On July 30, 2015 Baxalta Incorporated (NYSE:BXLT) reported revenues for the second quarter and first half of 2015, which exceeded expectations, and provided its financial outlook for the third quarter and second half of 2015 (Filing, 8-K, Baxalta, JUL 30, 2015, View Source [SID:1234506759]). The company continues to bolster its portfolio with acquisitions and collaborations focused on rare and orphan diseases, and advanced its product pipeline with the achievement of significant milestones. Baxalta launched as an independent company, listed on the New York Stock Exchange, on July 1, 2015.

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"The Baxalta team is successfully executing on our strategies to build an independent, global biopharmaceutical company focused on delivering innovation that provides patients with better treatment options for challenging chronic and rare diseases," said Ludwig Hantson, chief executive officer and president, Baxalta. "It is an exciting time for Baxalta. Our strong financial performance, increasing depth and breadth across the portfolio, progress toward near-term launches, and compelling growth prospects are differentiating our company."

Results for the Second Quarter of 2015

During the second quarter, Baxalta generated worldwide pro forma sales of $1.47 billion, reflecting growth of 7 percent excluding the impact of foreign currency. Pro forma sales include international sales of $40 million, which were comparable to the prior year, associated with the company’s manufacturing and supply agreement (MSA) for certain biosurgery products for Baxter International. On a GAAP (Generally Accepted Accounting Principles) basis, Baxalta’s worldwide revenues of $1.43 billion declined 2 percent from the prior-year period.

Within the United States, sales of $775 million rose 6 percent, and international sales of $654 million declined 9 percent. On a pro forma basis, international sales of $694 million declined 8 percent. Excluding foreign currency, international pro forma sales increased 9 percent.

Second quarter sales performance was the result of strong momentum and balanced growth across the company’s leading hematology and immunology businesses. Hematology revenues, excluding the impact of foreign currency, grew 6 percent in the second quarter driven by robust global demand for ADVATE [Antihemophilic Factor (Recombinant)], a treatment for hemophilia A, and double-digit growth of FEIBA [Anti-Inhibitor Coagulant Complex], an inhibitor treatment. Newly launched products also contributed to growth, such as RIXUBIS [Coagulation Factor IX (Recombinant)] for the treatment of hemophilia B, and OBIZUR [Antihemophilic Factor (Recombinant), Porcine Sequence], for the treatment of acquired hemophilia A.

Pro forma immunology sales, excluding the impact of foreign currency, advanced 10 percent driven by demand for immunoglobulin therapies and continued launch success of HYQVIA [Immune Globulin Infusion 10% (Human) with Recombinant Human Hyaluronidase]. HYQVIA is the only once-monthly subcutaneous treatment available for adults with primary immunodeficiency, which is achieving rapid acceptance in the United States.

Results for the First Six Months of 2015
Baxalta generated worldwide pro forma sales for the first six months of 2015 of $2.87 billion, reflecting growth of 8 percent excluding the impact of foreign currency. Excluding the impact of foreign currency, hematology revenues grew 5 percent and pro forma immunology sales advanced 11 percent. On a GAAP basis, Baxalta’s worldwide revenues for the first six months of 2015 were $2.79 billion, which does not reflect international pro forma MSA revenues of $82 million for the period, and were comparable to the prior year.

Revenues within the United States of $1.53 billion rose 6 percent, and international sales of $1.26 million declined 6 percent. On a pro forma basis, international sales of $1.34 billion declined 6 percent. Excluding foreign currency, international pro forma sales increased 9 percent versus the first six months of the prior year.
Significant Progress with Cross-Portfolio Pipeline and Commercial Milestones
"Baxalta has a rich pipeline, reflecting meaningful innovation with promising late-stage assets, novel mechanisms, and disruptive technologies," added Hantson. "We continue to achieve a number of significant pipeline and portfolio milestones, which positions the company to drive enhanced growth and value for patients and shareholders."

Recent highlights include:

• Completion of the ONCASPAR (pegaspargase) portfolio acquisition from Sigma-Tau Finanziaria S.p.A., further accelerating Baxalta’s innovation capabilities and commercial presence in growing oncology markets. The acquisition includes ONCASPAR, an important marketed biologic treatment for acute lymphocytic leukemia (ALL), the investigational biologic calaspargase pegol, and an established oncology infrastructure with clinical and sales resources.

