Welcome to Knight Therapeutics Inc.'s fourth quarter and year-end 2021 results conference call. Before turning the call over to Samira Sakhia, 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 as 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 info@knighttx.com or via phone at 514-484-4483. I would like to remind everyone that this call is being recorded today, March 24, 2022, and would now like to turn the meeting over to your host for today's call, Samira Sakhia. Please go ahead, ma'am.
Thank you, Emma. Good morning and welcome to Knight Therapeutics' fourth quarter and year-end conference call. I'm joined in today's call with Amal Khouri, our Chief Business Officer, Arvind Utchanah, our Chief Financial Officer, who recently moved to Uruguay and is participating from Montevideo, Jeff Martens, our Global VP of Commercial, who is on the last leg of a three-country tour and is joining the call from Bogotá, Colombia. I'm excited to report that 2021 was a record-setting year in Knight's history, despite the ongoing challenges posed by the pandemic. During the year, we made significant strides with completing the integration of the Grupo Biotoscana acquisition, all the while strengthening the team and processes and driving strong performance.
More specifically, we strengthened Knight's management team with the addition of 4 new executives last year, and I'm happy to announce that Leopoldo Bozzano has recently joined Knight as VP of Manufacturing and Operations. Leopoldo Bozzano has nearly 30 years of experience in operations management, including over 25 years in the pharmaceutical industry. He joins Knight from Givaudan, Argentina, where he had been working since 2014, most recently as Head of Operations LATAM. At Givaudan, he was responsible for production, quality control, quality assurance, supply chain, engineering, maintenance across seven sites located in Argentina, Chile, Brazil, Colombia, and Mexico. Prior to Givaudan, Leopoldo Bozzano had worked at HLB Pharma, where he was Industrial Operations Director. In addition, he worked as General Manager and VP at UV-Vis Metrolab in Argentina.
Prior to these roles, Leopoldo was at Bristol-Myers Squibb for many years in Argentina as well as in Panama, where he held several roles, including planning, supply chain procurement, technical operations, plant management, and GM for supply to Middle and Far East and Latin American markets. Leopoldo is based in Buenos Aires. In addition to the management team changes, we made integration advances with the implementation of several global systems, including CRM, pharmacovigilance systems, HR systems, and we have implemented our ERP system in 14 entities in six countries. We expect to complete the ERP implementation in all entities except the Argentine affiliates by the end of 2022. On the existing portfolio, our regulatory team advanced our product pipeline with the approval of Halaven and Lenvima in Colombia, as well as Rembre, Knight's dasatinib-branded generic, also for Colombia.
We also obtained approval for Nerlynx in metastatic breast cancer, which is the second approved indication for Nerlynx in Canada. On the commercial side, our team continued to generate strong growth on our key brands, delivering record revenues in 2021. Turning now to the NCIB. During the year, we purchased approximately 12.3 million shares for aggregate cash consideration of CAD 64.4 million at an average price of CAD 5.23 per share. Subsequent to the year, Knight has purchased an additional 934 ,000 common shares for aggregate cash consideration of CAD 5 million or CAD 5.35 per share. I will now turn the call over to Jeff to provide more details on our product results.
Thank you, Samira. Building on our hard work of 2020, our efforts in 2021 remain focused on executional excellence of our new product launches while delivering competitive growth for our mature promoted portfolio. Overall, the year ended December 31, 2021. Our revenues on a constant currency basis increased by CAD 48.3 million or 26% versus the prior year. The growth in revenues is driven by CAD 21 million resulting from the addition of Exelon, CAD 15 million in net revenues related to the growth of our recent launched products, and the balance due to incremental demand estimated to be between CAD 13.5 million-CAD 16.3 million, primarily driven by our infectious disease products that treat invasive fungal infections associated with COVID-19. As the last COVID wave dissipates, our team in the field is excited to get back to normal post-COVID activities.
With that, I'm happy to announce that we launched Lenvima and Rembre in Colombia in February, and launched Halaven also in Colombia in March of this year. I will now turn the call over to Arvind to go over our financial results.
Thank you, Jeff. In the course of this conference call, I will refer to EBITDA and adjusted EBITDA, as well as constant currency, which are non-IFRS measures. Knight defines EBITDA as operating loss or income excluding amortization and impairment of intangible assets, depreciation, purchase price, accounting adjustments, and the impact of accounting under hyperinflation, but to include costs related to leases. Adjusted EBITDA excludes acquisition costs and non-recurring expenses. In addition, constant currency is also a non-GAAP measure used to exclude foreign currency fluctuations. 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 the impact of hyperinflation.
For the quarter ended December 31, 2021, we reported revenues of CAD 58.3 million, an increase of CAD 2.9 million on a constant currency basis, or 6% compared to the same period last year. The revenues in the fourth quarter were impacted by the buying patterns on certain of our infectious diseases products. It is estimated that about CAD 3.2 million-CAD 4.2 million of such products were purchased in advance by our customers during the third quarter of 2021.
