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Seattle Genetics Announces Multiple Data Presentations Evaluating ADCETRIS® (Brentuximab Vedotin) in Patients with Hodgkin Lymphoma at ISHL 2018

On October 25, 2018 Seattle Genetics, Inc. (Nasdaq:SGEN) reorted that highlighted multiple presentations evaluating ADCETRIS (brentuximab vedotin) across a broad range of Hodgkin lymphoma (HL) settings at the 11th International Symposium on Hodgkin Lymphoma (ISHL) taking place in Cologne, Germany, October 27-29, 2018 (Press release, Seattle Genetics, OCT 25, 2018, View Source [SID1234530190]). Data include both encore and additional analyses from the phase 3 ECHELON-1 clinical trial evaluating ADCETRIS in combination with chemotherapy in frontline Stage III or IV classical HL adult patients, which formed the basis of U.S. Food and Drug Administration (FDA) approval in this indication in March 2018. Interim results will be presented from two ongoing clinical trials evaluating ADCETRIS in combination with Opdivo (nivolumab), including in newly diagnosed older HL patients. Lastly, five-year follow-up from the phase 3 AETHERA clinical trial will be presented. ADCETRIS is an antibody-drug conjugate (ADC) directed to CD30, a defining marker of classical HL that plays a role in tumor pathogenesis. ADCETRIS is being evaluated globally as the foundation of therapy for HL in more than 50 ongoing clinical trials. ADCETRIS and Opdivo are not approved in combination for the treatment of HL.

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"After more than a decade of dedicated clinical research with ADCETRIS, we have made significant progress in improving the treatment outcomes for patients with Hodgkin lymphoma," said Nancy Whiting, Pharm.D., Senior Vice President, Clinical Development and Global Medical Affairs at Seattle Genetics. "At ISHL, we will present additional analyses from the ECHELON-1 trial, which demonstrated that ADCETRIS plus AVD improves upon a frontline standard of care regimen, ABVD, in advanced patients and resulted in the first change in advanced stage HL in over 40 years. In addition, three oral presentations will highlight ADCETRIS plus Opdivo combination data in frontline and relapsed/refractory HL and five-year data from the phase 3 AETHERA trial. We are pleased to share these results from our broad ADCETRIS clinical development program with the Hodgkin lymphoma community."

Multiple corporate presentations will be presented at ISHL. Abstracts will be available at www.hodgkinsymposium.org.

Data from four analyses of the phase 3 ECHELON-1 clinical trial will be presented at ISHL. Importantly, an analysis from the ECHELON-1 study (Abstract #0038) will be presented in an oral presentation and poster showing PFS data per investigator that is consistent with the previously reported modified PFS data per Independent Review Facility (IRF). The ECHELON-1 abstracts include the following:

Frontline brentuximab vedotin plus chemotherapy exhibits superior modified progression-free survival vs chemotherapy alone in patients with stage III or IV Hodgkin lymphoma: phase 3 ECHELON-1 study (Abstract #0038, oral presentation and poster on Monday, October 29 at 07:30-07:50 CEST)
Population pharmacokinetic modeling and exposure-response assessment of brentuximab vedotin efficacy and safety in patients with advanced classical Hodgkin lymphoma from the phase 3 ECHELON-1 study (Abstract #0137, poster presentation)
Serum sCD30 and TARC do not correlate with PET-based response assessment in patients (pts) with stage III or IV classical Hodgkin lymphoma (cHL): phase 3 ECHELON-1 study of brentuximab vedotin plus chemotherapy vs chemotherapy alone (Abstract #0159, poster presentation)
Brentuximab vedotin plus chemotherapy in high risk advanced-stage classical Hodgkin lymphoma (cHL) patients: Results of pre-specified sub-group analyses from the ECHELON-1 study (Abstract #0136, poster presentation)
Additional data presentations at ISHL include the following:

Brentuximab Vedotin in Combination with Nivolumab in Patients with Relapsed or Refractory Hodgkin Lymphoma: Follow-up Results from the Phase 1/2 Study (Abstract #0005, oral presentation on Monday, October 29 at 14:40-14:50 CEST)

Data will be reported from 62 patients with relapsed or refractory HL who received the combination regimen of ADCETRIS plus Opdivo after failure of frontline therapy. Patients were treated once every three weeks, with up to four cycles of combination therapy in the outpatient setting. After completion of the fourth cycle of treatment, patients were eligible to undergo an autologous stem cell transplant (ASCT). The median age of patients was 37 years. The majority of patients (95 percent) were refractory or had relapsed after receiving the standard of care frontline treatment ABVD (Adriamycin, bleomycin, vinblastine and dacarbazine) or some variation of the standard of care (ABVE-PC, R-ABVD). Key findings will be presented in an oral presentation by Alex Herrera, M.D., Assistant Professor at the City of Hope Medical Center, Duarte, CA and include:

Of 61 response-evaluable patients, 49 patients (80 percent) had an objective response, including 37 patients (61 percent) with a complete response and 12 patients (20 percent) with a partial response.
Of the 61 response-evaluable patients, the estimated 21-month overall survival (OS) and PFS were 95 percent and 82 percent, respectively. The median follow-up time was 21.8 months and both median OS and PFS were not yet reached. Of 42 patients who underwent ASCT directly after treatment with ADCETRIS plus Opdivo, estimated PFS at 21-months was 97 percent and median PFS was not yet reached.
PFS was evaluated by response to treatment. The estimated PFS at 21-months for patients with a complete response was 97 percent, for patients with a partial response was 83 percent and patients with stable disease was 50 percent.
As previously reported, the most common adverse events (AEs) of any grade occurring prior to ASCT or subsequent salvage therapy in at least 20 percent of patients were nausea, infusion-related reaction (IRR), fatigue, pruritus, diarrhea, headache, vomiting, cough, pyrexia, dyspnea and nasal congestion.
Phase 2 Study of Frontline Brentuximab Vedotin Plus Nivolumab in Patients with Hodgkin Lymphoma Aged ≥60 Years (Abstract #0153, oral presentation on Monday, October 29 at 15:05-15:15 CEST)

Interim results will be presented from an ongoing phase 2 clinical trial evaluating ADCETRIS in combination with Opdivo as frontline therapy for HL patients age 60 years or older. ADCETRIS combination data were reported from 14 patients. The median age of patients was 71.5 years. The majority of patients (79 percent) had stage III/IV disease at the time of diagnosis. The interim results will be highlighted in an oral presentation by Jonathan Friedberg, M.D., Director of the University of Rochester Medical Center, NY and include:

Of 11 response-evaluable patients with a median follow-up time of eight months, nine patients (82 percent) had an objective response, including six patients (55 percent) with a complete response and three patients (27 percent) with a partial response. In addition, two patients (18 percent) had stable disease which equates to all 11 patients (100 percent) experiencing disease control (complete response + partial response + stable disease) as a result of treatment with ADCETRIS in combination with Opdivo.
The most common AEs of any grade occurring in at least 25 percent of patients were fatigue, diarrhea, constipation, nausea, arthralgia, chills, decreased appetite, pyrexia, IRR, aspartate aminotransferase increased and peripheral sensory neuropathy. Grade 3 or higher adverse events occurred in seven patients (50 percent), and the most common were peripheral neuropathy and lipase increased (three patients each); nausea and alanine aminotransferase increased (two patients each).
Five patients (36 percent) had IRRs, with the majority of symptoms at Grade 1 and there were no Grade 3 or higher symptoms. Four patients (29 percent) were treated with corticosteroid and no patients discontinued treatment due to an IRR.
Five-Year Progression-Free Survival Outcomes from a Pivotal Phase 3 Study of Consolidative Brentuximab Vedotin after Autologous Stem-Cell Transplantation (ASCT) in Patients with Hodgkin Lymphoma at Risk of Relapse or Progression (AETHERA) (Abstract #0110, oral presentation on Monday, October 29 at 17:10-17:20 CEST)

