On March 1, 2021 Reata Pharmaceuticals, Inc. (Nasdaq: RETA) ("Reata," the "Company," or "we"), a clinical-stage biopharmaceutical company, reported financial results for the quarter and full year ended December 31, 2020, and provided an update on the Company’s business operations and clinical development programs (Press release, Reata Pharmaceuticals, MAR 1, 2021, View Source [SID1234575863]).

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Recent Company Highlights

Chronic Kidney Disease

Bardoxolone Methyl ("Bardoxolone") in Alport Syndrome

Reata has submitted a New Drug Application ("NDA") for bardoxolone in Alport syndrome to the U.S. Food and Drug Administration ("FDA"). This NDA submission is based on the efficacy and safety data from the CARDINAL Phase 3 clinical trial, which was an international, double-blind, placebo-controlled, randomized trial that enrolled 157 patients with chronic kidney disease ("CKD") caused by Alport syndrome. This NDA submission includes a request for Priority Review, which, if granted, would shorten the FDA’s review of the NDA to eight months from the time of submission, versus a standard review timeline of 12 months. If approved, bardoxolone would become the first therapy specifically indicated for the treatment of CKD caused by Alport syndrome.

"We are extremely pleased to announce this submission of our NDA for bardoxolone in Alport syndrome," said Warren Huff, Reata’s President and Chief Executive Officer. "This submission of Reata’s first NDA marks a significant step toward our commitment to develop novel therapies for life threatening diseases that have limited treatment options. I want to thank all of the people who made this moment possible, including the patients and their families, investigators, and physicians who participated in our Alport syndrome clinical trials."

Bardoxolone in Autosomal Dominant Polycystic Kidney Disease ("ADPKD")

FALCON is an international, multi-center, randomized, double-blind, placebo-controlled, registrational Phase 3 trial studying the safety and efficacy of bardoxolone in patients with ADPKD randomized one-to-one to bardoxolone or placebo. In March 2020, we announced a temporary pause on enrollment in FALCON due to the COVID-19 pandemic; we resumed enrollment during the third quarter of 2020. Despite the pandemic, most sites are currently able to screen and randomize patients. More than 220 patients are currently enrolled in the study.

We are planning to amend the FALCON protocol to increase the target enrollment from 300 patients to a total of 550 patients. With the planned increase in anticipated enrollment, we expect to complete enrollment in FALCON by the end of 2021.

Bardoxolone in CKD Patients at Risk of Rapid Progression

MERLIN is a proof of concept, multi-center, double-blind, placebo-controlled, Phase 2 trial to evaluate the safety and efficacy of bardoxolone in patients at risk of rapidly progressing CKD due to multiple etiologies. The primary endpoint of the trial is the change in estimated glomerular filtration rate ("eGFR") from baseline to Week 12. Enrollment began in February 2021, and data are expected in the second half of 2021. If the results of this study are positive, our plan would be potentially to proceed to a larger Phase 3 with similar eligibility criteria. Rapid progression to end-stage kidney disease affects patient subsets across multiple etiologies of CKD. MERLIN is designed to evaluate the efficacy and safety of bardoxolone in this area of high unmet need.

Neurology

Omaveloxolone in Patients with Friedreich’s Ataxia ("FA")

MOXIe Part 2 was an international, multi-center, double-blind, placebo-controlled, randomized registrational study of omaveloxolone in 103 patients with FA. Patients who completed the study and met eligibility requirements could participate in the open-label extension ("MOXIe Extension"). In November 2020, the FDA suggested additional exploratory analyses that could inform the future development program of omaveloxolone in patients with FA. The analyses would include the change from baseline in the modified Friedreich’s Ataxia Rating Scale ("mFARS") during the MOXIe Extension, comparing patients randomized to placebo (the placebo-to-omaveloxolone group) with those randomized to omaveloxolone (the omaveloxolone-to-omaveloxolone group) in the double-blind period from MOXIe Part 2. Such analyses would include a graphical representation of the time course for the change from baseline mFARS in both omaveloxolone and placebo groups from the placebo-controlled MOXIe Part 2 and the change from baseline in the two treatments groups (the omaveloxolone-to-omaveloxolone group and the placebo-to-omaveloxolone group) through 48 weeks in the MOXIe Extension.

We conducted these additional exploratory analyses, called the Delayed-Start Analyses, of data from MOXIe Part 2 and the MOXIe Extension. Parallel trajectories between the placebo-to-omaveloxolone group and the omaveloxolone-to-omaveloxolone group in the MOXIe Extension could provide evidence of disease-modifying activity.

A total of 73 out of 75 (97%) patients without pes cavus who completed MOXIe Part 2 enrolled in the MOXIe Extension, including 39 patients previously randomized to placebo and 34 patients previously randomized to omaveloxolone. Annualized slopes using all available data from the MOXIe Extension showed similar slopes in mFARS for the placebo-to-omaveloxolone group (0.59 points per year) when compared to the omaveloxolone-to-omaveloxolone group (0.41 points per year) with no significant difference between slopes (p=0.75). The resulting parallel trajectories between both treatment groups is consistent with disease-modifying activity.

We have requested a Type C meeting with the FDA to discuss the Delayed-Start Analyses and the FA development program. We plan to initiate a second pivotal study in the second half of 2021, following discussions with the FDA and the European Medicines Agency ("EMA").

