Knight Therapeutics Inc.
TSX : GUD

Knight Therapeutics Inc.

August 12, 2015 06:00 ET

Knight Reports Second Quarter 2015 Results

MONTREAL, QUEBEC--(Marketwired - Aug. 12, 2015) - Knight Therapeutics Inc. (TSX:GUD) ("Knight" or the "Company"), a leading Canadian specialty pharmaceutical company, today reported its second quarter ended June 30, 2015 financial results.

Second Quarter 2015 Highlights

  • On April 2, 2015, Knight entered into an agreement with HarbourVest Partners LLC, whereby the Company committed to invest $10.0 million into HarbourVest Canada Growth Fund L.P.

  • On June 4, 2015, Knight extended a secured loan of $4.0 million to Profound Medical Inc. ("Profound") which bears interest at 15.0% per annum for an initial 4 year term. In addition, Knight purchased $2.0 million of equity in Profound and entered into an agreement with Profound pursuant to which Knight will act as the exclusive Canadian distributor of the its TULSA-PRO system.

  • On June 24, 2015, Knight acquired the assets related to Neuragen® following default by Origin BioMed Inc. under its secured loan agreement with Knight. Neuragen® is the first all-natural, non-prescription topical treatment for rapid relief of pain associated with diabetic and peripheral neuropathy, approved for sale in Canada and the U.S.

  • On June 26, 2015, Knight entered into a sale agreement with Synergy CHC Corp. related to the U.S. rights to Neuragen® acquired on June 24, 2015, for minimum aggregate consideration of $1.5 million [US$1.2 million]. Knight retains Canadian rights and other ex-U.S. global rights to Neuragen®.

  • On June 26, 2015, Knight issued a secured loan of $18.5 million [US$15 million] to Pro Bono Bio PLC ("Pro Bono Bio") which bears interest at 12.0% per annum and matures on June 25, 2018. In conjunction with the loan, Knight acquired the exclusive Quebec and Israeli rights to commercialize Pro Bono Bio's Flexiseq™ range of pain relief products and its SEQuaderma™ derma-cosmetic range of products, as well as the exclusive Canadian and Israeli rights to two earlier stage product groups.

  • On June 26, 2015, Knight issued a secured loan of $800,000 to Extenway Solutions Inc. which bears interest at 15.0% per annum and matures on June 25, 2021.

  • On June 30, 2015 Knight entered into an agreement with Sectoral Asset Management Inc. ("Sectoral"), whereby the Company committed to invest $12.6 million [US$10.0 million] into New Emerging Medical Opportunities Fund III, Ltd. This was subsequent to Knight receiving earlier in the quarter a partial distribution of $17.0 million [US$13.6 million] related to an investment in Sectoral's New Emerging Medical Opportunities Fund II, Ltd.

  • On June 30, 2015, Knight, through one of its wholly owned-subsidiaries, entered into an agreement with TVM Capital Life Science, whereby the Company committed to invest $2.0 million [US$1.6 million] into TVM Life Science Venture VII.

Subsequent to the Quarter Ended June 30, 2015 Highlights:

  • On July 9, 2015, Knight invested in the Bloom Burton Healthcare Lending Trust managed by Stratigis Capital Advisors Inc. by subscribing for $500,000 as part of a $15.9 million private placement.

  • On July 21, 2015, Knight entered into an agreement with Alimera Sciences, Inc. pursuant to which Knight acquired the exclusive Canadian distribution rights to ILUVIEN®, a sustained release intravitreal implant for the treatment of diabetic macular edema.

  • On July 24, 2015, Knight entered into an agreement with Akorn, Inc. pursuant to which Knight acquired the exclusive Canadian distribution rights to AzaSite®, an eye drop solution for topical treatment of bacterial conjunctivitis, commonly known as pink eye.

  • On August 5, 2015, Knight issued a secured loan of $1.3 million [US$1 million] to Ember Therapeutics Inc. ("Ember") which bears interest at 12.5% per annum for a one year term. Knight also acquired the exclusive rights to commercialize Ember's promising Bone Morphogenetic Protein-7 pipeline, including targeted therapies for osteoarthritis and kidney fibrosis, in Canada, Israel, Russia and Sub-Saharan Africa.

  • On August 6, 2015, Knight's New Drug Submission (NDS) was accepted for review by Health Canada for ATryn® (Antithrombin (Recombinant)) for the prevention of peri-operative and peri-partum thromboembolic events in hereditary antithrombin deficient patients.

Second Quarter 2015 Financial Results Reported in Canadian Dollars

The Company's financial statements for the period ended June 30, 2015 have been prepared in accordance with IAS 34, Interim Financial Reporting.

For the quarter ended June 30, 2015, the Company reported revenues of $333 thousand and net income of $8.5 million. For the six-month period ended June 30, 2015, the Company reported revenues of $580 thousand and net income of $22.3 million. As at June 30, 2015, the Company had $437.0 million in cash and marketable securities and 93,095,823 common shares outstanding.