The phase 3 AETHERA clinical trial was designed to evaluate the potential of single-agent ADCETRIS to extend PFS post-ASCT in patients with classical HL who were at high risk of relapse or progression. ADCETRIS was approved by the FDA in August 2015 for the treatment of adult patients with classical HL at high risk of relapse or progression as post-autologous hematopoietic stem cell transplantation (auto-HSCT) consolidation. The five-year follow-up efficacy and safety data will be highlighted in an oral presentation by Craig Moskowitz, M.D., Physician in Chief, Sylvester Comprehensive Cancer Center, University of Miami and include:

The five-year PFS rate per investigator was 59 percent in the ADCETRIS arm compared to 41 percent in the placebo arm. Median PFS per investigator was not yet reached in the ADCETRIS arm versus 15.8 months in the placebo arm. The hazard ratio was 0.521 indicating a 48 percent reduction in the risk of progression or death with treatment of ADCETRIS compared to placebo.
Fewer patients in the ADCETRIS arm of the study received subsequent anti-cancer therapies versus the placebo arm (32 percent versus 54 percent, respectively). In addition, fewer patients in the ADCETRIS arm received allogeneic stem-cell transplants versus the placebo arm (17 patients versus 31 patients).
A PFS analysis evaluating subgroups included patients in the ADCETRIS arm with either two or more or three or more risk factors, showed patients with a greater number of risk factors for relapse post-ASCT appeared to have the greatest benefit from ADCETRIS consolidation therapy. In both subgroups evaluating either two or more or three or more risk factors, median PFS was not reached in the ADCETRIS arm and was 9.7 months and 6.3 months, respectively, in the placebo arm.
In the ADCETRIS arm, 112 patients (67 percent) reported peripheral neuropathy. To date, 90 percent of these patients had resolution or improvement in symptoms, with 73 percent having complete resolution.
About Classical Hodgkin Lymphoma

Lymphoma is a general term for a group of cancers that originate in the lymphatic system. There are two major categories of lymphoma: Hodgkin lymphoma and non-Hodgkin lymphoma. Classical Hodgkin lymphoma is distinguished from other types of lymphoma by the presence of one characteristic type of cell, known as the Reed-Sternberg cell. The Reed-Sternberg cell expresses CD30.

According to the American Cancer Society, approximately 8,500 cases of Hodgkin lymphoma will be diagnosed in the United States during 2018 and more than 1,000 will die from the disease. Approximately half of all newly diagnosed Hodgkin lymphoma patients have Stage III/IV disease. According to the Lymphoma Coalition, over 62,000 people worldwide are diagnosed with Hodgkin lymphoma each year and approximately 25,000 people die each year from this cancer.

About ADCETRIS (brentuximab vedotin)

ADCETRIS is being evaluated broadly in more than 70 clinical trials in CD30-expressing lymphomas. These include the recently completed phase 3 ECHELON-2 trial in frontline peripheral T-cell lymphomas (also known as mature T-cell lymphoma), the completed phase 3 ECHELON-1 trial in previously untreated Hodgkin lymphoma, the completed phase 3 ALCANZA trial in cutaneous T-cell lymphoma, and the ongoing CHECKMATE 812 trial of ADCETRIS in combination with Opdivo (nivolumab) for relapsed/refractory Hodgkin lymphoma.

ADCETRIS is an ADC comprising an anti-CD30 monoclonal antibody attached by a protease-cleavable linker to a microtubule disrupting agent, monomethyl auristatin E (MMAE), utilizing Seattle Genetics’ proprietary technology. The ADC employs a linker system that is designed to be stable in the bloodstream but to release MMAE upon internalization into CD30-expressing tumor cells.

ADCETRIS injection for intravenous infusion has received FDA approval for five indications in adult patients with: (1) previously untreated Stage III or IV classical Hodgkin lymphoma (cHL), in combination with chemotherapy, (2) cHL at high risk of relapse or progression as post-autologous hematopoietic stem cell transplantation (auto-HSCT) consolidation, (3) cHL after failure of auto-HSCT or failure of at least two prior multi-agent chemotherapy regimens in patients who are not auto-HSCT candidates, (4) sALCL after failure of at least one prior multi-agent chemotherapy regimen, and (5) primary cutaneous anaplastic large cell lymphoma (pcALCL) or CD30-expressing mycosis fungoides (MF) who have received prior systemic therapy.

Health Canada granted ADCETRIS approval with conditions for relapsed or refractory Hodgkin lymphoma and sALCL in 2013, and non-conditional approval for post-autologous stem cell transplantation (ASCT) consolidation treatment of Hodgkin lymphoma patients at increased risk of relapse or progression.

ADCETRIS received conditional marketing authorization from the European Commission in October 2012. The approved indications in Europe are: (1) for the treatment of adult patients with relapsed or refractory CD30-positive Hodgkin lymphoma following ASCT, or following at least two prior therapies when ASCT or multi-agent chemotherapy is not a treatment option, (2) the treatment of adult patients with relapsed or refractory sALCL, (3) for the treatment of adult patients with CD30-positive Hodgkin lymphoma at increased risk of relapse or progression following ASCT, and (4) for the treatment of adult patients with CD30-positive cutaneous T-cell lymphoma (CTCL) after at least one prior systemic therapy.

ADCETRIS has received marketing authorization by regulatory authorities in 71 countries for relapsed or refractory Hodgkin lymphoma and sALCL. See select important safety information, including Boxed Warning, below.

Seattle Genetics and Takeda are jointly developing ADCETRIS. Under the terms of the collaboration agreement, Seattle Genetics has U.S. and Canadian commercialization rights and Takeda has rights to commercialize ADCETRIS in the rest of the world. Seattle Genetics and Takeda are funding joint development costs for ADCETRIS on a 50:50 basis, except in Japan where Takeda is solely responsible for development costs.

Horizon Pharma plc to Participate in Investor Conferences in November

On October 25, 2018 Horizon Pharma plc (Nasdaq: HZNP) reported that the company will participate in the following conferences in November (Press release, Horizon Pharma, OCT 25, 2018, View Source [SID1234530135]):

Stifel 2018 Healthcare Conference

Date: Wednesday, Nov. 14, 2018
Presentation Time: 10:15 a.m. EST
Location: New York, NY
Jefferies 2018 London Healthcare Conference

Date: Thursday, Nov. 15, 2018
Presentation Time: 10 a.m. GMT
Location: London, United Kingdom
The presentations will be webcast live and may be accessed by visiting Horizon’s website at View Source A replay of the webcast will be available for each event.

Sitka Biopharma Announces New Investment from Global Health Sciences Fund

On October 25, 2018 Sitka Biopharma reported that Quark Venture Inc. and GF Securities, through their Global Health Sciences Fund (GHS), has invested $1.9M into Sitka – financing that will enable the company to complete critical GLP toxicology studies and GMP manufacture of clinical drug product (Press release, Sitka Biopharma, OCT 25, 2018, View Source [SID1234530250]). This in turn will allow Sitka and partner Cancer Research UK (CRUK) to complete initial Phase 1 clinical trials of STK-01, Sitka’s lead product for the treatment of bladder cancer.

A spin-off of CDRD and the University of British Columbia (UBC), Sitka Biopharma is a preclinical biotechnology company focused on developing its breakthrough nanoparticle platform technology to increase absorption of drugs in difficult-to-penetrate tissues. While STK-01 is being developed for the treatment of bladder cancer, follow-on indications of the current core formulation include intraperitoneal delivery for ovarian cancer and other indications where localized drug delivery would be advantageous but currently ineffective due to those penetration challenges.

Preclinical studies have established that Sitka’s candidate formulation significantly improved bladder tissue uptake when compared to the commercial docetaxel formulation. Furthermore, the proprietary hyperbranched polyglycerols (HPG)-docetaxel formulation demonstrated superior efficacy over commercial docetaxel – providing a preclinical proof-of-concept.

Dr. Michael Parr, Sitka’s President and Chief Scientific Officer said, "This is an extremely pivotal investment for Sitka as it means we can complete the final IND-enabling studies and take our lead therapeutic for bladder cancer into the clinic via our partnership with CRUK. This investment sets up the company for rapid progression through those initial clinical trials and we can also begin planning to expand STK-01 to additional indications."

