On July 28, 2022 Merck (NYSE: MRK), known as MSD outside the United States and Canada, reported financial results for the second quarter of 2022 (Press release, Merck & Co, JUL 28, 2022, View Source [SID1234617083]).

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"I continue to be immensely proud of how the Merck team is performing in all facets of our business — scientifically, commercially and operationally," said Robert M. Davis, chief executive officer and president. "Our strategy is working and our future is bright. I am very confident that we are well-positioned to achieve our near- and long-term goals, anchored by our commitment to deliver innovative medicines and vaccines to patients and value to all of our stakeholders, including shareholders."

Financial Summary

Financial information presented in this release reflects Merck’s results on a continuing operations basis, which excludes Organon & Co. that was spun-off on June 2, 2021.

Generally accepted accounting principles (GAAP) earnings per share (EPS) assuming dilution was $1.55 for the second quarter of 2022. Non-GAAP EPS of $1.87 for the second quarter of 2022 excludes acquisition- and divestiture-related costs, restructuring costs, as well as income and losses from investments in equity securities. In 2022, the company changed the treatment of certain items for purposes of its non-GAAP reporting. Results for 2021 have been recast to conform to the new presentation, which reduced previously reported second-quarter 2021 non-GAAP EPS of $1.31, resulting in revised non-GAAP EPS of $0.61. For more information, refer to the Form 8-K filed by the company on April 21, 2022.

Year-to-date results can be found in the attached tables.

Vaccines Program Highlights

The FDA approved an expanded indication for VAXNEUVANCE (Pneumococcal 15-valent Conjugate Vaccine) to include infants and children. VAXNEUVANCE is now indicated to help prevent invasive pneumococcal disease caused by the serotypes in the vaccine in individuals six weeks and older.
The CDC Advisory Committee on Immunization Practices unanimously voted to provisionally recommend use of VAXNEUVANCE as an option to the currently available 13-valent pneumococcal conjugate vaccine (PCV13) for children under 19 years according to currently recommended PCV13 dosing and schedules. These provisional recommendations will be reviewed by the director of the CDC and the Department of Health and Human Services, and final recommendations will become official when published in the CDC’s Morbidity and Mortality Weekly Report.
Merck presented positive results from the Phase 1/2 study for V116, Merck’s investigational Pneumococcal 21-Valent Conjugate Vaccine designed to target serotypes that account for 85% of all invasive pneumococcal diseases in U.S. adults 65 years and older as of 20193, and enrolled the first patient into the Phase 3 STRIDE-3 trial evaluating V116 in vaccine-naïve adults. V116 contains eight serotypes not included in any currently licensed pneumococcal vaccine.
Oncology Program Highlights

Merck announced the following regulatory milestones for KEYTRUDA (pembrolizumab):
The FDA accepted an application seeking approval for KEYTRUDA as adjuvant therapy for stage IB (>4 centimeters), II or IIIA non-small cell lung cancer (NSCLC) following complete surgical resection based on data from the Phase 3 KEYNOTE-091 trial. The FDA has set a Prescription Drug User Fee Act date of January 29, 2023, however further data may be provided during the review process that may delay this date.
The EC approved four indications for KEYTRUDA:
Approved as monotherapy for the adjuvant treatment of adult and adolescent patients (>12 years of age) with stage IIB or IIC melanoma and who have undergone complete resection, based on results from the KEYNOTE-716 trial. The EC also approved expanding the indication for KEYTRUDA in advanced and stage III melanoma to include adolescent patients 12 years and older.
Approved in combination with chemotherapy as neoadjuvant treatment, and then continued as adjuvant monotherapy after surgery, for adults with locally advanced or early-stage triple-negative breast cancer (TNBC) at high risk of recurrence, based on results from the KEYNOTE-522 trial.
Approved as monotherapy for the treatment of certain adult patients with microsatellite instability-high (MSI-H) or mismatch repair deficient (dMMR) tumors for five types of cancer: unresectable or metastatic colorectal, gastric, small intestine or biliary cancer, as well as advanced or recurrent MSI-H/dMMR endometrial cancer, based on results from the KEYNOTE-164 and KEYNOTE-158 trials.
Approved in combination with chemotherapy, with or without bevacizumab, for patients with persistent, recurrent or metastatic cervical cancer whose tumors express PD-L1 (Combined Positive Score ≥ 1), based on results from the KEYNOTE 826 trial.
The European Medicines Agency Committee for Medicinal Products for Human Use adopted a positive opinion for Lynparza (olaparib), an oral poly (ADP-ribose) polymerase (PARP) inhibitor being co-developed and co-commercialized with AstraZeneca, as adjuvant treatment for patients with germline BRCA-mutated, human epidermal growth factor 2-negative high-risk early breast cancer who have been treated with neoadjuvant or adjuvant chemotherapy, based on results from the Phase 3 OlympiA trial.
At the 2022 American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) Annual Meeting, Merck presented new data in more than 25 types of cancer and held an investor event to highlight key data and provide updates from its late-stage development programs and diverse early-stage pipeline.
Global Pharmaceuticals Program Highlight