RTA 901 in Diabetic Peripheral Neuropathic Pain ("DPNP")

We have observed favorable activity of RTA 901 in a range of preclinical models of neurological disease, including models of diabetic neuropathy, neuroinflammation, and neuropathic pain. We have completed a Phase 1 trial to evaluate the safety, tolerability, and pharmacokinetic profile of RTA 901 administered orally, once-daily in healthy adult volunteers. RTA 901 was well tolerated in both single and multiple ascending dose studies across all dose groups with no safety signals, drug discontinuations, or serious adverse events. Additionally, we observed an acceptable pharmacokinetic profile with exposures approximately 10-fold larger than required for efficacy in preclinical animal models. We plan to initiate additional Phase 1 clinical pharmacology studies in the second quarter of 2021. We also expect to launch a randomized, placebo-controlled Phase 2 study in DPNP in the fourth quarter of 2021.

Fourth Quarter and Full Year Financial Highlights

On its fourth quarter 2020 and full-year financial results, Reata’s Chief Operating Officer and Chief Financial Officer, Manmeet S. Soni, commented: "Reata’s balance sheet is strong. Our current cash runway will allow us to invest appropriately in the promising assets within Reata’s pipeline. Our investments to date have enabled our readiness for bardoxolone’s commercial launch later this year, should we receive FDA approval of bardoxolone for the treatment of patients with Alport syndrome."

Cash and Cash Equivalents

At December 31, 2020, we had cash and cash equivalents of $818.2 million, as compared to $664.3 million at December 31, 2019.

Collaboration Revenue

Collaboration revenue was $4.7 million for the twelve-month period ended December 31, 2020, as compared to $25.3 million for the same period of the year prior.

GAAP and Non-GAAP Research and Development ("R&D") Expenses

R&D expenses according to generally accepted accounting principles in the U.S. ("GAAP") were $159.1 million for the twelve months ended December 31, 2020, as compared to $128.1 million, for the same period of the year prior.

Non-GAAP R&D expenses were $131.0 million for the twelve months ended December 31, 2020, as compared to $119.4 million, for the same period of the year prior.1

GAAP and Non-GAAP General and Administrative ("G&A") Expenses

GAAP G&A expenses were $75.1 million for the twelve months ended December 31, 2020, as compared to $58.3 million, for the same period of the year prior.

Non-GAAP G&A expenses were $45.6 million for the twelve months ended December 31, 2020, as compared to $40.6 million for the same period of the year prior.1

GAAP and Non-GAAP Net Loss

The GAAP net loss for the twelve months ended December 31, 2020, was $247.8 million, or $7.35 per share, on both a basic and diluted basis, as compared to a GAAP net loss of $290.2 million, or $9.54 per share, on both a basic and diluted basis, for the same period of the year prior.

The non-GAAP net loss for twelve months ended December 31, 2020, was $158.3 million, or $4.70 per share on both a basic and diluted basis, as compared to a non-GAAP net loss of $139.4 million, or $4.58 per share, on both a basic and diluted basis, for the same period of the year prior.1

Cash Guidance

The Company expects existing cash and cash equivalents will be sufficient to enable it to fund operations through mid-2024.

____________________________
1 See "Non-GAAP Financial Measures" below for a description of non-GAAP financial measures and a reconciliation between GAAP and non-GAAP R&D expenses, GAAP and non-GAAP G&A expenses, and GAAP and non-GAAP net loss, respectively, appearing later in the press release.

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures, including non-GAAP R&D expenses, non-GAAP G&A expenses, non-GAAP operating expenses, non-GAAP net loss and non-GAAP net loss per common share – basic and diluted. These measures are not in accordance with, or an alternative to, GAAP, and may be different from non-GAAP financial measures used by other companies.

The Company defines non-GAAP R&D expenses as GAAP R&D expenses, which excludes stock-based compensation expense; non-GAAP G&A expenses as GAAP G&A expenses, which excludes stock-based compensation expense; non-GAAP operating expenses as GAAP operating expenses, which excludes stock-based compensation expense and reacquired license rights; non-GAAP net loss as GAAP net loss, which excludes stock-based compensation expense, reacquired license rights, non-cash interest expense from liability related to sale of future royalties, loss on extinguishment of debt, and gain on lease termination; and non-GAAP net loss per common share – basic and diluted as GAAP net loss per common share – basic and diluted, which excludes stock-based compensation expense, reacquired license rights, non-cash interest expense from liability related to sale of future royalties, loss on extinguishment of debt, and gain on lease termination. The Company has excluded the impact of stock-based compensation expense, which may fluctuate from period to period based on factors including the variability associated with performance-based grants for stock options and restricted stock units and changes in the Company’s stock price, which impacts the fair value of these awards. The Company has excluded the impact of accreted non-cash interest expense from liability related to sale of future royalties as it may be calculated differently from, and therefore may not be comparable to, peer companies who also provide non-GAAP disclosures. The Company has excluded the impact of reacquired licenses rights expense, loss on extinguishment of debt, and gain on lease termination as they are non-recurring transactions, that make it difficult to compare its results to peer companies who also provide non-GAAP disclosures. The Company has excluded the impact of stock-based compensation expense, reacquired license rights expense, non-cash interest expense from liability related to sale of future royalties, loss on extinguishment of debt, and gain on lease termination because the Company believes its impact makes it difficult to compare its results to prior periods and anticipated future periods.