Ms. Karimah Es Sabar, Chief Executive Officer of Quark Venture and Director of GHS Fund commented "GHS Fund believes Sitka is poised for an important medical breakthrough in bladder cancer. This initial success will be leveraged for further development of the platform in other indications, including ovarian cancer."

Bladder cancer is the 4th most common cancer in men, and has the highest per patient lifetime cost of all cancers. The challenge in bladder cancer is that because of the nature of the bladder, drugs are not well-absorbed and only stay in the bladder for as long as the patient does not void their bladder – a critical issue addressed by the Sitka technology.

This technology was initially developed through a collaboration between the UBC and CDRD. Additional early funding included grants from the Canadian Institutes of Health Research (CIHR), Genome British Columbia, and the National Research Council of Canada’s IRAP Program. Quark Venture provided the first private financing in March 2016

argenx reports third quarter 2018 financial results and provides business update

On October 25, 2018 argenx (Euronext & Nasdaq: ARGX), a clinical-stage biotechnology company developing a deep pipeline of differentiated antibody-based therapies for the treatment of severe autoimmune diseases and cancer, reported financial results and provided a business update for the third quarter ended September 30, 2018 (Press release, argenx, OCT 25, 2018, View Source [SID1234530147]).

"The proof-of-concept data that we have generated in the last year from our Phase 2 clinical trials in generalized myasthenia gravis (gMG), immune thrombocytopenia (ITP) and pemphigus vulgaris (PV) support efgartigimod’s (ARGX-113) potential in severe autoimmune disease, and we are committed to advancing and expanding this clinical program as quickly as possible. We continue to see potential differentiation of our molecule among the anti-FcRn class of therapies in terms of tolerability, improvement in disease scores, and stage of development. We are now evaluating our lead candidate in four indications, two formulations to accommodate tailored therapy, and in one registration trial with another expected to launch next year," commented Tim Van Hauwermeiren, CEO of argenx. "Our second program, cusatuzumab (ARGX-110), will follow quickly as we enroll newly diagnosed, elderly acute myeloid leukemia (AML) patients in a Phase 2 clinical trial. We plan to show the full Phase 1 data in December during our annual American Society of Hematology (ASH) (Free ASH Whitepaper) workshop, along with the full dataset from the Phase 2 clinical trial of efgartigimod in ITP."

"We believe we have differentiated antibody design capabilities and continue to show this through reproducible value creation with the robust clinical datasets from our wholly-owned programs, successes from our collaborations including the in-licensing by AbbVie of ARGX-115, and the pipeline we grow using novel targets from esteemed academic institutions."

THIRD QUARTER 2018 AND RECENT HIGHLIGHTS:

Pipeline Updates:

Efgartigimod (ARGX-113):

Reported positive topline results from Phase 2 proof-of-concept trial of intravenous (IV) efgartigimod in primary ITP:

Well-tolerated, consistent with efgartigimod clinical trials to-date.

Clinically meaningful platelet count improvements seen across doses and ITP patient classifications, correlating with consistent reduction in Immunoglobulin G levels.

Showed separation from placebo at increasing response thresholds, with response rates of 46% and 58% in primary trial and first dosing of open-label extension study, respectively.

Announced plans to advance IV efgartigimod into Phase 3 development in ITP in second half of 2019 and subcutaneous efgartigimod into Phase 2 trial in ITP in first half of 2019.

Dosed first patient in global Phase 3 registration trial of efgartigimod in patients with gMG.

Phase 3 trial, if results are positive, expected to serve as basis to submit Biologics License Application (BLA) in U.S. and for marketing authorization in Japan, based on feedback from U.S. Food and Drug Administration (FDA) and Pharmaceuticals and Medical Devices Agency (PMDA) in Japan.

Data from Phase 2 proof-of-concept trial of efgartigimod in PV on track to read out in first half of 2019.

Announced chronic inflammatory demyelinating polyneuropathy (CIDP) as fourth indication for efgartigimod with Phase 2 proof-of-concept trial expected to start in first half of 2019.

Cusatuzumab (ARGX-110):

Enrollment ongoing of initial 21 patients in Phase 2 part of Phase 1/2 proof-of-concept trial of 10 mg/kg cusatuzumab in combination with standard of care azacytidine in newly diagnosed, elderly AML and myelodysplastic syndromes patients who are unfit for chemotherapy.

Corporate Updates:

AbbVie exercised its exclusive option to license ARGX-115, a novel immuno-oncology antibody targeting glycoprotein A repetitions predominant (GARP).

argenx received preclinical milestone in its strategic collaboration with Shire plc. The milestone, for which an undisclosed payment has been received, was triggered by Shire exercising its exclusive option to in-license an antibody discovered and developed using argenx’s proprietary SIMPLE Antibody platform and Fc engineering technologies.

FINANCIAL HIGHLIGHTS (as of September 30, 2018) (compared to financial highlights as of September 30, 2017)

Raised approximately $300.6 million in gross proceeds in U.S. public offering from sale of 3,475,000 American Depositary Shares (ADSs) at a price to the public of $86.50 per ADS; proceeds to be used to advance efgartigimod program in ITP, launch efgartigimod program in CIDP, further scale up manufacturing in advance of potential commercial operations, and expand argenx organization.

Operating income of €24.5 million (September 30, 2017: €30.5 million).

Total comprehensive loss of €36.5 million (September 30, 2017: €16.5 million).

Cash position of €582.3 million (cash, cash-equivalents and current financial assets) allowing argenx to pursue development of its pipeline in severe autoimmune diseases and cancer (September 30, 2017: €161.7 million).

UPCOMING CLINICAL MILESTONES

Present full dataset from Phase 2 proof-of-concept trial of efgartigimod in ITP at workshop around ASH (Free ASH Whitepaper) Annual Meeting (San Diego, December 3, 2018).

Report full data from Phase 1 dose-escalation trial of cusatuzumab in AML at workshop around ASH (Free ASH Whitepaper).

Report full data from Phase 2 proof-of-concept trial of efgartigimod in PV in first half of 2019.

Launch Phase 2 clinical trial in ITP using subcutaneous formulation of efgartigimod in first half of 2019.

Launch Phase 2 clinical trial of efgartigimod in CIDP in first half of 2019.

Q3 2018 FINANCIAL RESULTS:

Nine months ended

September 30,

Adjustments

September 30,

2018

Adoption

2018

2017

(in thousands of €)

IAS 18

IFRS 15 (*)

IFRS 15

IAS 18

Variance

Revenue

17,892

2,031

19,924

28,422

(8,498)

Other operating income

4,594

2,090

2,504

Total operating income

22,487

2,031

24,518

30,512

(5,994)

Research and development expenses

(53,352)

(198)

(53,550)

(36,655)

(16,895)

Selling, general and administrative expenses

(18,245)

(7,339)

(10,906)

Operating loss

(49,111)

1,833

(47,278)

(13,482)

(33,796)

Financial income

1,983

1,895

Exchange gains/(losses)

8,826

(2,476)

11,302

Loss before taxes

(38,301)

1,833

(36,468)

(15,870)

(20,598)

Income tax benefit/(expense)

(597)

629

Loss for the period and total comprehensive loss

(38,269)

1,833

(36,436)

(16,467)

(19,969)

Net increase in cash, cash-equivalents and current financial assets compared to year-end 2017 and 2016

222,506

64,989

Cash, cash-equivalents and current financial assets at the end of the period

582,281

161,717

(*) The company has adopted IFRS 15 on January 1, 2018 using a modified retrospective approach. The impact of adopting IFRS 15 amounts to €1.8 million for the nine months ended September 30, 2018.

Total operating income was €24.5 million for the nine months ended September 30, 2018, compared to €30.5 million for the nine months ended September 30, 2017. The decrease in operating income in 2018 was due to a decrease of €8.5 million in revenue primarily related to the completion of the preclinical activities under the ongoing collaborations with LEO Pharma and AbbVie. The decrease in revenue was partially offset by an increase of €2.5 million in other operating income, mainly driven by an increase in payroll tax rebates for employing certain research and development personnel and higher grant income following the approval of two VLAIO grants in 2018.