Merck, in collaboration with Ridgeback Biotherapeutics, announced data from a pre-specified exploratory analysis for LAGEVRIO (molnupiravir) from the Phase 3 MOVe-OUT study indicating that a lower proportion of participants treated with LAGEVRIO had an acute care visit or COVID-19-related acute care visit versus placebo. Additionally, in a post-hoc subgroup analysis, fewer LAGEVRIO-treated patients who were hospitalized post-randomization in MOVe-OUT required respiratory interventions (including invasive mechanical ventilation) compared to those who received placebo.
Second-Quarter Revenue Performance

The following table reflects sales of the company’s top pharmaceutical products, as well as sales of Animal Health products.

Pharmaceutical Revenue

Second-quarter pharmaceutical sales increased 28% to $12.8 billion. Pharmaceutical sales growth in the second quarter was 16% excluding LAGEVRIO sales, and was primarily driven by oncology, vaccines and hospital acute care products. The COVID-19 pandemic unfavorably affected sales in the second quarter of 2021 by approximately $400 million, which favorably impacted the growth rate in the second quarter of 2022.

LAGEVRIO sales totaled $1.2 billion for the second quarter, primarily consisting of sales in Japan and the U.K. The initial commitment of LAGEVRIO to the U.S. was fulfilled in the first quarter of 2022.

Growth in oncology was largely driven by higher sales of KEYTRUDA, which rose 26% to $5.3 billion in the quarter. Global sales growth of KEYTRUDA reflects continued strong momentum from metastatic indications including certain types of NSCLC, renal cell carcinoma, head and neck squamous cell carcinoma, TNBC and MSI-H cancers, and increased uptake across recent earlier-stage launches including certain types of neoadjuvant/adjuvant TNBC in the U.S.

Also contributing to higher sales in oncology was a 28% increase in Lenvima (lenvatinib) alliance revenue driven primarily by higher demand in the U.S., and an 11% increase in Lynparza alliance revenue reflecting continued demand globally, particularly in the U.S. driven by strong uptake in earlier-stage breast cancer.

Growth in vaccines was primarily driven by higher combined sales of GARDASIL (Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine, Recombinant) and GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) vaccines to prevent certain cancers and other diseases caused by human papillomavirus (HPV). Second-quarter GARDASIL/GARDASIL 9 sales grew 36% to $1.7 billion primarily driven by strong demand outside of the U.S., particularly in China, which also benefited from increased supply.

Growth in hospital acute care reflects higher demand globally for BRIDION (sugammadex) injection 100 mg/mL, a medicine for the reversal of neuromuscular blockade induced by rocuronium bromide or vecuronium bromide in adults and pediatric patients aged 2 years and older undergoing surgery. Sales increased 10% to $426 million, primarily due to an increase in its share among neuromuscular blockade reversal agents and an increase in surgical procedures during the second quarter. Growth in hospital acute care also reflects higher sales of ZERBAXA (ceftolozane and tazobactam), a combination cephalosporin antibacterial and beta-lactamase inhibitor for the treatment of adults with certain bacterial infections. Sales of $46 million resulted from the phased resupply initiated in the fourth quarter of 2021 that is being expanded to additional markets during 2022.