• Presentations at the 2015 International Society on Thrombosis and Haemostasis (ISTH) Congress, during which the company:

- Introduced ADYNOVATE as the marketed brand name for BAX 855, an investigational, extended half-life recombinant factor VIII (rFVIII) treatment based on ADVATE. ADYNOVATE is currently under regulatory review by the U.S. Food and Drug Administration (FDA) as well as Japan’s Ministry of Health.

- Announced continued progress on the Phase I/II open-label study on BAX 335, an investigational factor IX gene therapy treatment for hemophilia B.

- Presented additional data from the Phase III clinical trial of BAX 111, which will be marketed in the U.S. as VONVENDI. VONVENDI is currently under regulatory review in the U.S., and if approved, will be the first highly-purified recombinant von Willebrand Factor (rVWF) for patients with von Willebrand disease.

• Receipt of a positive opinion on OBIZUR from the European Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA). OBIZUR is a treatment for bleeding episodes in adult patients with acquired hemophilia A caused by antibodies to factor VIII, a very rare and potentially life-threatening acute bleeding disorder. Marketing authorization from the European Commission is anticipated later this year.

• Submission of a European marketing authorization application (MAA) for approval of the investigational 20% concentration subcutaneous immune globulin (IGSC) treatment for primary immunodeficiencies. As Baxalta expands its immunoglobulin portfolio to address patient needs, the higher potency IG treatment is intended to offer faster infusions with less volume. The company expects to file for U.S. approval later this year.

• Progress in Baxalta’s contract fractionation agreement with Stichting Sanquin Bloedvoorziening (Sanquin Blood Supply Foundation) to enhance supply and support growth in global demand for plasma-based therapies. Sanquin has submitted the production line for approval in Europe, which will provide additional manufacturing flexibility.

• Submission of a European MAA for MM-398 (nal-IRI), for the treatment of metastatic pancreatic cancer for patients who have previously been treated with gemcitabine-based therapy. Baxalta’s U.S. partner Merrimack Pharmaceuticals submitted a new drug application (NDA) for MM-398 to the FDA and it has been granted Priority Review status.

• Presentation of additional data on pacritinib with CTI BioPharma during the 51st Annual Meeting of the American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper). The presentation included primary and secondary endpoints from PERSIST-1, a randomized, controlled Phase III registration clinical trial of pacritinib, an oral kinase inhibitor with specificity for JAK2 and FLT3 for the treatment of patients with myelofibrosis.

• Formation of Vitesse Biologics, LLC, a unique collaboration model among Baxalta Ventures, Mayo Clinic, and Velocity Pharmaceutical Development to develop antibody and protein-based therapeutics in the areas of hematology, immunology, and oncology. Each organization will provide recognized expertise to enhance target selection and optimization, expression, and product development processes. Baxalta will be involved in the early stages of development and has an exclusive option to acquire the candidates identified by Vitesse following the completion of Phase I trials.

Financial Outlook for Third Quarter and Second Half of 2015

Baxalta today provided its financial outlook for the third quarter and second half of 2015. For the third quarter of 2015, excluding the impact of foreign currency, the company expects pro forma sales growth of 8 to 10 percent. Including the impact of foreign currency, the company expects reported pro forma sales to be comparable to the prior year. Baxalta also expects adjusted earnings, before special items, of $0.48 to $0.50 per diluted share.

For the second half of 2015, Baxalta expects pro forma sales growth, excluding the impact of foreign currency, of 5 to 6 percent. Including the impact of foreign currency, the company expects reported pro forma sales to decline 2 to 3 percent. Also for the second half of the year, Baxalta expects adjusted earnings, before special items, of $1.02 to $1.04 per diluted share.
The company’s guidance for earnings in the third quarter of 2015 excludes approximately $0.01 per diluted share of projected intangible asset amortization expense. The company’s adjusted earnings guidance for the second half excludes $0.02 per diluted share of projected intangible asset amortization expense. Reconciling for the inclusion of these items results in expected GAAP earnings of $0.47 to $0.49 per diluted share for the third quarter of 2015, and earnings of $1.00 to $1.02 per diluted share for the second half of 2015.