Research and development expenses were €53.6 million for the nine months ended September 30, 2018, compared to €36.7 million for the nine months ended September 30, 2017. The increase in research and development expenses in 2018 was principally due to (i) an increase of €11.2 million in costs related to the advancement of the clinical development and manufacturing activities of argenx’s product candidates efgartigimod (notably with the start of a Phase 3 registration trial in efgartigimod), cusatuzumab and ARGX-117 and (ii) an increase of €6.2 million in share-based compensation expenses linked to the grant of stock options to the Company’s research and development employees (including an increase of €1.0 million in social security costs on stock options granted to certain Belgian and non-Belgian resident employees). argenx employed 89 employees and consultants in its research and development functions on September 30, 2018, compared to 71 employees and consultants on September 30, 2017.

Selling, general and administrative expenses were €18.2 million for the nine months ended September 30, 2018, compared to €7.3 million for the nine months ended September 30, 2017. The increase in selling, general and administrative expenses in 2018 is mainly explained by an increase of €9.6 million of personnel expenses resulting primarily from an increase of €7.5 million in share-based compensation expenses linked to the grant of stock options to argenx’s selling, general and administrative employees (including an increase of €1.3 million in social security costs on stock options granted to certain Belgian and non-Belgian resident employees). argenx employed 31 employees and consultants in its selling, general and administration functions on September 30, 2018, compared to 19 employees and consultants on September 30, 2017.

Financial income and exchange gains amounted to €10.8 million for the nine months ended September 30, 2018, compared to financial income and exchange losses of €2.4 million for the nine months ended September 30, 2017, which was primarily attributable to €8.8 million of unrealized exchange rate gains on the Company’s cash, cash equivalents and current financial assets position in USD linked to the favorable fluctuation of the USD exchange rate in the nine months ended September 30, 2018.

argenx generated a loss for the period and total comprehensive loss of €36.5 million for the nine months ended September 30, 2018, compared to a loss for the period and total comprehensive loss of €16.5 million for the nine months ended September 30, 2017.

On September 30, 2018, argenx’s cash, cash equivalents and current financial assets amounted to €582.3 million, compared to €359.8 million on December 31, 2017. The significant increase in its cash balance on September 30, 2018 resulted from the follow-on U.S. public offering of ADSs on the Nasdaq Global Select Market completed in September 2018.

EXPECTED 2019 FINANCIAL CALENDAR:

February 28, 2019: FY 2018 business update and financial results

May 9, 2019: Q1 2019 business update and financial results

August 1, 2019: HY 2019 business update and financial results

October 24, 2019: Q3 2019 business update and financial results

Merck Announces Third-Quarter 2018 Financial Results

On October 25, 2018 Merck reported Third-Quarter 2018 Financial Results (Press release, Merck & Co, OCT 25, 2018, View Source [SID1234530146]).

Third-Quarter 2018 Worldwide Sales Were $10.8 Billion
Third-Quarter 2018 GAAP EPS was $0.73, Third-Quarter Non-GAAP EPS was $1.19
Company Narrows 2018 Full-Year Revenue Range to be Between $42.1 Billion and $42.7 Billion, Including a Minimal Impact from Foreign Exchange
Company Narrows and Lowers 2018 Full-Year GAAP EPS Range to be Between $2.41 and $2.47; Narrows and Raises 2018 Full-Year Non-GAAP EPS Range to be Between $4.30 and $4.36, Including an Approximately 1 Percent Negative Impact from Foreign Exchange
Results from KEYNOTE-426 Studying KEYTRUDA in Combination with Axitinib as First-line Treatment for Advanced or Metastatic Renal Cell Carcinoma Met Primary Endpoints of Overall Survival and Progression-Free Survival
Company Announces 15 Percent Increase to Quarterly Dividend to 55 Cents Per Outstanding Share and Authorizes an Additional $10 Billion Share Repurchase, Including a $5 Billion Accelerated Share Repurchase Program
KENILWORTH, N.J.–(BUSINESS WIRE)– Merck (NYSE: MRK), known as MSD outside the United States and Canada, reported financial results for the third quarter of 2018.

This press release features multimedia. View the full release here: View Source

"We built on our strong momentum during the quarter and believe that Merck is well-positioned to continue creating sustainable value for shareholders and patients," said Kenneth C. Frazier, Merck Chairman and CEO. "Our focused execution is driving our operational results, with KEYTRUDA making a difference to cancer patients around the world. We are also continuing to advance our broad pipeline, including in oncology, vaccines, hospital and specialty as well as animal health. With this strong performance, we are highly confident in our portfolio, strategy and pipeline as demonstrated by our announced capital return actions today."

Financial Summary

Third Quarter
$ in millions, except EPS amounts 2018 2017
Sales $ 10,794 $ 10,325
GAAP net income (loss)1

1,950 (56 )
Non-GAAP net income that excludes items listed below1,2 3,178 3,054
GAAP EPS 0.73 (0.02 )
Non-GAAP EPS that excludes items listed below2

1.19 1.11
Worldwide sales were $10.8 billion for the third quarter of 2018, an increase of 5 percent compared with the third quarter of 2017, including a 1 percent negative impact from foreign exchange. The sales increase in the third quarter of 2018 was partially attributable to a reduction in sales in the third quarter of 2017 of approximately $240 million due to a borrowing from the U.S. Centers for Disease Control and Prevention (CDC) Pediatric Vaccine Stockpile of GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant), a vaccine to prevent certain HPV-related cancers and other diseases, driven in part by the temporary production shutdown resulting from the cyber-attack that occurred in June of 2017, as well as overall higher demand than originally planned. Additionally, sales in the third quarter of 2017 were unfavorably affected by approximately $135 million from lost revenue in certain markets related to the cyber-attack.

GAAP (generally accepted accounting principles) earnings (loss) per share assuming dilution (EPS) were $0.73 for the third quarter of 2018. Non-GAAP EPS of $1.19 for the third quarter of 2018 excludes acquisition- and divestiture-related costs, restructuring costs, a charge of $420 million related to the termination of a collaboration agreement with Samsung Bioepis Co., Ltd. (Samsung) for insulin glargine and certain other items. Year-to-date results can be found in the attached tables.

Oncology Pipeline Highlights

Merck continued to expand its oncology program by further advancing the development programs for KEYTRUDA (pembrolizumab), the company’s anti-PD-1 therapy; Lynparza (olaparib), a PARP inhibitor being co-developed and co-commercialized with AstraZeneca; and Lenvima (lenvatinib mesylate), an orally available tyrosine kinase inhibitor being co-developed and co-commercialized with Eisai Co., Ltd. (Eisai).

KEYTRUDA

Merck announced that based on the results of the KEYNOTE-189 trial, the U.S. Food and Drug Administration (FDA) and the European Commission (EC) approved KEYTRUDA in combination with pemetrexed and platinum chemotherapy for the first-line treatment of patients with metastatic nonsquamous non-small cell lung cancer (NSCLC), with no EGFR or ALK genomic tumor aberrations.
Merck announced that the FDA granted priority review to a new supplemental Biologics License Application seeking approval for KEYTRUDA as monotherapy for first-line treatment of locally advanced or metastatic nonsquamous or squamous NSCLC in patients whose tumors express PD-L1 (tumor proportion score [TPS] ≥1%) without EGFR or ALK genomic tumor aberrations, based on the results of the pivotal Phase 3 KEYNOTE-042 trial. The FDA set a PDUFA date of Jan. 11, 2019.
Merck announced top-line results from KEYNOTE-426, a pivotal Phase 3 trial studying KEYTRUDA in combination with Pfizer’s axitinib as first-line treatment for advanced or metastatic renal cell carcinoma. KEYNOTE-426 met its primary endpoints of overall survival (OS) and progression-free survival (PFS) demonstrating that the combination made a statistically significant and clinically meaningful improvement in survival versus sunitinib.
Merck announced interim results from KEYNOTE-048, a pivotal Phase 3 trial studying KEYTRUDA as both monotherapy and in combination with chemotherapy, for the first-line treatment of recurrent or metastatic head and neck squamous cell carcinoma. KEYNOTE-048 met its primary endpoint demonstrating that monotherapy and combination therapy showed significantly improved OS compared to the standard of care. These results were presented at the European Society for Medical Oncology (ESMO) (Free ESMO Whitepaper) 2018 Congress.
Merck announced that the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) adopted a positive opinion for KEYTRUDA as adjuvant therapy in the treatment of patients with melanoma based on the significant recurrence-free survival benefit demonstrated with KEYTRUDA in the pivotal Phase 3 EORTC1325/KEYNOTE-054 trial.
Merck announced the first presentation of results from KEYNOTE-057, a Phase 2 trial evaluating KEYTRUDA in previously-treated patients with high-risk non-muscle invasive bladder cancer at the ESMO (Free ESMO Whitepaper) 2018 Congress. KEYTRUDA demonstrated a complete response rate of nearly 40 percent.
Lynparza