Pharmaceutical sales growth was partially offset by lower combined sales of ISENTRESS/ISENTRESS HD (raltegravir), an HIV integrase inhibitor used in combination with other antiretroviral agents for the treatment of HIV-1 infection, which declined 24% to $147 million reflecting lower global demand. Pharmaceutical sales growth was also partially offset by lower combined sales of JANUVIA (sitagliptin) and JANUMET (sitagliptin and metformin HCI), which declined 2% to $1.2 billion, primarily reflecting the unfavorable effect of foreign exchange and lower pricing in certain international markets, partially offset by the impact of a prior year unfavorable adjustment to rebate reserves in the U.S. The company lost market exclusivity for JANUVIA and JANUMET in China in July and will lose market exclusivity in the European Union in September.

Animal Health Revenue

Animal Health sales totaled $1.5 billion for the second quarter of 2022, flat compared to the second quarter of 2021. Excluding the unfavorable effect from foreign exchange, Animal Health sales grew 5%. Sales were driven primarily by livestock products reflecting higher demand globally for ruminant and poultry products. Sales in companion animal products were primarily driven by the BRAVECTO (fluralaner) parasiticide line of products.

Second-Quarter Expense, EPS and Related Information

GAAP Expense, EPS and Related Information

Gross margin was 71.1% for the second quarter of 2022 compared to 72.8% for the second quarter of 2021. The decrease primarily reflects impacts from LAGEVRIO, which has a lower gross margin due to profit sharing with Ridgeback, as well as higher inventory write-offs, higher manufacturing costs and higher acquisition- and divestiture-related costs. The gross margin decline was partially offset by the favorable effects of product mix.

Selling, general and administrative (SG&A) expenses were $2.5 billion in the second quarter of 2022, an increase of 10% compared to the second quarter of 2021. The increase primarily reflects higher promotion and administrative costs, including compensation and benefit costs, as well as higher acquisition- and divestiture-related costs, partially offset by the favorable impact of foreign exchange.

Research and development (R&D) expenses were $2.8 billion in the second quarter of 2022 compared to $4.3 billion in the second quarter of 2021. The decrease was primarily driven by a $1.7 billion charge in the prior year for the acquisition of Pandion Therapeutics, Inc. (Pandion). The decline was partially offset by higher clinical development spending, higher compensation and benefits, and higher investments in technology in support of the digital enablement of Merck’s research operations.

Other (income) expense, net, was $438 million of expense in the second quarter of 2022 compared to $103 million of income in the second quarter of 2021, primarily due to net unrealized losses from investments in equity securities in the second quarter of 2022, compared to net unrealized income from investments in equity securities in the second quarter of 2021. Other (income) expense, net, in the second quarter of 2022 also reflects higher pension settlement costs of approximately $100 million compared to the second quarter of 2021.

The effective income tax rate was 12.0% for the second quarter of 2022 compared to 29.3% in the second quarter of 2021. The effective income tax rate in the second quarter of 2021 reflects no tax benefit recognized on the charge for the acquisition of Pandion.

GAAP EPS was $1.55 for the second quarter of 2022 compared to $0.48 for the second quarter of 2021.

Non-GAAP Expense, EPS and Related Information

Non-GAAP gross margin was 74.7% for the second quarter of 2022 compared to 76.5% for the second quarter of 2021. The decrease in non-GAAP gross margin primarily reflects impacts from LAGEVRIO, which has a lower gross margin due to profit sharing with Ridgeback, as well as higher inventory write-offs and manufacturing costs. The gross margin decline was partially offset by the favorable effects of product mix.