Because management believes certain items, such as stock-based compensation expense, reacquired license rights expense, non-cash interest expense from liability related to sales of future royalties, loss on extinguishment of debt, and gain on lease termination, can distort the trends associated with the Company’s ongoing performance, the following measures are often provided, excluding special items, and utilized by the Company’s management, analysts, and investors to enhance consistency and comparability of year-over-year results, as well as to industry trends, and to provide a basis for evaluating operating results in future periods: non-GAAP net loss; non-GAAP net loss per common share – basic and diluted; non-GAAP R&D expenses; non-GAAP G&A expenses; and non-GAAP operating expenses.

The Company believes the presentation of these non-GAAP financial measures provides useful information to management and investors regarding the Company’s financial condition and results of operations. When GAAP financial measures are viewed in conjunction with these non-GAAP financial measures, investors are provided with a more meaningful understanding of the Company’s ongoing operating performance and are better able to compare the Company’s performance between periods. In addition, these non-GAAP financial measures are among those indicators the Company uses as a basis for evaluating performance, allocating resources and planning and forecasting future periods. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for GAAP financial measures. A reconciliation between these non-GAAP measures and the most directly comparable GAAP measures is provided later in this press release.

Conference Call Information

Reata’s management will host a conference call on March 1, 2021, at 8:30 am ET. The conference call will be accessible by dialing (866) 270-1533 (toll-free domestic) or (412) 317-0797 (international) using the access code: 10152707. The webcast link is View Source

Fourth quarter and full year 2020 financial results to be discussed during the call will be included in an earnings press release that will be available on the company’s website shortly before the call at View Source and will be available for 12 months after the call. The audio recording and webcast will be accessible for at least 90 days after the event at View Source.

On March 1, 2021 Kaleido Biosciences, Inc. (Nasdaq: KLDO), a clinical-stage healthcare company with a differentiated, chemistry-driven approach to targeting the microbiome to treat disease and improve human health, reported that Dan Menichella, President and Chief Executive Officer of Kaleido will present a corporate overview and host 1×1 meetings with investors during Chardan’s 3rd Annual Microbiome Medicines Summit (Press release, Kaleido Biosciences, MAR 1, 2021, View Source [SID1234575862]). The presentation will take place virtually on Monday, March 8th at 9:30am-9:55am EST.

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A webcast of the presentation can be accessed on the Investors & Media section of Kaleido’s website at View Source An archived replay will be available for 90 days following the event.

On March 1, 2021 SOM Biotech reported its participation in the BIO-Europe Spring 2021 partnering event on March 22nd – 25th, which will take place digitally due to the pandemic situation (Press release, SOM Biotech, MAR 1, 2021, View Source;utm_medium=rss&utm_campaign=som-biotech-at-bio-europe-spring-2021 [SID1234575861]).

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Organized by the EBD Group, a global partnering event organizer, the BIO-Europe Spring event attracts leading decision-makers not only from the traditional pharma and biotech sectors but also the world´s most innovative scientific institutions and leading investors in life sciences.

Raúl Insa, CEO of SOM Biotech highlights: "The BIO-Europe is a very relevant global life science partnering event, that enables us to meet with executives of the leading drug development and pharmaceutical industries. Partnering is for SOM Biotech a key strategic pillar and the event offers us a unique opportunity to meet with potential partners to discuss strategic collaborations and share our latest drug development updates. Additionally, the event is a fantastic platform to meet qualified investors, present our strategic growth plan and explore future business opportunities".

Maria Zimina, Business Development Manager of SOM Biotech remarks: "We look forward to meeting with potential partners at BIO-Europe Spring 2021 and continuing building a strong network of pharmaceutical companies and research institutions to boost our development pipeline and strengthen operations with our AI-ligand-based drug discovery technology SOMAIPRO".

On March 1, 2021 Perrigo Company plc (NYSE; TASE: PRGO), a leading provider of Quality, Affordable Self-Care Products, reported financial results for the fourth quarter and fiscal year ended December 31, 2020 (Press release, Perrigo Company, MAR 1, 2021, View Source [SID1234575860]).

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President and CEO, Murray S. Kessler commented, "I am deeply proud of how our Perrigo team safely managed through the complications brought on by the COVID-19 pandemic and, at the same time, continued to make major progress on our Consumer Self-Care transformation. Thanks to their relentless dedication, we were able to provide our essential and affordable products to consumers who needed them, while delivering value to customers and growing our business. Our 2020 financial results reflect strong performance across the business as we delivered record Worldwide Consumer net sales, despite the fourth quarter impact from the extremely low incidence of cough/cold illnesses worldwide and the incremental costs associated with keeping our facilities safely running without interruption. We remain focused on creating value for shareholders through our commitment to delivering 3% net sales growth, 5% adjusted operating income growth and 7% adjusted earnings per share growth from continuing operations in 2021 and beyond."

Kessler continued, "With today’s agreement to divest the RX Pharmaceuticals business, we have now completed our portfolio reconfiguration to return Perrigo to a pure-play consumer self-care company, while providing us with the financial flexibility to build our business and deliver on our growth targets."