Merck and AstraZeneca announced detailed results from the Phase 3 SOLO-1 trial testing Lynparza as a maintenance treatment for patients with newly-diagnosed advanced BRCA-mutated ovarian cancer who were in complete or partial response following first-line standard platinum-based chemotherapy. Results of the trial confirm the statistically-significant and clinically-meaningful improvement in PFS for Lynparza as compared to placebo, reducing the risk of disease progression or death by 70 percent. At 41 months of follow-up, the median PFS for patients treated with Lynparza was not reached compared to 13.8 months for patients treated with placebo. These results were presented at the ESMO (Free ESMO Whitepaper) 2018 Congress and published simultaneously online in the New England Journal of Medicine.
Lenvima

Merck and Eisai announced that the FDA approved Lenvima for the first-line treatment of patients with unresectable hepatocellular carcinoma. Lenvima was also approved for the same use in China by the China National Drug Administration and in Europe by the EC.
Merck and Eisai announced that the FDA granted Breakthrough Therapy Designation for Lenvima in combination with KEYTRUDAfor the potential treatment of patients with advanced and/or metastatic non-microsatellite instability high/proficient mismatch repair endometrial carcinoma who have progressed following at least one prior systemic therapy. This is the third Breakthrough Therapy Designation for Lenvima and the second Breakthrough Therapy Designation for Lenvima in combination with KEYTRUDA.
Other Oncology Pipeline Highlights

Clinical data from Merck’s early pipeline was presented at the ESMO (Free ESMO Whitepaper) 2018 Congress in October and additional data on other programs will be presented at the Society for Immunotherapy of Cancer (SITC) (Free SITC Whitepaper) 2018 meeting in November.

At ESMO (Free ESMO Whitepaper) 2018, Merck presented a number of datasets from its early pipeline:
STING agonist (MK-1454) first-in-human data from Merck’s Phase 1 program studying it as a monotherapy and in combination with KEYTRUDA in patients with advanced solid tumors or lymphomas;
RIG-I (MK-4621) data from Merck’s Phase 1/2 trial studying it in advanced or recurrent tumors;
CAVATAK data from Merck’s Phase 1 KEYNOTE-200 trial studying it in combination with KEYTRUDA for treatment of NSCLC and bladder cancer; and
CTLA-4 (MK-1308) data from Merck’s Phase 1 trial studying it in combination with KEYTRUDA for treatment of advanced solid tumors.
At SITC (Free SITC Whitepaper) 2018, Merck will be presenting:
LAG3 (MK-4280) data from Merck’s Phase 1 trial studying it as monotherapy and in combination with KEYTRUDA for the treatment of advanced solid tumors;
TIGIT (MK-7684) data from Merck’s Phase 1 trial studying it as monotherapy and in combination with KEYTRUDA for the treatment of patients with solid tumors; and
ILT4 (MK-4830) pre-clinical data.
Other Pipeline Highlights

The company continued to advance its vaccines, antibiotics and HIV pipelines.

The FDA approved an expanded age indication for GARDASIL 9 for use in women and men ages 27 through 45.
Merck announced that the pivotal Phase 3 clinical study evaluating the company’s antibiotic ZERBAXA (ceftolozane and tazobactam) at an investigational dose for the treatment of adult patients with either ventilated hospital-acquired bacterial pneumonia or ventilator-associated bacterial pneumonia met the pre-specified primary endpoints, demonstrating non-inferiority to meropenem, the active comparator, in day 28 all-cause mortality and in clinical cure rate at the test-of-cure visit. Based on these results, Merck plans to submit supplemental new drug applications to the FDA and EMA seeking regulatory approval of ZERBAXA for these potential new indications.
Merck announced that the FDA approved two new HIV-1 medicines indicated for the treatment of HIV-1 infection in adult patients with no prior antiretroviral treatment experience: DELSTRIGO, a once-daily fixed-dose combination tablet of doravirine (100 mg), lamivudine (3TC, 300 mg) and tenofovir disoproxil fumarate (TDF, 300 mg); and PIFELTRO (doravirine, 100 mg), a new non-nucleoside reverse transcriptase inhibitor to be administered in combination with other antiretroviral medicines. The CHMP of the EMA adopted a positive opinion recommending granting of marketing authorization for DELSTRIGO and PIFELTRO for the treatment of adults with HIV-1 infection without past or present evidence of resistance to the non-nucleoside reverse transcriptase class, lamivudine or tenofovir.
Third-Quarter Revenue Performance

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

$ in millions Third Quarter
2018 2017 Change Change
Ex-Exchange

Total Sales $ 10,794 $ 10,325 5 % 6 %
Pharmaceutical 9,658 9,156 5 % 7 %
KEYTRUDA 1,889 1,047 80 % 82 %
JANUVIA / JANUMET 1,490 1,525 -2 % -1 %
GARDASIL / GARDASIL 9 1,048 675 55 % 56 %
PROQUAD,
M-M-R II and VARIVAX

525

519
1

ISENTRESS / ISENTRESS HD 275 310 -11 % -9 %
ZETIA / VYTORIN 257 462 -44 % -43 %
NUVARING 234 214 9 % 10 %
BRIDION 217 185 17 % 20 %
PNEUMOVAX 23 214 229 -7 % -6 %
SIMPONI 210 219 -4 % -3 %
Animal Health 1,021 1,000 2 % 6 %
Livestock 660 655 1 % 5 %
Companion Animals 361 345 5 % 7 %
Other Revenues

115 169 -32 % -21 %
Pharmaceutical Revenue

Third-quarter pharmaceutical sales increased 5 percent to $9.7 billion, including a 2 percent negative impact from foreign exchange. In addition to the factors mentioned in the Financial Summary above, the increase was primarily driven by growth in oncology and hospital acute care, partially offset by lower sales in virology and the ongoing impacts of the loss of market exclusivity for several products.

Growth in oncology was driven by a significant increase in sales of KEYTRUDA, reflecting the company’s continued launches with new indications globally and the strong momentum for the treatment of patients with NSCLC, as KEYTRUDA is the only anti-PD-1 approved in the first-line setting. Additionally, oncology sales reflect alliance revenue of $49 million related to Lynparza and $43 million related to Lenvima, representing Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.

Growth in hospital acute care reflects strong demand in the United States for BRIDION (sugammadex) Injection 100 mg/mL, a medicine for the reversal of neuromuscular blockade induced by rocuronium bromide or vecuronium bromide in adults undergoing surgery, and strong global demand for NOXAFIL (posaconazole), a medicine for the prevention of invasive fungal infections.

Vaccines performance reflects higher sales of GARDASIL [Human Papillomavirus Quadrivalent (Types 6, 11, 16 and 18) Vaccine, Recombinant] and GARDASIL 9, vaccines to prevent certain cancers and other diseases caused by HPV, in the United States attributable to the CDC stockpile borrowing in the third quarter of 2017 as described previously, and growth in international markets, primarily due to higher sales in Europe and the ongoing commercial launch in China. Vaccines performance was negatively affected by a significant decrease in sales of ZOSTAVAX (zoster vaccine live), a vaccine for the prevention of herpes zoster, primarily due to the approval of a competitor product that received a preferential recommendation from the U.S. Advisory Committee on Immunization Practices in October 2017. The company anticipates that future sales of ZOSTAVAX will continue to be unfavorably affected by competition.