Non-GAAP SG&A expenses were $2.4 billion in the second quarter of 2022, an increase of 7% compared to the second quarter of 2021. The increase primarily reflects higher promotion and administrative costs, including compensation and benefit costs, partially offset by the favorable impact of foreign exchange.

Non-GAAP R&D expenses were $2.8 billion in the second quarter of 2022 compared to $4.3 billion in the second quarter of 2021. The decrease primarily reflects a $1.7 billion charge in the prior year for the acquisition of Pandion. The decline was partially offset by higher clinical development spending, higher compensation and benefits, and higher investments in technology in support of the digital enablement of Merck’s research operations.

Non-GAAP other (income) expense, net, was $202 million of expense in the second quarter of 2022 compared to $38 million of expense in the second quarter of 2021 reflecting higher pension settlement costs of approximately $100 million.

The non-GAAP effective income tax rate was 13.8% for the second quarter of 2022 compared to 26.7% in the second quarter of 2021. The non-GAAP effective income tax rate in the second quarter of 2021 reflects no tax benefit recognized on the charge for the acquisition of Pandion.

Non-GAAP EPS was $1.87 for the second quarter of 2022 compared to $0.61 for the second quarter of 2021.

A reconciliation of GAAP to non-GAAP net income and EPS is provided in the table that follows.

Financial Outlook

Beginning in 2022, Merck no longer excludes expenses for upfront and milestone payments related to collaborations and licensing agreements, or charges related to pre-approval assets obtained in transactions accounted for as asset acquisitions from its non-GAAP results. Historically, the company excluded these charges to the extent they were considered by the company to be significant to the results of a particular period. These changes were made to align with views expressed by the U.S. Securities and Exchange Commission. Prior periods have been recast to reflect this change. For 2021, non-GAAP results have been recast to include $1.7 billion of incremental R&D expense, resulting in revised full-year 2021 EPS of $5.37.

Business development continues to be a priority for Merck, as demonstrated by the company’s recent collaboration with Orion announced in July for the development and commercialization of ODM-208, an investigational steroid synthesis inhibitor for the treatment of metastatic castration-resistant prostate cancer. The GAAP and non-GAAP financial outlooks include the upfront payment of $290 million, which will have an estimated $0.09 negative impact on full-year EPS.

As an on-going practice, the financial outlook will not include significant potential business development transactions.

Merck continues to experience strong global underlying demand across its key pillars of growth, particularly in oncology and vaccines. As a result, Merck is raising and narrowing its full-year guidance for sales.

At mid-July 2022 exchange rates, Merck expects sales growth of 18% to 20% in 2022, with full-year sales estimated to be between $57.5 billion and $58.5 billion, including a negative impact from foreign exchange of approximately 3%, a greater than 1% incremental negative impact from prior sales guidance.

Merck’s estimated full-year non-GAAP effective income tax rate is unchanged and expected to be between 13.5% and 14.5%.

Merck expects its estimated full-year 2022 GAAP EPS to be between $5.89 and $5.99.

Merck is narrowing its expected full-year 2022 non-GAAP EPS range to be between $7.25 and $7.35, including a negative impact from foreign exchange of approximately 3% at mid-July exchange rates. Operational strength of approximately $0.25 that would have resulted in an increase from the previous guidance range is being offset by the following negative impacts:

The upfront payment of $290 million to Orion
A greater than 1% incremental negative impact from foreign exchange
Higher U.S. pension settlement expense
The non-GAAP range excludes acquisition- and divestiture-related costs and costs related to restructuring programs as well as income and losses from investments in equity securities.

The company continues to expect sales of $5.0 billion to $5.5 billion from LAGEVRIO for full-year 2022. Merck shares profits equally with its partner, Ridgeback, which is reflected in cost of sales.

Earnings Conference Call

Investors, journalists and the general public may access a live audio webcast of the call today at 8:00 a.m. EDT on Merck’s website.

Participants may join the call by dialing 877-692-8955 (USA Toll-Free) or 234-720-6979. If you are calling from other countries, visit this weblink. All dial-in participants can use the access code 1857604. Journalists who wish to ask questions are requested to contact a member of Merck’s Media Relations team.