Kessler concluded, "At this point all of the commercial pieces of our transformation are in place and Perrigo is poised to create significant value. That is why I have agreed to the Board’s request to extend my contract by 3 years – to finish the job on Perrigo’s transformation. I am excited about what we have accomplished to date, and even more excited by all that remains to accomplish going forward."

Refer to Tables I – IV at the end of this press release for a reconciliation of non-GAAP adjustments to the current year and prior year periods and additional non-GAAP information. The Company’s reported results are included in the attached Consolidated Statements of Operations, Balance Sheets and Statements of Cash Flows.

Fourth Quarter 2020 Consolidated Results Versus Fourth Quarter 2019

Consolidated net sales for the fourth quarter were $1.3 billion, a decrease of $33 million or 2.5%. Organic net sales declined 4.7%, which included a negative 5.0 percentage points impact due to lower worldwide net sales of cough/cold products.

Consolidated net sales gains were driven by 1) $30 million from the Dr. Fresh and Eastern European dermatology brands acquisitions, 2) organic growth in Worldwide Consumer, excluding the impact from cough/cold, of $23 million, and 3) $17 million in net favorable currency movements. These consolidated gains were more than offset by 1) a decline of $65 million across all segments due to lower cough/cold net sales, 2) a $19 million decline in the RX Pharmaceuticals ("RX") segment, excluding cough and cold prescription products, and 3) $19 million from divested businesses.

Reported net loss was $175 million, or $1.29 per diluted share, versus a net loss of $19 million, or $0.14 per diluted share in the prior year period. Excluding certain charges as outlined in Table I, fourth quarter 2020 adjusted net income was $127 million, or $0.93 per diluted share, versus $145 million, or $1.06 per diluted share, for the same period last year resulting in a 12.3% decrease in adjusted diluted EPS. This decrease was due primarily to the impact from cough/cold products of approximately $0.11 per diluted share and divested businesses of $0.05 per diluted share.

Fourth Quarter 2020 Worldwide Consumer Self-Care Results Versus Fourth Quarter 2019

Worldwide Consumer is comprised of the CSCA segment, the Consumer Self-Care International ("CSCI") segment and Corporate.

Worldwide Consumer Self-Care fourth quarter net sales decreased $14 million, or 1.3%, to $1.1 billion. Organic net sales decreased 3.8%, which included a negative 6.0 percentage point impact due to lower net sales of cough/cold products compared to the prior year.

Fourth quarter reported gross profit margin was 36.5%. Adjusted gross profit margin of 38.7%, was 60 basis points lower year-over-year as favorable product mix was more than offset by higher input costs and the impact from divested businesses.

Reported operating margin was 4.2%. Adjusted operating margin decreased 320 basis points year-over-year to 11.1% due primarily to gross profit flow-through, higher advertising and promotion expenditures in CSCI and higher corporate expenses.

CSCA Fourth Quarter 2020 Results Versus Fourth Quarter 2019

Consumer Self-Care Americas fourth quarter net sales of $701 million, were 1.4% or $10 million lower than the prior year. Organic net sales decreased 4.7% and included a negative 5.4 percentage point impact due to lower net sales of cough/cold products compared to the prior year and a negative 0.7 percentage point impact related to a timing benefit in the prior year of a pre-build of contract pack inventory in the infant nutrition business.

OTC net sales were driven by 1) strong e-commerce growth as consumers continued to shift purchasing towards online where Perrigo has greater market share, which more than offset lower traditional brick and mortar purchases as measured by IRI MULO, 2) favorable consumer conversion to Perrigo products in the Digestive Health category, 3) the incremental benefit from new product sales led by Prevacid, Diclofenac sodium topical gel 1%, and Esomeprazole Mini, and 4) the Skincare and Personal Hygiene category led by store brand minoxidil. More than offsetting these drivers were 1) lower cough/cold net sales resulting from extremely low levels of cough/cold and flu illnesses, which impacted the Upper Respiratory and Pain & Sleep Aids categories, and 2) normal pricing pressure.

Perrigo omnichannel POS (point of sale) declined 0.6% for the 13-weeks ending December 27, 2020, compared to an estimated decline in store brand OTC omnichannel POS data of 5.7%, leading to a Perrigo store brand share gain of 100 basis points. Total OTC omnichannel POS data declined an estimated 3.5% in the categories in which Perrigo competes, resulting in a Perrigo penetration share gain of 14 basis points versus national brands.

Net sales growth in the Oral Self-Care category were driven by 1) the Dr. Fresh acquisition, 2) base business growth led by record quarterly shipments to customers and growth in the Plackers brand, and 3) continued momentum in e-commerce.

In the Nutrition category, net sales growth in e-commerce was more than offset by 1) operational challenges that caused a shortfall in achieving normal customer service levels leading to a decline in market share, and 2) a benefit in the prior year quarter due to a pre-build of contract pack inventory.

Fourth quarter reported gross margin was 32.3%. Adjusted gross margin of 33.0% was 80 basis points lower than the prior year as favorable product mix, including higher margin new products, were more than offset by normal pricing pressure and lower manufacturing efficiencies in infant formula.

Reported operating margin was 16.8%. Adjusted operating margin decreased 160 basis points to 18.8%, due primarily to gross margin flow-through and planned investments in current and future OTC brand launches.