Pharmaceutical sales growth in the quarter was partially offset by lower sales in virology, largely reflecting a significant decline in ZEPATIER (elbasvir and grazoprevir), a medicine for the treatment of chronic hepatitis C virus genotypes 1 or 4 infection, due to increasing competition and declining patient volumes, which the company expects to continue.

Pharmaceutical sales growth for the quarter was also partially offset by the ongoing impacts from the loss of market exclusivity for ZETIA (ezetimibe) and VYTORIN (ezetimibe/simvastatin), medicines for lowering LDL cholesterol; and biosimilar competition for REMICADE (infliximab), a treatment for inflammatory diseases, in the company’s marketing territories in Europe.

Animal Health

Animal Health sales totaled $1.0 billion for the third quarter of 2018, an increase of 2 percent compared with the third quarter of 2017, including a 4 percent negative impact from foreign exchange. Growth was primarily driven by higher sales of companion animal products, predominantly from the BRAVECTO (fluralaner) line of products that kill fleas and ticks in dogs and cats for up to 12 weeks. Growth was also driven by higher sales of livestock products including ruminants and poultry products.

Animal Health segment profits were $409 million in the third quarter of 2018, an increase of 5 percent compared with $389 million in the third quarter of 2017.3

Third-Quarter Expense, EPS and Related Information

The table below presents selected expense information.

$ in millions
Third-Quarter 2018

GAAP

Acquisition- and
Divestiture-Related
Costs 4

Restructuring
Costs

Certain Other
Items

Non-GAAP 2

Materials and production $ 3,619 $ 680 $ 2 $ 420 $ 2,517
Marketing and administrative 2,443 2 – – 2,441
Research and development 2,068 5 (4) – 2,067
Restructuring costs 171 – 171 – –
Other (income) expense, net (172 ) (10) – – (162)

Third-Quarter 2017 5

Materials and production $ 3,307 $ 768 $ 25 $ – $ 2,514
Marketing and administrative 2,459 11 – – 2,448
Research and development 4,413 271 2 2,350 1,790
Restructuring costs 153 – 153 – –
Other (income) expense, net (207 ) (18) – – (189)
GAAP Expense, EPS and Related Information

Gross margin was 66.5 percent for the third quarter of 2018 compared to 68.0 percent for the third quarter of 2017. The decrease in gross margin for the third quarter of 2018 was primarily driven by the charge related to the termination of a collaboration agreement with Samsung. The decrease was partially offset by the favorable effects of foreign exchange, as well as costs recorded in the third quarter of 2017 related to the cyber-attack. In addition, a lower net impact of acquisition- and divestiture-related costs and restructuring costs, which reduced gross margin by 6.3 percentage points in the third quarter of 2018 compared with 7.7 percentage points in the third quarter of 2017, also partially offset the margin decline.

Marketing and administrative expenses were $2.4 billion in the third quarter of 2018, a decline of 1 percent compared to the third quarter of 2017, reflecting lower direct selling and promotion costs, as well as the favorable effects of foreign exchange, largely offset by higher administrative costs.

Research and development (R&D) expenses were $2.1 billion in the third quarter of 2018 compared with $4.4 billion in the third quarter of 2017. The decline primarily reflects a $2.35 billion charge recorded in the third quarter of 2017 related to the formation of a collaboration with AstraZeneca and lower in-process research and development (IPR&D) impairment charges, partially offset by increased clinical development spending, in particular for oncology, higher licensing costs and investment in discovery and early drug development.

GAAP EPS was $0.73 for the third quarter of 2018 compared with $(0.02) for the third quarter of 2017.

Non-GAAP Expense, EPS and Related Information

The non-GAAP gross margin was 76.7 percent for the third quarter of 2018 compared to 75.7 percent for the third quarter of 2017. The increase was predominantly due to the favorable effects of foreign exchange, as well as costs recorded in the third quarter of 2017 related to the cyber-attack.

Non-GAAP marketing and administrative expenses were $2.4 billion in the third quarter of 2018, comparable to the third quarter of 2017, reflecting lower direct selling and promotion costs, as well as the favorable effects of foreign exchange, offset by higher administrative costs.

Non-GAAP R&D expenses were $2.1 billion in the third quarter of 2018, an increase of 15 percent compared to the third quarter of 2017. The increase primarily reflects higher clinical development spending, in particular for oncology, higher licensing costs and investment in discovery and early drug development.

Non-GAAP EPS was $1.19 for the third quarter of 2018 compared with $1.11 for the third quarter of 2017.

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

$ in millions, except EPS amounts Third Quarter
2018 2017
EPS
GAAP EPS $ 0.73 $ (0.02 )
Difference6

0.46 1.13
Non-GAAP EPS that excludes items listed below2 $ 1.19 $ 1.11

Net Income
GAAP net income (loss)1 $ 1,950 $ (56 )
Difference 1,228 3,110
Non-GAAP net income that excludes items listed below1,2 $ 3,178 $ 3,054

Decrease (Increase) in Net Income Due to Excluded Items:
Acquisition- and divestiture-related costs4

$ 677 $ 1,032
Restructuring costs 169 180
Charge related to the termination of a collaboration agreement with Samsung 420 –
Charge related to the formation of a collaboration with AstraZeneca – 2,350
Net decrease (increase) in income before taxes 1,266 3,562
Income tax (benefit) expense7

(38 ) (452 )
Decrease (increase) in net income $ 1,228 $ 3,110
Financial Outlook

Merck narrowed its full-year 2018 revenue range to be between $42.1 billion and $42.7 billion, including a minimal impact from foreign exchange at current exchange rates.

Merck narrowed and lowered its full-year 2018 GAAP EPS range to be between $2.41 and $2.47. The change in the GAAP EPS range reflects the inclusion of the charge related to the termination of the collaboration agreement with Samsung. Merck narrowed and raised its full-year 2018 non-GAAP EPS range to be between $4.30 and $4.36, including an approximately 1 percent negative impact from foreign exchange at current exchange rates. The non-GAAP range excludes acquisition- and divestiture-related costs, costs related to restructuring programs, charges related to the formation of the Eisai collaboration and the Viralytics acquisition, a charge related to the termination of a collaboration agreement with Samsung and certain other items.

The following table summarizes the company’s 2018 financial guidance.

GAAP Non-GAAP 2

Revenue $42.1 to $42.7 billion $42.1 to $42.7 billion*
Operating expenses Lower than 2017 by a low- to mid-single digit rate Higher than 2017 by a low- to mid-single digit rate
Effective tax rate 26.0% to 27.0% 19.0% to 20.0%
EPS** $2.41 to $2.47 $4.30 to $4.36

*The company does not have any non-GAAP adjustments to revenue.

**EPS guidance for 2018 assumes a share count (assuming dilution) of approximately 2.7 billion shares.

A reconciliation of anticipated 2018 GAAP EPS to non-GAAP EPS and the items excluded from non-GAAP EPS are provided in the table below.

$ in millions, except EPS amounts

Full-Year 2018

GAAP EPS $2.41 to $2.47
Difference6 1.89
Non-GAAP EPS that excludes items listed below2 $4.30 to $4.36

Acquisition- and divestiture-related costs4 $ 2,800
Restructuring costs 550
Charge related to the formation of a collaboration with Eisai 1,400
Charge related to the termination of a collaboration agreement with Samsung 420
Charge for Viralytics acquisition 344
Net decrease (increase) in income before taxes 5,514
Estimated income tax (benefit) expense (460)
Decrease (increase) in net income $ 5,054
The expected full-year 2018 GAAP effective tax rate of 26.0 percent to 27.0 percent reflects an unfavorable impact of approximately 7.0 percentage points from the above items.

Capital Allocation

Merck’s Board of Directors has approved a 15 percent increase to the company’s quarterly dividend, raising it to $0.55 per share from $0.48 per share of the company’s outstanding common stock. Payment will be made on Jan. 8, 2019, to shareholders of record at the close of business on Dec. 17, 2018. The Board also authorized an additional $10 billion of treasury stock purchases with no time limit for completion. The company has entered into a $5 billion accelerated share repurchase program under its expanded authorization.