"During and subsequent to the quarter, we added a total of nine innovative specialty pharmaceuticals, OTC products and medical devices to our pipeline thanks to the relentless execution of our proven strategies," said Jonathan Ross Goodman, President and CEO of Knight Therapeutics Inc. "Looking ahead, we plan to continue building our pipeline while also focusing our attention on the re-launch Neuragen® in Canada."

Conference Call Notice

Knight will host a conference call to discuss its second quarter results today at 8:30 am ET. Investors and other interested parties may call 877-223-4471 (Operator Assisted Toll-Free) or 647-788-4922 (local or international).

A taped replay of the conference call will be available from today at 11:30 a.m. ET until Wednesday, September 9, 2015 at 11:59 p.m. ET. To access the replay, please call 1-800-585-8367 or 416-621-4642 and use access code 47058125.

Notice of Third Quarter 2015 Results

Knight expects to release its third quarter 2015 financial results on the morning of Wednesday, November 11, 2015. Knight expects to hold a conference call at 8:30 am ET on the morning of the release. All interested parties are cordially invited to attend. Investors and other interested parties may call 877-223-4471 (Operator Assisted Toll-Free) or 647-788-4922 (local or international).

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'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 the Company 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. The Company 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 the Company 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 the Company's Annual Report and in the Company's Annual Information Form for the year ended December 31, 2014. The Company 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.

Knight Therapeutics Inc.

INTERIM CONSOLIDATED BALANCE SHEETS

As at

[in Canadian dollars]

[unaudited]

June 30,
2015
December 31,
2014
$ $
ASSETS
Current
Cash and cash equivalents 329,047,144 283,445,451
Marketable securities 107,949,722 133,411,500
Accounts receivable 1,452,227 740,545
Investment tax credits receivable 200,000 -
Inventory 1,528,923 601,780
Other current financial assets 6,924,454 10,089,462
Other current assets 433,612 283,867
Total current assets 447,536,082 428,572,605
Property and equipment 32,642 47,728
Intangible assets 3,277,207 845,761
Other financial assets 76,689,550 57,147,077
Deferred income tax assets 2,600,276 -
Total assets 530,135,757 486,613,171
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 1,502,514 2,089,911
Income taxes payable 1,963,435 4,492,701
Deferred revenue 330,716 1,039,825
Total current liabilities 3,796,665 7,622,437
Shareholders' equity
Share capital 358,097,490 341,065,000
Warrants 161,329 -
Contributed surplus 4,116,779 2,100,025
Accumulated other comprehensive income 15,768,857 9,966,837
Retained earnings 148,194,637 125,858,872
Total shareholders' equity 526,339,092 478,990,734
Total liabilities and shareholders' equity 530,135,757 486,613,171

Knight Therapeutics Inc.

INTERIM CONSOLIDATED STATEMENTS OF INCOME

[in Canadian dollars]

[unaudited]

Three-month period ended Six-month period ended
June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014
$ $ $ $
Revenue 332,674 247,373 580,030 248,814
Cost of goods sold 271,856 - 358,095 -
Gross margin 60,818 247,373 221,935 248,814
Expenses
General and administrative 2,446,822 693,360 5,123,473 770,632
Research and development 300,124 112,736 634,714 127,773
(2,686,128 ) (558,723 ) (5,536,252 ) (649,591 )
Depreciation of property and equipment 7,545 6,515 15,087 7,008
Amortization of intangible assets 20,927 18,970 42,048 25,294
Interest expense - 4,500 - 23,540
Interest income (3,595,573 ) (878,744 ) (7,561,603 ) (919,727 )
Other income (525,541 ) (104,859 ) (966,718 ) (104,859 )
Net gain on financial assets (6,495,488 ) - (14,024,076 ) -
Purchase gain on business combination - - (550,000 ) -
Gain on settlement of loan receivable (358,204 ) - (358,204 ) -
Foreign exchange loss (gain) 592,771 (1,210 ) (3,817,774 ) (1,210 )
Income before income taxes 7,667,435 396,105 21,684,988 320,363
Income tax (recovery) expense (1,053,503 ) 5,488 (1,053,503 ) 5,488
Deferred income tax expense 201,363 - 402,726 -
Net income for the period 8,519,575 390,617 22,335,765 314,875
Basic and diluted earnings per share 0.09 0.006 0.24 0.009
Weighted average number of common shares outstanding
Basic 93,089,609 63,066,993 92,816,245 35,725,338
Diluted 93,222,325 63,166,988 93,028,011 35,784,315

Knight Therapeutics Inc.

