24

YTD-23

Revenues

96,864

74,197

22,667

31%

371,304

328,199

43,105

13%

Cost of goods sold

56,512

39,982

(16,530)

41%

196,899

175,547

(21,352)

12%

Gross margin

40,352

34,215

6,137

18%

174,405

152,652

21,753

14%

Gross margin (%)

42%

46%

47%

Expenses

Selling and marketing

14,576

10,816

(3,760)

35%

53,861

46,279

(7,582)

16%

General and administrative

10,741

8,109

(2,632)

32%

45,488

37,414

(8,074)

22%

Research and development

7,365

4,258

(3,107)

73%

23,304

17,549

(5,755)

33%

Amortization of intangible assets

10,630

11,115

485

44,355

45,040

685

Impairment of non-current assets

9,260

100%

9,260

100%

Operating income (loss)

(2,960)

(9,343)

6,383

68%

7,397

(2,890)

10,287

356%

Interest income on financial instruments

measured at amortized cost

(2,540)

(2,449)

(9,094)

(8,667)

427

Other interest income

(122)

(632)

(510)

81%

(1,316)

(3,908)

(2,592)

66%

Interest expense

2,447

4,090

1,643

40%

9,223

12,488

3,265

26%

Other expense (income)

1,135

(782)

(1,917)

245%

129

(2,905)

(3,034)

104%

Net (income) loss on financial instruments

measured at fair value through profit or loss

(8,317)

7,878

16,195

206%

11,435

10,224

(1,211)

12%

Foreign exchange (gain) loss

(1,740)

9,007

10,747

119%

4,194

15,169

10,975

72%

Gain on hyperinflation

(1,698)

(303)

1,395

460%

(9,226)

(3,303)

5,923

179%

Income (loss) before income taxes

7,875

(26,152)

34,027

130%

2,052

(21,988)

24,040

109%

Income taxes

Current

(3,813)

722

4535

628%

963

3,973

3,010

76%

Deferred

953

(2,548)

(3,501)

137%

(3,243)

(9,126)

(5,883)

64%

Income tax recovery

(2,860)

(1,826)

1,034

57%

(2,280)

(5,153)

(2,873)

56%

Net income (loss)

10,735

(24,326)

35,061

144%

4,332

(16,835)

21,167

126%

Basic and diluted net income (loss) per share

0.11

(0.23)

0.34

148%

0.04

(0.16)

0.20

127%

KNIGHT THERAPEUTICS INC.

Management's Discussion and Analysis for the year ended December 31, 2024 (In thousands of Canadian dollars, except for share and per share amounts)

Revenues For the quarter ended December 31, 2024, revenues increased by $22,667 or 31% compared to the same period in prior year, of which $17,003 is explained by the Hyperinflation Impact. Excluding IAS 29, the increase was $5,664 or 6%, driven by the growth of our key promoted products partly offset by declines in our mature products and the depreciation of select LATAM currencies.

For the year ended December 31, 2024, revenues increased by $43,105 or 13% compared to the prior year, of which $20,831 is explained by the Hyperinflation Impact. Excluding IAS 29, the increase was $22,274 or 6%, and was driven by the growth of our key promoted products partly offset by declines of our mature products and the depreciation of select LATAM currencies.

Our revenues by therapeutic area is as follows:

Change

Therapeutic Area

Q4-24

Q4-23

YTD-24

YTD-23

Oncology/Hematology

35,771

26,053

9,718

37%

140,837

114,626

26,211

23%

Infectious Disease

40,545

31,080

9,465

30%

150,986

136,662

14,324

10%

Other Specialty

20,548

17,064

3,484

20%

79,481

76,911

2,570

Total

96,864

74,197

22,667

31%

371,304

328,199

43,105

13%

Oncology/Hematology

Q4-24 vs Q4-23

YTD-24 vs YTD-23

Infectious Disease

Q4-24 vs Q4-23

YTD-24 vs YTD-23

KNIGHT THERAPEUTICS INC.

Management's Discussion and Analysis for the year ended December 31, 2024 (In thousands of Canadian dollars, except for share and per share amounts)

MOH Contract

The Company signed a contract with the Ministry of Health of Brazil for Ambisome® in December 2022 ("2022 MOH Contract"). Knight delivered a total of $34,600 under the 2022 MOH Contract as follows: $7,000 in 2022, $25,200 in 2023 ($2,400 in Q1-23, $18,000 in Q2-23 and $4,800 in Q4-23) and $2,400 Q1-24. In December 2023, Knight signed a second contract with the MOH ("2024 MOH Contract") and has delivered $22,400 under this contract in 2024 as follows: $6,800 in Q1-24, $8,900 in Q2-24, $6,700 in Q3-24. The total MOH sales Ambisome® delivered in YTD-24 was $24,800. In January 2025, Knight signed a third contract with the MOH and it is expected that $22,400 will be delivered in 2025.

Other Specialty

Q4-24 vs Q4-23

YTD-24 vs YTD-23

1 Revenues at constant currency is a non-GAAP measure and does not have any standardized meaning under GAAP. As a result, the information presented may not be comparable to similar measures presented by other companies. Refer to Section 8 - Financial Results under Non-GAAP measures for additional details.

Disclaimer

Knight Therapeutics Inc. published this content on March 19, 2025, and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on March 20, 2025 at 15:20:09.355.