For the 12 months ended December 31, 2021, we achieved record revenues of CAD 243.5 million, an increase of CAD 48.8 million or 26% on a constant currency basis due to the acquisition of Exelon, the growth of our recently launched products, and increased demand of our infectious diseases product portfolio as a result of the pandemic. As for gross margin, for the quarter ended December 31, 2021, we reported CAD 28.2 million or 48% of revenues, compared to CAD 20.1 million or 36% of revenues in the same period last year. For the full year, gross margin was CAD 115.4 million or 47%, compared to CAD 81.7 million or 41% in 2020.
Excluding the impact of hyperinflation, the gross margin would have been 51% for the quarter and 50% for the year. The increase in gross margin is mainly due to the acquisition of Exelon and related revenues recorded as a net profit transfer, in addition to low inventory provisions and a change in product mix, offset by the renegotiation of certain license agreements and the depreciation of the Latin currencies. Our total operating expenses, including the amortization of intangible assets of CAD 25.8 million for the fourth quarter, increased by CAD 2 million compared to the same period last year. For the full year, total operating expenses were CAD 87.1 million, an increase of CAD 0.9 million compared to the same period last year.
Excluding the non-recurring costs, such as the unified tender offer cost incurred in 2020, the allowance for expected credit losses and the acquisition cost, the increase was CAD 9 million or 13% on a constant currency basis, and is mainly driven by an increase in variable costs such as logistic expenses, the annual incentive compensation plan, the extension of the expiry date of certain stock options, as well as an increase in selling and marketing activities related to key promoted products, including Exelon. Moving on to adjusted EBITDA. The adjusted EBITDA was CAD 5.7 million for the quarter, an increase of CAD 4.3 million or 321% on a constant currency basis compared to the same period last year.
For the 12-month period, our adjusted EBITDA was CAD 38 million, an increase of CAD 24 million or 175% on a constant currency basis over last year. The increase in adjusted EBITDA for the quarter and the full year is mainly due to an increase in gross margin, offset by an increase in operating expenses, adjusted for acquisition and transaction costs as well as non-recurring expenses. Now moving on to net gains on our financial assets, which are not reflected in our adjusted EBITDA. In 2021, we recorded CAD 18.9 million of net gain measured at fair value through profit and loss, which is mainly coming from our strategic fund investments. Finally, Knight generated cash inflows from operations of CAD 4.7 million for the quarter and CAD 44.6 million for the 12-month period ended December 31, 2021.
The cash flow from operations generated is driven by our operating results. I will now turn over the call to Amal to provide an update on business development activities.
Thank you, Arvind. As Samira previously mentioned, 2021 was a record-setting year for Knight, and that statement applies to the achievements of our business development efforts as the team executed on all of our growth strategies. In the second quarter of 2021, we announced the acquisition of the exclusive rights of Exelon for Canada and Latin America. This acquisition brought us our first global brand that we are selling across our entire territory and that is immediately accretive to both revenue and EBITDA.
In addition to the Exelon acquisition, in the third quarter of 2021, we announced the signature and exclusive supply and distribution agreement with Incyte for Latin America for tafasitamab, sold as Monjuvi in the U.S. and Minjuvi in Europe, and pemigatinib, marketed as Pemazyre in the U.S., Europe, and Japan. Tafasitamab and pemigatinib are innovative products that fit perfectly into our oncology and hematology portfolio and expertise. We expect to submit tafasitamab in key countries in the second half of 2022 and pemigatinib in 2023. Lastly, our team continued to build our branded generics portfolio, and we look forward to announcing milestones in due time. We will continue to focus on leveraging our Pan-American ex-U.S. footprint to build our portfolio along our three-pronged growth strategy, which includes acquiring products or companies with existing sales and licensing innovative pipeline assets and developing our branded generics portfolio.
I will now turn the call back to Samira for concluding remarks.
Thank you, Amal. Now turning to the financial outlook. We expect revenues to be in the range of CAD 260 million-CAD 265 million for 2022. The guidance on revenues is on a non-GAAP basis as it excludes the impact of IAS 29 or hyperinflation. This is due to the difficulty in predicting the Argentinian inflation rates. The guidance is also based on a number of assumptions which are described in more detail in our press release. Should any of those assumptions differ, the financial outlook and the actual results may vary materially. Looking ahead, we are committed to continuing to build a leading Pan-American ex-U.S. specialty pharmaceutical company.
We have CAD 150 million in cash equivalents, and marketable securities, and we generate cash from our operations, which positions us well to continue to execute on our strategy to in-license and acquire innovative pharmaceuticals, as well as developing our branded generic portfolio. It is thanks to the hard work of our employees that we achieved unprecedented results in 2021, and we are entering 2022 with a stronger platform that is well equipped to continue delivering on future growth and success. Thank you for the support and confidence in the Knight team. This concludes my formal remarks. I'd now like to open up the call for questions. Emma?
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 at info@knighttx.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're using a speakerphone, please lift the handset before pressing any key. If you would like to withdraw your question, please press pound key. We will pause for a moment to allow people to queue. We will now take our first question from Justin Keywood from Stifel. Please go ahead. Your line is open.
Hi, good morning. Thanks for taking my call. The results showed some substantial improvement on a year-over-year basis, particularly EBITDA, but did fall short of what we were expecting and was down sequentially. Are you able just to describe what led to the difference sequentially, if there was any seasonal factors or other?