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

[in Canadian dollars]

[unaudited]

Three-month
period ended
Six-month
period ended
June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014
$ $ $ $
Net income for the period 8,519,575 390,617 22,335,765 314,875
Realized gain reclassified to statement of income (net of tax of $810,435 and $1.3 million for the three and six-month periods ended June 30, 2015) (5,206,098 ) -

(8,050,242
) -
Other comprehensive income to be reclassified to income or loss in subsequent periods:
Unrealized gain on available-for-sale financial instruments (net of tax of $71,842 and $403,972 for the three and six-month periods ended June 30, 2015, respectively and $265,929 for the three and six-month periods ended June 30, 2014) 897,855 1,711,235



2,999,712
1,711,235
Unrealized (loss) gain on translating financial statements of foreign operations (2,064,641 ) -
10,852,550
-
Other comprehensive (loss) income for the period (6,372,884 ) 1,711,235 5,802,020 1,711,235
Comprehensive income for the period 2,146,691 2,101,852 28,137,785 2,026,110

Knight Therapeutics Inc.

[in Canadian dollars]

[unaudited]

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

Share
capital
Warrants Contributed surplus Accumulated other comprehensive income Retained earnings Total shareholders' equity
$ $ $ $ $ $
Balance on Incorporation and as at January 1, 2014 1 - - - - 1
Net income and comprehensive income for the period - - - 1,711,235 314,875 2,026,110
Stock based compensation expense - - 258,467 - - 258,467
Issuance of common shares as part of Business Separation Agreement 11,909,000 - - - - 11,909,000
Issuance of warrants, net of costs and deferred tax - 244,320,699 491,877 - - 244,812,576
Deemed exercise of Special Warrants into common shares 244,320,699 (244,320,699 ) - - - -
Share purchase loans (450,000 ) - - - - (450,000 )
Balance as at June 30, 2014 225,779,700 - 750,344 1,711,235 314,875 258,556,154
Share
capital
Warrants Contributed surplus Accumulated other comprehensive income Retained earnings Total shareholders' equity
$ $ $ $ $ $
Balance as at January 1, 2015 341,065,000 - 2,100,025 9,966,837 125,858,872 478,990,734
Net income for the period - - - - 22,335,765 22,335,765
Realized gain reclassified to statement of income, net of tax of $1.3 million - - - (8,050,242 ) - (8,050,242 )
Change in fair value of available-for-sale financial instruments, net of tax of $403,972 - - - 2,999,712 - 2,999,712
Unrealized gain on translating financial statements of foreign operations - - - 10,852,550 - 10,852,550
Share-based compensation expense - - 2,865,363 - - 2,865,363
Issuance of shares upon financing, net of costs and includes deferred tax of $2.2 million 14,573,364 - - - - 14,573,364
Issuance of shares upon exercise of stock options 1,486,982 - (553,482 ) - - 933,500
Issuance of warrants - 161,329 - - - 161,329
Exercise of compensation warrants 930,227 - (295,127 ) - - 635,100
Issuance of shares under share purchase plan 41,917 - - - - 41,917
Balance as at June 30, 2015 358,097,490 161,329 4,116,779 15,768,857 148,194,637 526,339,092

Knight Therapeutics Inc.

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS

[in Canadian dollars]

[unaudited]

Six-month period ended
June 30, 2015 June 30, 2014
$ $
OPERATING ACTIVITIES
Net income 22,335,765 314,875
Adjustments reconciling net income to operating cash flows:
Deferred tax 402,726 -
Share-based compensation 2,865,363 258,467
Depreciation of property and equipment 15,087 7,008
Amortization of intangible assets 42,048 25,294
Accretion of interest (2,219,887 ) -
Gain on disposal of other financial assets (13,799,211 ) -
Gain on settlement of loan receivable (358,204 ) -
Purchase gain on business combination (550,000 ) -
Unrealized loss on derivative (224,865 ) -
Unrealized foreign exchange gain (4,145,730 ) -
Changes in non-cash working capital related to operations (5,375,802 ) (364,230 )
Deferred revenue (709,108 ) -
Cash inflow (outflow) from operating activities (1,721,818 ) 241,414
INVESTING ACTIVITIES
Purchase of marketable securities (383,577,657 ) -
Proceeds from disposal of marketable securities 420,690,955 -
Purchase of other current financial assets (2,356,037 ) -
Proceeds from disposal of other financial assets 29,242,137 -
Investment in funds (8,294,952 ) (10,664,025 )
Issuance of loans and debentures receivable (31,346,858 ) -
Proceeds from repayments on loans receivable 10,027,773 -
Purchase of property and equipment - (64,484 )
Consideration paid on business combination (1,750,000 ) -
Cash inflow (outflow) from investing activities 32,635,361 (11,578,509 )
FINANCING ACTIVITIES
Net impact of Business Separation Agreement - 1,000,000
Net proceeds from warrants issuance - 245,294,330
Proceeds from exercise of Over-Allotment Option 12,424,253 -
Proceeds from exercise of compensation warrants 635,100 -
Costs related to prior period share financing (206,828 ) -
Share option plan 933,500 -
Share purchase plan 41,917 -
Share purchase loans - (450,000 )
Loan from related party - 2,500,000
Cash inflow from financing activities 13,827,942 245,844,330
Increase in cash during the period 44,741,485 234,507,235
Cash, beginning of year 283,445,451 1
Net foreign exchange difference 860,208 -
Cash, end of year 329,047,144 234,507,236

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