On July 28, 2022 MaaT Pharma (EURONEXT: MAAT – the "Company"), a French clinical-stage biotech and a pioneer in the development of Microbiome Ecosystem TherapiesTM (MET) dedicated to improving survival outcomes for patients with cancer, reported its cash position as of June 30, 2022, and its revenues for the second quarter of 2022 (Press release, MaaT Pharma, JUL 28, 2022, View Source [SID1234617082]).

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"The second quarter of 2022 saw further progress in our pipeline and the achievement of a crucial milestone for MaaT Pharma. The announcement of data showing a satisfactory safety profile and robust engraftment for MaaT033, our second drug candidate, opens an attractive market opportunity to expand the development to a wider patient population as we focus on preventing complications in patients receiving allo-HSCT[2] and in haematological malignancies overall," said Hervé Affagard, CEO and co-founder of MaaT Pharma.

Second quarter operational and clinical highlights

Clinical development

In June 2022, the Company confirmed positive results from its Phase 1b study evaluating MaaT033, the Company’s second drug candidate, in blood cancer patients; the clinical trial was completed early due to promising interim results.
MaaT Pharma also indicated that preparations are on track for the upcoming Phase 2/3 trial to evaluate MaaT033’s efficacy in improving overall survival and preventing complications in patients with blood cancers receiving allogeneic hematopoietic stem cell transplantation; based on current plans, this study is expected to start in Q4 2022.
In Europe, MaaT013, the Company’s leading drug candidate, is currently being evaluated in two clinical trials launched in Q1 2022, which are moving forward according to the Company’s expected timelines:
Phase 3 open label, single arm trial for drug candidate MaaT013 in the treatment of acute Graft-versus-Host Disease: in addition to France, Germany, and Spain where the trial is ongoing, the Company has received regulatory approvals to start the clinical trial in Austria and Belgium. An interim review of preliminary data is expected in the first half of 2023.
Phase 2a trial, sponsored by AP-HP[3], evaluating MaaT013 in combination with immune checkpoint inhibitors for patients with melanoma, is ongoing.
In the US, interactions with the U.S. Food and Drug Administration (FDA) are ongoing regarding MaaT013, for which US development is currently on clinical hold.
Operational highlights

On May 31, 2022, MaaT Pharma held its annual general meeting. For further information, please visit: View Source
On June 7, 2022, the Company hosted its first virtual R&D Day conference, attended by 150 participants. The replay is accessible here: View Source
"Over the first half of 2022 we are proud to have delivered to our shareholders the operational and clinical milestones set out at the time of our IPO. Our cash position remains solid, providing us with a cash runway through Q3 2023 by which time we expect to have interim data from our Phase 3 trial of MaaT013, and the first patient treated with MaaT033 in a Phase 2/3," stated Siân Crouzet, CFO and COO of MaaT Pharma.

Cash position1

As of June 30, 2022, total cash and cash equivalents were EUR 38.4 million, as compared to EUR 41.1 million as of March 31, 2022, and EUR 43.3 million as of December 31, 2021. The net change in cash over the first half of 2022 was EUR 4.9 million, including EUR 2.7 million in bank loans from BNP Paribas and Caisse d’Epargne Rhone Alpes (CERA) received over the course of the second quarter of 2022. Additional draws down, up to 4.4 million euros, are expected to be made by the end of 2022 from existing facilities signed with CIC and Bpifrance. The Company believes it has sufficient cash to cover needs of the development programs up until the end of the third quarter of 2023.

Revenues in Q2 20221

MaaT Pharma reported revenues[4] from its compassionate access program of EUR 0.2 million for the quarter ended June 30, 2022, compared with EUR 0.3 million for the first quarter of 2022. Total revenues for the first half of 2022 amount to EUR 0.5 million compared with EUR 0.4 million for the first half of 2021. In 2021, revenues were invoiced as of February 2021 whereas in 2022 the Company benefits from a full 6 months of revenues.