Fourth Quarter 2020 CSCI Results Versus Fourth Quarter 2019

Consumer Self-Care International net sales were $352 million, a decrease of $4 million, or 1.1%. Organic net sales were 1.9% lower and included a negative 7.1 percentage point impact due to lower net sales of cough/cold products compared to the prior year.

The decline in net sales was due primarily to 1) lower cough/cold net sales resulting from extremely low levels of cough/cold and flu illnesses, which impacted the Upper Respiratory category, 2) lower consumer demand for anti-parasite products within the Skincare & Personal Hygiene category due primarily to COVID-19 related school closings and limited travel, and 3) divested businesses of $19 million and discontinued products of $5 million. These were partially offset by 1) new products, including line extensions in the ACO dermatology product line, 2) higher net sales in both the VMS (vitamins, minerals and supplements) category and the Pain & Sleep Aids category, each of which benefited from consumer behavior surrounding COVID-19, and 3) $18 million in favorable currency movements.

Reported gross margin was 44.8%. Adjusted gross margin of 50.0% declined 40 basis points due primarily to the impact from divested businesses.

Reported operating margin was (3.8)%. Adjusted operating margin decreased 430 basis points to 9.6% due to higher advertising and promotion spend and the impact from divested businesses.

RX Fourth Quarter 2020 Results Versus Fourth Quarter 2019

RX net sales of $236 million were $20 million, or 7.7%, lower than the prior year due primarily to $13 million in discontinued lower-margin distribution products and $2 million due to lower net sales of cough/cold products compared to the prior year. These were partially offset by improved customer service levels and higher net sales in the Israeli distribution business.

Reported gross margin was 35.9% while adjusted gross margin was 44.9%, an increase of 170 basis points. The increase in adjusted gross margin was due primarily to an improvement in customer service levels and favorable product mix. These benefits were partially offset by normal pricing pressure.

Reported operating margin was (40.8)% driven primarily by a $144 million goodwill impairment charge taken in the quarter. Adjusted operating margin was 29.4%, an increase of 540 basis points due to gross margin flow-through and lower operating expenses, of which $11 million was related to the generic albuterol pre-commercialization R&D costs in the prior year that did not reoccur.

Fiscal Year 2020 Results

Consolidated Fiscal 2020 Results Versus Fiscal 2019

Consolidated net sales were $5.1 billion, an increase of 5.0% compared to the prior year. Excluding the impact of currency and divested businesses, net sales increased 6.4%. This increase was driven by 1) new product sales of $304 million, 2) net sales from acquisitions of $214 million, which included a half-year benefit from the prior year Ranir acquisition and 9-months from the Dr. Fresh acquisition, 3) strong organic growth in CSCA, and 4) robust e-commerce growth. These drivers were partially offset by 1) divested businesses of $60 million and discontinued products of $51 million, 2) normal levels of pricing pressure, and 3) lower net sales of cough/cold products compared to the prior year. Consolidated organic net sales growth of 1.9% included a negative 1.4 percentage point impact due to lower worldwide net sales of cough/cold products.

Reported net loss was $163 million, or a loss of $1.19 per diluted share, versus reported net income of $146 million, or $1.07 per diluted share, in the prior year. Excluding certain charges as outlined in Table I, fiscal 2020 adjusted net income was $552 million, or $4.02 per diluted share, versus $550 million, or $4.03 per diluted share, in fiscal 2019. Strong organic performance in CSCA, robust e-commerce growth across the portfolio and the Oral Self-Care acquisitions offset lower worldwide net sales of cough/cold products, the impact from divested businesses and COVID-19 related costs.

Fiscal 2020 Worldwide Consumer Self-Care Results Versus Fiscal 2019

Worldwide Consumer net sales were a fiscal year record $4.1 billion, an increase of 6.0% compared to the prior year. Excluding the impact of currency and divested businesses, net sales were 7.9% higher year-over-year. Organic net sales were up 2.3%, despite a negative 1.7 percentage point impact due to lower net sales of cough/cold products compared to the prior year.

Fiscal 2020 reported gross profit margin was 36.7%. Adjusted gross profit margin of 38.9% was 140 basis points lower due primarily to 1) the Oral Self-Care acquisitions, 2) changes in global product mix associated with store brand products growing at a faster rate than branded products, and 3) COVID-19 related costs.

Reported operating margin was 7.2%. Adjusted operating margin was 13.2%, or 90 basis points lower as gross profit flow-through and higher corporate costs were partially offset by cost savings from Project Momentum and lower advertising and promotion expenditures.

CSCA Fiscal 2020 Results Versus Fiscal 2019

Consumer Self-Care Americas achieved record fiscal year net sales of $2.7 billion, an increase of $222 million, or 9.0%, which included $168 million attributable to the Ranir and Dr. Fresh acquisitions and a negative $11 million impact from foreign currency. Organic net sales were up 3.4%, including a negative 1.6 percentage point impact due to lower net sales of cough/cold products compared to the prior year.

The increase in OTC net sales were driven by 1) favorable consumer conversion to products in the Digestive Health category, 2) the increase of consumer COVID-19 related demand experienced in the first half of 2020 in the Pain and Sleep Aids category, and 3) the incremental impact of new product sales led by Prevacid, Diclofenac sodium topical gel 1%, and Esomeprazole Mini, and 4) continued robust e-commerce growth. These increases were partially offset by 1) lower cough/cold net sales resulting from extremely low levels of cough/cold and flu illnesses, which impacted the Upper Respiratory and Pain & Sleep Aids categories, and 2) normal pricing pressure.