In addition, the company also plans to now invest approximately $16 billion on new capital projects through 2022, up $4 billion from its prior $12 billion commitment announced in February.

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 at View Source Institutional investors and analysts can participate in the call by dialing (706) 758-9927 or (877) 381-5782 and using ID code number 2169459. Members of the media are invited to monitor the call by dialing (706) 758-9928 or (800) 399-7917 and using ID code number 2169459. Journalists who wish to ask questions are requested to contact a member of Merck’s Media Relations team at the conclusion of the call.

About Merck

For more than a century, Merck, a leading global biopharmaceutical company known as MSD outside of the United States and Canada, has been inventing for life, bringing forward medicines and vaccines for many of the world’s most challenging diseases. Through our prescription medicines, vaccines, biologic therapies and animal health products, we work with customers and operate in more than 140 countries to deliver innovative health solutions. We also demonstrate our commitment to increasing access to health care through far-reaching policies, programs and partnerships. Today, Merck continues to be at the forefront of research to advance the prevention and treatment of diseases that threaten people and communities around the world – including cancer, cardio-metabolic diseases, emerging animal diseases, Alzheimer’s disease and infectious diseases including HIV and Ebola. For more information, visit www.merck.com and connect with us on Twitter, Facebook, Instagram, YouTube and LinkedIn.

Forward-Looking Statement of Merck & Co., Inc., Kenilworth, N.J., USA

This news release of Merck & Co., Inc., Kenilworth, N.J., USA (the "company") includes "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based upon the current beliefs and expectations of the company’s management and are subject to significant risks and uncertainties. There can be no guarantees with respect to pipeline products that the products will receive the necessary regulatory approvals or that they will prove to be commercially successful. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements.

Risks and uncertainties include but are not limited to, general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of pharmaceutical industry regulation and health care legislation in the United States and internationally; global trends toward health care cost containment; technological advances, new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; the company’s ability to accurately predict future market conditions; manufacturing difficulties or delays; financial instability of international economies and sovereign risk; dependence on the effectiveness of the company’s patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions.

The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the company’s 2017 Annual Report on Form 10-K and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site (www.sec.gov).

###

1 Net income (loss) attributable to Merck & Co., Inc.

2 Merck is providing certain 2018 and 2017 non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s results as it permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. Senior management’s annual compensation is derived in part using non-GAAP income and non-GAAP EPS. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP. For a description of the items, see Table 2a attached to this release.

3 Animal Health segment profits are comprised of segment sales, less all materials and production costs, as well as marketing and administrative expenses and research and development costs directly incurred by the segment. For internal management reporting, Merck does not allocate general and administrative expenses not directly incurred by the segment, nor the cost of financing these activities. Separate divisions maintain responsibility for monitoring and managing these costs, including depreciation related to fixed assets utilized by these divisions and, therefore, they are not included in segment profits.

4 Includes expenses for the amortization of intangible assets and purchase accounting adjustments to inventories recognized as a result of acquisitions, intangible asset impairment charges and expense or income related to changes in the estimated fair value measurement of contingent consideration. Also includes integration, transaction and certain other costs related to business acquisitions and divestitures.

5 On Jan. 1, 2018, the company adopted a new accounting standard related to defined benefit plans. Upon adoption, net periodic benefit cost/credit other than service cost was reclassified to Other (income) expense, net from the previous classifications within Materials and production costs, Marketing and administrative expenses and Research and development costs. Previously reported amounts have been reclassified to conform to the new presentation.

6 Represents the difference between calculated GAAP EPS and calculated non-GAAP EPS, which may be different than the amount calculated by dividing the impact of the excluded items by the weighted-average shares for the period.

7 Includes the estimated tax impact on the reconciling items. In addition, amount for third quarter 2017 includes a $234 million net tax benefit related to the settlement of certain federal income tax issues.

MERCK & CO., INC.
CONSOLIDATED STATEMENT OF INCOME – GAAP
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 1

GAAP % Change GAAP % Change
3Q18 3Q17 Sep YTD 2018 Sep YTD 2017
Sales $ 10,794 $ 10,325 5% $ 31,296 $ 29,689 5%

Costs, Expenses and Other
Materials and production (1) (2) 3,619 3,307 9% 10,220 9,472 8%
Marketing and administrative (1) 2,443 2,459 -1% 7,459 7,432 –
Research and development (1) (3) 2,068 4,413 -53% 7,538 8,024 -6%
Restructuring costs (4) 171 153 12% 494 470 5%
Other (income) expense, net (1) (172 ) (207 ) -17% (512 ) (351 ) 46%
Income Before Taxes 2,665 200 * 6,097 4,642 31%
Taxes on Income (1) 707 251 1,682 1,186
Net Income (Loss) 1,958 (51 ) * 4,415 3,456 28%
Less: Net Income Attributable to Noncontrolling Interests 8 5 22 16
Net Income (Loss) Attributable to Merck & Co., Inc. $ 1,950 $ (56 ) * $ 4,393 $ 3,440 28%
Earnings (Loss) per Common Share Assuming Dilution (5) $ 0.73 $ (0.02 ) * $ 1.63 $ 1.25 30%

Average Shares Outstanding Assuming Dilution (5) 2,678 2,727 2,694 2,754
Tax Rate (6) 26.5 % 125.5 % 27.6 % 25.5 %

* 100% or greater
(1) Amounts include the impact of acquisition and divestiture-related costs, restructuring costs and certain other items. See accompanying tables for details.

(2) Materials and production costs in the third quarter and first nine months of 2018 include a $420 million aggregate charge related to the termination of a collaboration agreement with Samsung Bioepis Co., Ltd. (Samsung) for insulin glargine.

(3) Research and development expenses in the first nine months of 2018 include a $1.4 billion aggregate charge related to the formation of a collaboration with Eisai Co., Ltd. (Eisai), as well as a $344 million charge for the acquisition of Viralytics Limited. Research and development expenses for the third quarter and first nine months of 2017 include a $2.35 billion aggregate charge related to the formation of a collaboration with AstraZeneca PLC (AstraZeneca).

(4) Represents separation and other related costs associated with restructuring activities under the company’s formal restructuring programs.

(5) Because the company recorded a net loss in the third quarter of 2017, no potential dilutive common shares were used in the computation of loss per common share assuming dilution as the effect would have been anti-dilutive.

(6) The effective income tax rates for the third quarter and first nine months of 2018 include the unfavorable impact of a $420 million aggregate pretax charge related to the termination of a collaboration agreement with Samsung for which no tax benefit was recognized. The effective income tax rate for the first nine months of 2018 also reflects the unfavorable impact of a $1.4 billion aggregate pretax charge related to the formation of a collaboration with Eisai for which no tax benefit was recognized. The effective income tax rates for the third quarter and first nine months of 2017 reflect the unfavorable impact of a $2.35 billion aggregate pretax charge related to the formation of a collaboration with AstraZeneca for which no tax benefit was recognized, partially offset by the favorable impact of a net tax benefit of $234 million related to the settlement of certain federal income tax issues.
MERCK & CO., INC.
GAAP TO NON-GAAP RECONCILIATION
THIRD QUARTER 2018
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 2a

GAAP
Acquisition and
Divestiture-Related
Costs (1)

Restructuring
Costs (2)

Certain Other
Items (3)

Adjustment
Subtotal

Non-GAAP
Materials and production $ 3,619 680 2 420 1,102 $ 2,517
Marketing and administrative 2,443 2 2 2,441
Research and development 2,068 5 (4) 1 2,067
Restructuring costs 171 171 171 -
Other (income) expense, net (172) (10) (10) (162)
Income Before Taxes 2,665 (677) (169) (420) (1,266) 3,931
Income Tax Provision (Benefit) 707 (26) (4) (20) (4) 8 (38) 745
Net Income 1,958 (651) (149) (428) (1,228) 3,186
Net Income Attributable to Merck & Co., Inc. 1,950 (651)
(149)

(428) (1,228) 3,178
Earnings per Common Share Assuming Dilution $ 0.73 (0.24) (0.06) (0.16) (0.46) $ 1.19

Tax Rate 26.5% 18.9%

Only the line items that are affected by non-GAAP adjustments are shown.
Merck is providing certain non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s results as it permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. Senior management’s annual compensation is derived in part using non-GAAP income and non-GAAP EPS. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP.