Sure, Justin. One of the things that you probably noted, and especially in Q2 and Q3, we saw a significant spike related to some purchases of infectious disease products in Q2 and Q3. As we announced in Q3, there was some inventory in the channel, CAD 3 million-CAD 4 million worth of purchases that related to those infectious disease products that was advanced buying related to Q4, that ended up being advanced buying related to Q4. That softened the results of Q4. On an annual basis, we did really well, but that led to the fluctuations. What I can say when it comes to seasonality, unfortunately due to COVID, normal seasonality has been really impacted. Similar to Canada, we would normally see a higher Q4 in some of the LatAm markets.
This year and last year, completely unpredictable.
Thank you. That's helpful. For the infectious disease products that are using or being used to manage COVID-19 symptoms, I also assume there could be some rebound as far as elective surgeries resuming. How does that dynamic play out? Is there still inventory in the channel? When should we see the growth resume?
That's a great question. So actually what we were really happy with how kind of the market ended with inventory in the channel. We don't really see excess at the end of December this year. As the world opens up and we see things going back to normal, we expect normal purchases to come back.
Okay. Just one other question on the guidance in revenue. Is there any indication on what the EBITDA could be for that level of revenue in the business?
We don't guide towards EBITDA. We only guide towards revenue. What you see this year is we ended the year with kind of a mid-teens EBITDA, which is significantly higher than what we had last year. It's a level that we're comfortable with, for now.
Right. Is there potential operating leverage in the business in 2022? Given that the guided sales is still showing growth, would there be a possible expansion on EBITDA? Or I know there has also been some expenses that you didn't have in 2021, related to sales and marketing. Would that increase possibly negating the operating leverage potential?
We have a great platform, and we can add more assets into this platform. While we are growing top line, one of the things is we have been shut in our homes for a long time, and as the world opens back up, similar to Jeff doing a three-country tour, our reps are now on the road. They're traveling in territories. Conferences are gonna happen. We do expect SG&A to rise in 2022.
Okay, understood. Thank you for taking my questions.
Thank you. We will now take our next question from Endri Leno from National Bank. Please go ahead.
Hi. Good morning. Thanks for taking my question. The first one for me is on guidance. You had a couple of points there that are not included. The first one was discontinuation of certain distribution agreements that is not included, and the other one, unforeseen government-mandated price regulations. I was wondering if you can expand a little bit on those. With regards to discontinuation of distribution agreements, what could the impact be should those come to happen? On the government pricing regulations, are there any specific countries that we should monitor or more of a concern there?
Sure. No. On the termination of agreements, what we did, we know that when it comes to our HIV and HCV portfolio, we did announce that we are transitioning out of those products during the year. It's gonna have a couple of points, not significant, on the top line. It's really a normal course of looking at our portfolio, what's the strategic products, what's the growth and profitability, and we determined it didn't make sense for us to continue to be promoting those products, and we came to an agreement with Gilead on that. That's a normal process that, with the size of portfolio that we have, is to continue to monitor what we are commercializing and where we're commercializing it.
As for government regulations, one of the things that there's nothing specific, but what we know is a lot of governments spent a lot of money during COVID. As payers look to manage their budgets, they're going to try and see where they can cut spend, and one of the places that is an easy place to look at is pharma pricing. That is something that it's not just going to impact Knight. It is an industry impact. That's something that we continue to monitor and be aware of and be concerned about.
Okay. Great. Thank you for color, Samira. The other question I had, I mean, you did flag that you could see some higher operating expenses because of travel, which should also lead to more sales. The question I have there is more on you had highlighted logistics fees and higher compensation. What you got for those in Q4, would that be a good run rate for 2022, or can we expect those two items to pick up a bit more?
Logistics fees is really the more we sell, the more logistics we pay, so it'll go higher. When it comes to the compensation impact, it's more on a comparative basis between Q4 and Q4, and that's really because we, given the results in 2020, there was little to no bonuses given to executives or employees, whereas this year there was a bit more.
Okay. Thank you. The last one for me, you did mention that BizDev continues to be active, and you're looking forward to a license or to acquire. Any color, any additional color that you can give there? I mean, what you're seeing in the landscape, is there any more or less activity and any change in multiples in that regard?
Good morning, Endri. This is Amal. I'll take that. We haven't seen any changes, whether it's in terms of strategy. Our focus is the same. If you recall, we're really looking at three growth strategies, acquiring existing sales or bolt-on M&A. The second one is on the innovative pipeline to build that, and the third one is for our branded generics portfolio. The focus remains the same on the therapeutic areas as well, that we have highlighted in the past. The inflow continues to be quite heavy. The team is very busy. No changes really on the BD side. We continue to be quite busy and optimistic.
Okay, great. Thank you. That's it for me.
Thank you. There are no further questions. I will turn the call back to your host.
Perfect. Thank you for the confidence in the Knight team and for joining our Q4 and year-end conference call. Please stay healthy and safe, and we'll speak to you next Q.
This concludes today's call. Thank you for your participation. You may now disconnect.