Higher net sales in the Oral Self-Care category were driven by 1) a half-year benefit from the prior year Ranir acquisition and 9-months from the current year Dr. Fresh acquisition, 2) growth in the base business and the Plackers brand, and 3) continued momentum in e-commerce.

The decrease in Nutrition net sales was due primarily to the prior year pre-build of contract pack inventory and operational challenges that led to a shortfall in achieving normal customer service levels, which more than offset new product sales from the launch of infant formula at a major retailer in December 2019.

Perrigo omnichannel POS data increased 7.1% for the 52-weeks ending December 27, 2020, compared to an estimated increase in store brand OTC omnichannel POS data of 1.9%, leading to Perrigo store brand share gains versus competitors of 100 share points. Total OTC omnichannel POS data grew an estimated 4.8% in the categories in which Perrigo competes, resulting in Perrigo penetration share gains of 13 share points.

Reported gross profit margin was 31.9%. Adjusted gross profit margin of 32.7% was 90 basis points lower as favorable product mix and savings on raw materials were more than offset by normal pricing pressure, COVID-19 related costs and lower manufacturing efficiencies in infant formula.

Reported operating margin was 17.5%. Adjusted operating margin of 19.6% was 10 basis points lower as gross profit flow-through was mostly offset by cost savings from Project Momentum.

Fiscal 2020 CSCI Results Versus Fiscal 2019

CSCI net sales increased 0.8% to $1.4 billion. Excluding divested businesses of $40 million and favorable currency movements of $4 million, net sales were higher by 3.6%. Organic net sales were flat and included a negative 1.8 percentage point impact due to lower net sales of cough/cold products compared to the prior year.

Net sales growth was driven by 1) new product sales of $98 million driven by additions to the XLS-Medical Forte 5 brand and new products in the ACO dermatology portfolio, 2) an incremental $45 million in net sales from the acquisitions of Ranir and the Eastern European dermatology brands, 3) strong consumer demand in the VMS and Pain & Sleep Aids categories, each of which benefited from consumer behavior surrounding COVID-19, and 4) solid performance in the U.K. store brand business. CSCI also benefited from strong growth in e-commerce.

This growth was partially offset by 1) lower consumer demand for anti-parasite and weight management products within the Skincare & Personal Hygiene and Healthy Lifestyle categories, respectively, due primarily to consumer behavior surrounding COVID-19, including related school closings and country-specific lockdowns, 2) lower cough/cold net sales resulting from extremely low levels of cough/cold and flu illnesses, which impacted the Upper Respiratory category, and 3) divested businesses of $40 million and discontinued products of $10 million.

Reported gross margin was 45.9%. Adjusted gross margin of 50.8% declined 160 basis points due primarily to 1) the full-year inclusion of Ranir and improved performance in the U.K. store brand business, both of which have relatively lower gross margins than the overall portfolio, 2) impact from divested businesses, and 3) higher input costs on a particular OTC brand.

Reported operating margin was 2.3%. Adjusted operating margin of 14.3% declined 140 basis points as gross margin flow-through and transformation investments were offset by the relatively higher operating margin in Ranir, Project Momentum cost savings and lower advertising and promotion expense.

RX Fiscal 2020 Results Versus Fiscal 2019

RX net sales increased $8 million to $975 million due primarily to new product sales of $165 million, which were mostly offset by 1) normal pricing pressure, 2) discontinued lower-margin distribution products of $35 million, 3) a $31 million impact from the reserve for the estimated generic albuterol sulfate recall costs, and 4) fewer patient visits to dermatologists and other physicians related to COVID-19, which led to lower U.S. prescription volumes.

Reported gross margin was 32.3% and adjusted gross margin was 41.0%. The 260 basis point decline in adjusted gross margin was due primarily to less favorable product mix and costs for the generic albuterol recall in the third quarter of 2020.

Reported operating margin of (18.2)% was driven primarily by $347 million in goodwill impairment charges. Adjusted operating margin of 26.2% was 110 basis points lower as gross margin flow-through was partially offset by lower operating expenses, of which $11 million was related to the generic albuterol pre-commercialization R&D costs in the prior year that did not reoccur.

Share Repurchase

In the fourth quarter, the Company repurchased 3.4 million of its shares for approximately $164 million under its approved $1 billion share repurchase authorization program.

Reached Agreement to Sell RX Pharmaceuticals Business

Perrigo announced today, in a separate release, a definitive agreement to sell its Generic Rx Pharmaceuticals business to Altaris Capital Partners, LLC for total consideration of $1.55 billion, including $1.5 billion in cash and more than $50 million in other considerations. This transaction establishes Perrigo as a pure-play global consumer self-care leader with top-tier Consumer Packaged Goods fundamentals.

Fiscal 2021 Outlook

For fiscal 2021, Perrigo Worldwide Consumer is committed to delivering 3% organic net sales growth, 5% adjusted operating income growth and 7% adjusted diluted EPS growth, in line with CPG peers that trade at much higher multiples. Based on a preliminary estimate of the accounting treatment to classify Rx as discontinued operations, translates to an adjusted diluted EPS range of $2.50 to $2.70.