(1) Amounts included in materials and production costs reflect expenses for the amortization of intangible assets recognized as a result of business acquisitions. Amounts included in marketing and administrative expenses reflect integration, transaction and certain other costs related to business acquisitions and divestitures. Amounts included in research and development expenses primarily reflect an increase in the estimated fair value measurement of liabilities for contingent consideration. Amounts included in other (income) expense, net primarily reflect royalty income, partially offset by an increase in the estimated fair value measurement of liabilities for contingent consideration related to the termination of the Sanofi-Pasteur MSD joint venture.

(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to activities under the company’s formal restructuring programs.

(3) Amount included in materials and production costs represents an aggregate charge related to the termination of a collaboration agreement with Samsung Bioepis Co., Ltd. for insulin glargine.

(4) Represents the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments.
MERCK & CO., INC.
GAAP TO NON-GAAP RECONCILIATION
NINE MONTHS ENDED SEPTEMBER 30, 2018
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 2b

GAAP
Acquisition and
Divestiture-Related
Costs (1)

Restructuring
Costs (2)

Certain Other
Items (3)

Adjustment
Subtotal

Non-GAAP
Materials and production $ 10,220 2,147 11 420 2,578 $ 7,642
Marketing and administrative 7,459 26 2 28 7,431
Research and development 7,538 7 1 1,744 1,752 5,786
Restructuring costs 494 494 494 -
Other (income) expense, net (512 ) 85 (54 ) 31 (543 )
Income Before Taxes 6,097 (2,265 ) (508 ) (2,110 ) (4,883 ) 10,980
Income Tax Provision (Benefit) 1,682 (230 )
(4

)

(69 )
(4

)

(101

)
(4

)

(400

) 2,082
Net Income 4,415 (2,035 ) (439 ) (2,009 ) (4,483 ) 8,898
Net Income Attributable to Merck & Co., Inc. 4,393 (2,035 ) (439 ) (2,009 ) (4,483 ) 8,876
Earnings per Common Share Assuming Dilution $ 1.63 (0.75 ) (0.16 ) (0.75 ) (1.66 ) $ 3.29

Tax Rate 27.6 % 19.0 %

(1) Amounts included in materials and production costs reflect expenses for the amortization of intangible assets recognized as a result of business acquisitions. Amounts included in marketing and administrative expenses reflect integration, transaction and certain other costs related to business acquisitions and divestitures. Amounts included in research and development expenses primarily reflect an increase in the estimated fair value measurement of liabilities for contingent consideration. Amounts included in other (income) expense, net primarily reflect an increase in the estimated fair value measurement of liabilities for contingent consideration, partially offset by royalty income related to the termination of the Sanofi-Pasteur MSD joint venture.

(3) Amount included in materials and production costs represents an aggregate charge related to the termination of a collaboration agreement with Samsung Bioepis Co., Ltd. for insulin glargine. Amounts included in research and development expenses represent a $1.4 billion aggregate charge related to the formation of a collaboration with Eisai Co., Ltd., as well as a $344 million charge for the acquisition of Viralytics Limited.

2017

Sep YTD
1Q 2Q 3Q Sep YTD 1Q 2Q 3Q Sep YTD 4Q Full Year Nom % Ex-Exch % Nom % Ex-Exch %
TOTAL SALES (1) $10,037 $10,465 $10,794 $31,296 $9,434 $9,930 $10,325 $29,689 $10,433 $40,122 5 6 5 5
PHARMACEUTICAL 8,919 9,282 9,658 27,859 8,185 8,759 9,156 26,101 9,290 35,390 5 7 7 5
Oncology
Keytruda 1,464 1,667 1,889 5,020 584 881 1,047 2,512 1,297 3,809 80 82 100 97
Emend 125 148 123 396 133 143 137 413 143 556 -10 -10 -4 -6
Temodar 57 56 46 159 66 65 68 198 73 271 -32 -30 -20 -21
Alliance Revenue – Lynparza 33 44 49 125 5 5 16 20 * * * *
Alliance Revenue – Lenvima 35 43 78 * 100 * 100
Vaccines (2)
Gardasil / Gardasil 9 660 608 1,048 2,317 532 469 675 1,675 633 2,308 55 56 38 36
ProQuad / M-M-R II / Varivax 392 426 525 1,343 355 399 519 1,273 403 1,676 1 2 5 5
Pneumovax 23 179 193 214 586 163 166 229 558 263 821 -7 -6 5 4
RotaTeq 193 156 191 540 224 123 179 525 160 686 7 8 3 2
Zostavax 65 44 54 163 154 160 234 547 121 668 -77 -77 -70 -71
Hospital Acute Care
Bridion 204 240 217 661 148 163 185 495 209 704 17 20 33 31
Noxafil 176 188 188 551 141 155 162 458 179 636 16 18 21 18
Invanz 151 149 137 437 136 150 159 445 157 602 -14 -12 -2 -2
Cubicin 98 94 95 287 96 103 91 290 92 382 4 6 -1 -3
Cancidas 91 87 79 257 121 112 94 327 95 422 -16 -14 -22 -25
Primaxin 72 68 72 212 62 71 73 206 74 280 -1 0 3 -1
Immunology
Simponi 231 233 210 673 184 199 219 602 217 819 -4 -3 12 5
Remicade 167 157 135 459 229 208 214 651 186 837 -37 -35 -29 -33
Neuroscience
Belsomra 54 71 66 191 42 52 56 150 60 210 17 17 27 25
Virology
Isentress / Isentress HD 281 305 275 860 305 282 310 896 308 1,204 -11 -9 -4 -5
Zepatier 131 113 104 347 378 517 468 1,363 296 1,660 -78 -77 -75 -76
Cardiovascular
Zetia 305 226 165 696 334 367 320 1,021 323 1,344 -48 -48 -32 -36
Vytorin 167 155 92 414 241 182 142 565 186 751 -35 -34 -27 -31
Atozet 73 101 84 258 49 63 59 171 54 225 42 44 51 42
Adempas 68 75 94 238 84 67 70 221 79 300 35 35 7 4
Diabetes (3)
Januvia 880 949 927 2,756 839 948 1,012 2,799 938 3,737 -8 -8 -2 -3
Janumet 544 585 563 1,693 496 563 513 1,572 586 2,158 10 12 8 6
Women’s Health
NuvaRing 216 236 234 686 160 199 214 573 188 761 9 10 20 19
Implanon / Nexplanon 174 174 186 535 170 178 155 503 183 686 20 22 6 6
Diversified Brands
Singulair 175 185 161 521 186 203 161 550 182 732 0 1 -5 -9
Cozaar / Hyzaar 120 125 103 348 112 119 128 360 125 484 -20 -18 -3 -6
Nasonex 122 81 71 274 139 85 42 266 120 387 67 73 3 0
Arcoxia 83 84 83 249 103 89 80 272 91 363 3 7 -8 -10
Follistim AQ 67 70 60 198 81 79 72 232 66 298 -16 -15 -15 -17
Fosamax 55 59 45 159 61 66 53 180 62 241 -16 -14 -12 -15
Dulera 57 42 50 149 82 69 59 210 77 287 -15 -14 -29 -29
Other Pharmaceutical (4) 989 1,053 980 3,023 995 1,064 952 3,017 1,048 4,065 3 6 0 -1
*
ANIMAL HEALTH 1,065 1,090 1,021 3,176 939 955 1,000 2,894 981 3,875 2 6 10 8
Livestock 652 633 660 1,946 578 582 655 1,816 668 2,484 1 5 7 6
Companion Animals 413 457 361 1,230 361 373 345 1,078 313 1,391 5 7 14 12

Other Revenues (5) 53 93 115 261 310 216 169 694 162 857 -32 -21 -62 -16

* 200% or greater

Sum of quarterly amounts may not equal year-to-date amounts due to rounding.

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