Upcoming financial communication and investor conference participation

September 12-14, 2022 – C. Wainwright 24th Annual Global Investment Conference
September 15-16, 2022 – KBC Securities Life Sciences Conference
September 28, 2022 – 5th edition – Forum LPB Valeurs Régionales
September 29, 2022 – Half-year Results 2022*
October 6-7, 2022 – Investor Access Event
*Indicative calendar that may be subject to change.

[1] Unaudited data
[2] Allogeneic hematopoietic stem cell transplantation (allo-HSCT) is a curative treatment of liquid tumors which affect approximately 22,000 patients every year in the 7 major markets
[3] AP-HP: Assistance Publique – Hôpitaux de Paris
[4] Revenues correspond to compensation invoiced in relation to the compassionate access program, as approved by the French National Drug Safety Agency (Agence Nationale de Sécurité du Médicament or ANSM).

On July 28, 2022 Lexicon Pharmaceuticals, Inc. (Nasdaq: LXRX) ("Lexicon") reported the pricing of its previously announced underwritten public offering of 16,843,600 shares of its common stock, par value $0.001 (the "Common Stock"). The shares of Common Stock are being offered at a public offering price of $2.50 per share (Press release, Lexicon Pharmaceuticals, JUL 28, 2022, View Source [SID1234617081]). All of the shares are being offered by Lexicon. The gross proceeds from the public offering are expected to be approximately $42.1 million, before deducting underwriting discounts and commissions and other offering expenses. In addition, Lexicon has granted the underwriters a 30-day option to purchase up to an additional 2,526,540 shares of Common Stock (the "Option Shares") at the public offering price, less underwriting discounts and commissions. The public offering is expected to close on or about August 1, 2022, subject to the satisfaction of customary closing conditions.

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Lexicon currently intends to use the net proceeds that it will receive from the public offering and the concurrent private placement, together with its existing cash and cash equivalents and short-term investments, for (i) funding pre-commercial and commercial launch activities for sotagliflozin in heart failure; (ii) funding continued development of sotagliflozin in heart failure and LX9211 in neuropathic pain; and (iii) working capital and other general corporate purposes.

Citigroup and Piper Sandler are acting as joint book-running managers for the public offering.

In addition to the shares being sold in the underwritten public offering, Lexicon has agreed to sell 17,156,400 shares of its Common Stock to raise gross proceeds of approximately $42.9 million in a concurrent private placement at $2.50 per share to one or more affiliates (the "Private Placement Purchasers") of Invus, L.P., Lexicon’s largest stockholder. The Private Placement Purchasers will have the option to purchase, on a pro rata basis, up to an additional 2,573,460 shares of Common Stock at the public offering price of $2.50 per share to the extent the underwriters exercise their option to purchase the Option Shares. The sale of these shares of Common Stock will not be registered under the Securities Act of 1933, as amended (the "Securities Act"). The concurrent private placement is also scheduled to close on August 1, 2022, subject to the satisfaction of customary closing conditions. The closing of the underwritten public offering is not conditioned on the closing of the concurrent private placement.

A shelf registration statement on Form S-3 relating to the underwritten public offering was filed with the U.S. Securities and Exchange Commission ("SEC") on August 6, 2021 and declared effective by the SEC on September 14, 2021. The shares of Common Stock proposed to be issued in the concurrent private placement have not been registered under the Securities Act, or the securities laws of any state or other jurisdiction in the United States, and may not be offered, pledged, sold, delivered or otherwise transferred, directly or indirectly, in the United States except pursuant to registration under the Securities Act, or an applicable exemption from the registration requirements of the Securities Act and, in each case, in compliance with other applicable securities laws. A preliminary prospectus supplement and accompanying prospectus relating to the underwritten public offering have been filed with the SEC and are available on the SEC’s website at www.sec.gov. A final prospectus supplement and accompanying prospectus will be filed with the SEC. When available, copies of the final prospectus supplement and accompanying prospectus may also be obtained from Citigroup Global Markets Inc., c/o Broadridge Financial Services, 1155 Long Island Avenue, Edgewood, NY 11717, or by telephone at 1-800-831-9146, or by email at [email protected]; or Piper Sandler & Co., 800 Nicollet Mall, J12S03, Minneapolis, Minnesota 55402, Attn: Prospectus Department, by telephone at 1-800-747-3924, or by email at [email protected].