The Company cannot reconcile its expected adjusted diluted earnings per share to diluted earnings per share under "Fiscal 2021 Outlook" without unreasonable effort because certain items that impact net income and other reconciling metrics are out of the Company’s control and/or cannot be reasonably predicted at this time.

On March 1, 2021 Athenex, Inc., (NASDAQ: ATNX), a global biopharmaceutical company dedicated to the discovery, development, and commercialization of novel therapies for the treatment of cancer and related conditions, reported a corporate and financial update for the fourth quarter and full year ended December 31, 2020 (Press release, Athenex, MAR 1, 2021, View Source [SID1234575859]).

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Oral Paclitaxel Plus Encequidar Update

As announced by Athenex in a separate press release this morning, the U.S. Food and Drug Administration (FDA) has issued a complete response letter (CRL) for the Company’s New Drug Application (NDA) for oral paclitaxel and encequidar for the treatment of metastatic breast cancer. In the CRL, the FDA expressed the following:

Concerns about safety risks associated with increase in neutropenia-related sequelae
Concerns regarding the primary endpoint assessment conducted by the Blinded Independent Central Review (BICR)
Recommendation that Athenex conduct a new clinical trial in a patient population with metastatic breast cancer representative of the population in the U.S.
"We are surprised and disappointed by the FDA’s decision to issue a complete response letter for oral paclitaxel and encequidar," said Johnson Lau, Chief Executive Officer of Athenex. "Based on the clinical benefits demonstrated by the Phase III trial results, we are committed to exploring our available options to obtain approval for oral paclitaxel and encequidar. Additionally, we will undertake a thorough review of our organization to best position ourselves to create value for all stakeholders as we move forward."

Fourth Quarter 2020 and Recent Business Updates

Clinical Programs:

Oral Paclitaxel Plus Encequidar for Metastatic Breast Cancer

Athenex received a Complete Response Letter from the FDA for the NDA for oral paclitaxel for metastatic breast cancer
On December 9, 2020, the Company presented four abstracts associated with oral paclitaxel plus encequidar for the treatment of metastatic breast cancer and angiosarcoma at the 2020 San Antonio Breast Cancer Symposium
Klisyri for Actinic Keratosis

On December 14, 2020, the U.S. Food and Drug Administration (FDA) approved Klisyri (tirbanibulin), 1% for the treatment of actinic keratosis of the face or scalp
In February 2021, the New England Journal of Medicine published Phase 3 trial results on the efficacy and safety of tirbanibulin ointment for the topical treatment of actinic keratosis of the face or scalp
Almirall, S.A. (BLM: ALM), Athenex’s U.S. partner, launched Klisyri in the U.S. on February 18, 2021
Commercial Business:

Product sales growth in the fourth quarter were primarily driven by sales of specialty pharmaceutical products used to treat patients hospitalized with COVID-19
Athenex Pharmaceutical Division (APD) currently markets a total of 34 products with 63 SKUs
Athenex Pharma Solutions (APS) currently markets 6 products with 19 SKUs
Key Anticipated Future Milestones

Request a meeting with the FDA to discuss and align on next steps to obtain approval for oral paclitaxel plus encequidar in metastatic breast cancer
Identify and undertake appropriate adjustments for the company pending the outcome of the FDA meeting
Begin expansion portion of the oral paclitaxel plus pembrolizumab Phase I trial
Present the oral paclitaxel plus pembrolizumab Phase I trial data at a medical conference in 2021
Anticipate EMA approval of Klisyri in 2021
TCR-T NY-ESO-1 IRB approval and initiate P1 trial enrollment in 1H 2021
Anticipate results from the I-SPY 2 trial of oral paclitaxel plus anti PD-1 in 2022
Fourth Quarter and Full Year 2020 Financial Highlights

Product sales for the three months ended December 31, 2020 were $21.8 million, up from $14.1 million for the three months ended December 31, 2019, which represents a 54% increase. Product sales for the full year in 2020 were $105.3 million, up from $80.5 million for the full year in 2019, which represents a 31% increase. The increase was primarily driven by the impact of the global health pandemic which led to the increased demand for COVID-19 related drugs, and the launch of additional products, resulting in a significant increase in specialty product sales. The product sales increase was partially offset by a decrease in API and 503B products sales, which was attributable to the reduced production and external sales of API, and the discontinued vasopressin sales.

Collaboration and license revenue for the three months and year ended December 31, 2020 were $28 thousand and $39.1 million, respectively, compared to $20.3 million and $20.7 million, respectively, for the same periods in 2019. The collaboration and license revenue recognized in the full year of 2020 was primarily attributable to the 2019 Xiangxue License Agreement, while the revenue in the full year of 2019 was primarily attributable to a milestone achieved pursuant to the license agreement entered with Almirall in December 2017.

Total revenues for the three months and year ended December 31, 2020 were $21.8 million and $144.4 million, respectively, compared to $34.4 million and $101.2 million, respectively, for the same periods in 2019.