This press release does not constitute an offer to sell, or the solicitation of an offer to buy, these securities, nor will there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale is not permitted.

On July 28, 2022 Leidos (NYSE: LDOS), a FORTUNE 500 science and technology leader, reported that it will participate in the Jefferies Industrials Conference being held in New York, NY (Press release, Leidos, JUL 28, 2022, View Source [SID1234617080]).

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Roger Krone, Chief Executive Officer, will engage in a question and answer "fireside chat" on Tuesday, Aug. 9, 2022, at 3:30 p.m. ET.

A live audio webcast of the event will be available on the Leidos Investor Relations website at View Source . A replay of the webcast will be available following the presentation at the same link listed above for 90 days afterward.

On July 28, 2022 Labcorp (NYSE: LH) (the "Company"), a leading global life sciences company, reported that its Board of Directors has authorized the Company to pursue a spin-off of the Company’s wholly owned Clinical Development business to Labcorp shareholders through a tax-free transaction (Press release, LabCorp, JUL 28, 2022, View Source [SID1234617079]). The planned spin-off will result in two independent, publicly traded companies, each poised for strong, sustainable growth:

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Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

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Labcorp: A leading global laboratory business comprising the Company’s routine and esoteric labs, central labs and early development research labs, all of which are leaders with deep scientific expertise, vast health data and insights, and an extensive, advanced global laboratory network.
The Clinical Development Business: A leading, global Contract Research Organization (CRO) providing Phase I-IV clinical trial management, market access and technology solutions to pharmaceutical and biotechnology organizations.
Following the decision by the Board last year to initiate a dividend and accelerate the Company’s share repurchase program, Labcorp’s management team and Board continued to evaluate all avenues to further enhance stakeholder value. The planned spin-off is expected to provide each company with:

Strengthened strategic flexibility and operational focus to pursue specific market opportunities and better meet customer needs.
Focused capital structures and capital allocation strategies to drive innovation and growth.
A more targeted investment opportunity for different investor bases.
"Spinning off the Clinical Development business will benefit customers and shareholders by creating two standalone businesses that are poised to accelerate growth and focus resources on distinct strategic priorities, customer needs and value creation," said Adam Schechter, chairman and CEO of Labcorp. "Our shareholders will be able to participate in the upside potential of two market-leading businesses in the global healthcare sector, each of which will be well-capitalized and positioned to generate sustainable growth with strong free cash flows and attractive returns. Our customers will continue to have access to our full range of capabilities with the same quality and seamless delivery of services they have come to expect from our teams. Today is a testament to our long history of growth through innovation and track record of delivering on our mission to improve health and improve lives."

Labcorp: A Compelling Value Proposition with a Strong Growth Platform Serving All Healthcare Sectors and Customers

Labcorp will remain a global leader advancing healthcare through science, innovation and technology with deep scientific expertise, vast health data and insights, and an extensive, advanced global laboratory network. Together, its lab-based businesses will create a cohesive, global provider of laboratory-focused services with complementary resources operating at scale and a diverse customer base. Following the planned spin-off, the business will be positioned to:

Invest in R&D and innovation to develop and launch diagnostic advancements globally in key areas including oncology, Alzheimer’s, autoimmune and liver disease through organic and inorganic opportunities.
Bring together its global health and patient data and provide insights to enable customers to advance innovation.
Utilize its worldwide laboratory network to serve a broad, growing and global customer base including pharmaceutical and biotechnology companies, physicians, health systems, consumers, and other start-ups and labs who require lab services or diagnostic testing.
Launch innovative tests globally, providing patients, physicians, health systems and pharmaceutical companies with access to Labcorp’s advanced science, technology and diagnostic capabilities.
Over the last four quarters ending June 30, 2022, Labcorp’s routine and esoteric labs, central lab and early development research lab businesses delivered total revenue of $12.7 billion, or $10.5 billion excluding COVID-19 Testing revenues. These businesses combined grew 5.5% on a CAGR basis from second quarter 2019 to second quarter 2022 excluding COVID-19 Testing revenues. Going forward, Labcorp will continue to have an attractive growth profile and is expected to deliver mid-single digit annual revenue growth. In addition, Labcorp remains committed to its capital allocation strategy and maintaining its investment grade credit rating.

Adam Schechter will continue to lead Labcorp as chairman and CEO following the completion of the planned spin-off. Labcorp will continue to be headquartered in Burlington, North Carolina.

The Clinical Development Business: Leading Global CRO Focused on Supporting Biotechnology and Pharmaceutical Customers and Accelerating Innovation

The Clinical Development business will continue to be a leading global provider of Phase I-IV clinical trial, market access and technology solutions to both large and emerging pharmaceutical and biotechnology organizations. Following the planned spin-off, the business will be positioned to:

Capitalize on growth opportunities across Phases I-IV clinical trials and extend its leadership in oncology, cell and gene therapy, rare disease, and other emerging therapeutic areas.
Increase agility with large pharmaceutical and biotechnology clients to better serve customers and advance life-saving therapies.
Retain access to Labcorp’s vast health and clinical data set through an arrangement which will enable it to provide enhanced trial execution and a differentiated value proposition.
Continue to invest in capabilities, technologies, diverse talent and innovation to enhance trial execution and better serve all of its customers.
Implement a capital structure that is tailored to support its growth strategy and enhance stakeholder value.
Over the last four quarters ending June 30, 2022, the Clinical Development business delivered total revenue of $3.0 billion. This business grew 8.0% on a CAGR basis from second quarter 2019 to second quarter 2022. Going forward, the Clinical Development business is expected to deliver high-single-digit revenue growth.

Transaction Details

Labcorp currently expects to effect the planned spin-off through a dividend of the Clinical Development business’ shares to Labcorp’s shareholders. Following the spin-off, Labcorp expects to continue to be publicly traded on the New York Stock Exchange and expects the Clinical Development business to be publicly listed. The spin-off is intended to qualify as a tax-free transaction for U.S. federal income tax purposes.

The Board of Directors, executive leadership, and company name of the Clinical Development business will be determined and announced in the future as plans for the spin-off continue to progress.

Labcorp anticipates that, consistent with any applicable legal and tax requirements, there will be ongoing transitional and commercial arrangements to provide for a seamless delivery of services to the customers and other stakeholders of the Labcorp and the Clinical Development businesses.

Labcorp is targeting completion of the planned spin-off in the second half of 2023. The spin-off will be subject to the satisfaction of certain customary conditions, including, among others, the receipt of final approval by Labcorp’s Board of Directors, the receipt of appropriate assurances regarding the tax-free nature of the separation and effectiveness of any required filings with the Securities and Exchange Commission. Labcorp notes that there can be no assurances regarding the ultimate timing of the transaction or that the spin-off will be completed.

Advisors

Barclays, Evercore and Goldman Sachs & Co. LLC are serving as Labcorp’s financial advisor, and Jones Day and Hogan Lovells are serving as legal counsel.

Conference Call and Webcast

Labcorp will discuss the spin-off announcement on its second quarter 2022 earnings conference call, which will be held today at 9:00 a.m. ET. The online webcast of the call, along with the accompanying slide presentation, will be available at View Source

The conference call may also be accessed by dialing 800-715-9871 (646-307-1963 for international callers). The conference ID is 4124787. A telephone replay of the call will be available through August 11, 2022, and can be heard by dialing 800-770-2030 (609-800-9909 for international callers). The conference ID for the replay is 4124787.