Cost of sales totaled $18.3 million for the three months ended December 31, 2020, an increase of 16%, as compared to $15.7 million for the three months ended December 31, 2019. Cost of sales totaled $95.4 million for the full year in 2020, an increase of 37%, as compared to $69.6 million for the full year in 2019. The increase in cost of specialty product sales was generally in-line with the increase in revenue, and we continued to incur fixed costs despite decreased production at our API and 503B facilities. in the fourth quarter, the increase in product sales outpaced that of cost of sales, primarily as a result of an uptake in the blended product margin of our specialty product portfolio.

Research & Development (R&D) expenses totaled $18.3 million for the three months ended December 31, 2020, a decrease of 16%, as compared to $21.8 million for the three months ended December 31, 2019. R&D expenses totaled $75.9 million for the full year in 2020, a decrease of 10%, as compared to $84.4 million for the full year in 2019. This was primarily attributable to a decrease in clinical operations expenses, drug development costs for specialty products and certain licensing costs. The decrease in R&D expenses in the full year of 2020 was partially offset by an increase in medical affairs expenses related to preparing our proprietary drugs for commercialization, API development costs, and expenses related to the expansion of our R&D teams in Latin America and Taiwan.

Selling, General & Administrative (SG&A) expenses totaled $31.4 million for the three months ended December 31, 2020, an increase of 73%, as compared to $18.1 million for the three months ended December 31, 2019. SG&A expenses totaled $96.9 million for the full year in 2020, an increase of 45%, as compared to $66.7 million for the full year in 2019. This was primarily attributable to an increase in commercial preparations costs associated with the possible approval of Oral Paclitaxel, expanded work forces at our manufacturing facilities and an increase in general and administrative costs related to professional service fees, IT costs, insurance and other operational costs. In addition, in the three months ended December 31, 2020, we recorded a provision for a potential credit loss of $8.9 million related to an outstanding balance due from Xiangxue and associated expenses resulting from currency conversion. This provision is related to the license revenue we recognized in the third quarter of 2020. As of February 28, 2021, we have received $1.5 million from Xiangxue.

Interest expense totaled $4.4 million and $1.7 million for the three months ended December 31, 2020 and 2019, respectively. Interest expense totaled $11.2 million and $7.0 million for the full year in 2020 and 2019, respectively. In June 2020, we refinanced the $50 million long-term debt with Perceptive, with an up to $225 million long-term credit facility with Oaktree. In the three months ended December 31, 2020, we received net proceeds of $24.25 million from the Oaktree facility upon achievement of the tirbanibulin FDA approval milestone. As of December 31, 2020, we had drawn down $150 million, out of the $225 million Oaktree facility.

We recognized a $7.2 million loss on the extinguishment of debt related to the termination of the senior secured loan agreement with Perceptive and a $3.0 million loss on the partial extinguishment of debt related to the assignment of a portion of the senior secured loan from Oaktree’s co-investors to Sagard during the year ended December 31, 2020. We did not incur expenses of similar nature in 2019.

For the full year in 2020, we incurred income tax expense of $4.1 million, compared to $0.9 million for the same period in 2019. The increase was primarily attributable to foreign income tax withholdings on our revenue earned under our out-license arrangements.

Net losses attributable to Athenex for the three months and year ended December 31, 2020 were $49.5 million and $146.2 million, respectively, or ($0.53) and ($1.72) per diluted share, respectively, as compared to a net loss of $21.7 million and $123.7 million, or ($0.28) and ($1.67) per diluted share, for the same periods in 2019. Excluding the credit loss provision of $8.9 million during the three months ended December 31, 2020, net loss attributable to Athenex for the quarter was $40.6 million or ($0.43) per diluted share. Excluding the one-time debt extinguishment expenses of $10.3 million and the $8.9 million credit loss provision during the year ended December 31, 2020, net loss attributable to Athenex for the full year in 2020 was $127.0 million, or ($1.49) per diluted share.

As of December 31, 2020, the Company had cash, cash equivalents and restricted cash of $86.1 million and short-term investments of $138.6 million.

2021 Financial Guidance

In terms of product sales guidance, the Company is limiting financial guidance to only the existing product portfolio, which excludes any proprietary products, until meaningful sales data from the proprietary product Klisyri becomes available. In 2020, the Company recorded a significant amount of revenues from international customers as a result of the global pandemic. However, the Company does not see these revenues as recurring in nature, while it has been continuing to expand its product portfolio. The Company currently expects its product sales in 2021, excluding any royalties from Klisyri, to be in line with 2020 levels.

The Company expects that its cash, cash equivalents, restricted cash, and short-term investments as of December 31, 2020, will enable it to meet its current operational liquidity needs and fund operations into the second quarter of 2022. The Company’s estimates are based on relevant conditions that are known and reasonably knowable at the date of these consolidated financial statements being available for issuance, and are subject to change due to changes in business, industry or macroeconomic conditions. The cash runway described above does not reflect additional funding available through the existing Senior Credit Agreement with Oaktree, or the Revenue Interest Financing Agreement with Sagard.

Conference Call and Webcast Information

Athenex will host a conference call and live audio webcast today, Monday, March 1, 2021, before the market open, at 8:00 am Eastern Time to discuss the financial results and provide a business update.

To participate in the call, dial (877) 407-0784 (domestic) or (201) 689-8560 (international) fifteen minutes before the conference call begins and reference the conference passcode 13715950. The live conference call and replay can also be accessed by audio webcast here and also on the Investor Relations section of the Company’s website, located at View Source