On October 24, 2018 Vertex Pharmaceuticals Incorporated (Nasdaq: VRTX) reported consolidated financial results for the third quarter ended September 30, 2018 and reviewed recent progress with its approved and investigational medicines (Press release, Vertex Pharmaceuticals, OCT 24, 2018, View Source [SID1234530273]). Vertex also reiterated its guidance for full-year 2018 total CF product revenues and guidance for combined GAAP and non-GAAP R&D and SG&A expenses.

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We continue to make significant progress toward our goal of developing medicines for all people with CF as marked by the recent approvals of KALYDECO and ORKAMBI in younger children, the launch of SYMDEKO in the U.S. and the rapid progress we have made with our triple combination pivotal studies," said Jeffrey Leiden, M.D., Ph.D., Chairman, President and Chief Executive Officer of Vertex. "In our development pipeline, we are advancing potential medicines for pain, sickle cell disease and beta thalassemia and are also beginning to advance additional compounds from research into early clinical development that could fundamentally change the treatment of other serious diseases in the future."

Dr. Leiden continued, "Our ability to treat more and more people with CF is driving revenue and earnings growth and significant cash flow generation, which enables the company to invest to discover and develop transformative future medicines for the treatment of CF and other life-threatening diseases."

Combined non-GAAP R&D and SG&A expenses increased compared to the third quarter of 2017 due to the advancement of the company’s portfolio of triple combination regimens for CF and investments to support the treatment of CF globally.
Combined GAAP R&D and SG&A expenses decreased compared to the third quarter of 2017 due to an upfront payment of $160.0 million related to the acquisition of VX-561, an investigational once-daily CFTR potentiator, from Concert Pharmaceuticals in the third quarter of 2017, partially offset by expenses related to the advancement of the company’s portfolio of triple combination regimens for CF and investments to support the treatment of CF globally.

Third-Quarter 2018 Net Income and Cash Position

Non-GAAP net income increased 107% compared to the third quarter of 2017 largely driven by the strong growth in total CF product revenues.
GAAP net income increased compared to the third quarter of 2017 largely driven by the strong growth in total CF product revenues and by a reduction to research and development expenses due to the $160.0 million payment to Concert in the third quarter of 2017.

Cash, cash equivalents and marketable securities as of September 30, 2018 were approximately $3.1 billion, an increase of approximately $1.0 billion compared to $2.1 billion as of December 31, 2017.

2018 Financial Guidance
Vertex today reiterated its full-year 2018 total CF product revenue guidance and guidance for combined GAAP and non-GAAP R&D and SG&A expenses as summarized below:

"We have created a strong financial profile for our business and are poised for continued growth as we make progress developing medicines for many more people with CF," said Ian Smith, Executive Vice President and Chief Operating Officer. "Nearer term, we anticipate revenue growth in 2019 will be driven by the impact of the SYMDEKO and SYMKEVI launches and recently completed reimbursement agreements and label expansions for our CF medicines. The potential for additional revenue growth in 2019 will be dependent upon gaining new reimbursement agreements in key countries, including the UK and France. Continued growth beyond 2019 will be driven by the potential approval, reimbursement and uptake of a triple combination medicine for the large number of patients with a minimal function mutation who currently do not have a treatment for the cause of their CF."

Business Highlights

TRIPLE COMBINATION REGIMENS

Bringing triple combination regimens to people with CF as quickly as possible
•
Data are expected in late 2018 for the two Phase 3 studies of VX-659 in triple combination with tezacaftor and ivacaftor in people with CF who have one F508del mutation and one minimal function mutation and in people who have two F508del mutations.
•
Enrollment is expected to be complete in the fourth quarter of 2018 for the two Phase 3 studies of VX-445 in triple combination with tezacaftor and ivacaftor in people with CF who have one F508del mutation and one minimal function mutation and in people who have two F508del mutations. The company plans to report data from these studies in the first quarter of 2019.
•
Vertex plans to evaluate data from both the VX-659 and VX-445 Phase 3 triple combination programs to choose the best regimen to submit for potential regulatory approval. Together these data are expected to provide the basis for submission of a New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) for people who have one F508del mutation and one minimal function mutation no later than mid-2019.

Evaluating VX-659 and VX-445 in children
•
Studies are underway to evaluate both the VX-659 and VX-445 triple combination regimens in children with CF ages 6 through 11 who have one F508del mutation and one minimal function mutation and in children who have two F508del mutations. These studies are intended to support potential approval of a triple combination regimen in children ages 6 through 11.

Potential once-daily regimens
•
In early 2018, the company reported positive safety and efficacy results for the once-daily potentiator VX-561 when dosed as part of a triple combination regimen including VX-659 or VX-445 and tezacaftor. The once-daily triple combination regimens were generally well tolerated, and the majority of adverse events were mild to moderate.

Based on recent feedback from the FDA, Vertex plans to initiate a Phase 2 study in the first half of 2019 evaluating VX-561 as a monotherapy in people with CF who have a gating mutation.

SYMKEVI in the European Union
•
On July 27, 2018, Vertex announced that the European Medicines Agency (EMA) Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion for SYMKEVI (tezacaftor/ivacaftor) in a combination regimen with ivacaftor (KALYDECO) for the treatment of people with CF ages 12 and older who either have two copies of the F508del mutation or who have one copy of the F508del mutation and a copy of one of the following 14 mutations in which the CFTR protein shows residual activity: P67L, R117C, L206W, R352Q, A455E, D579G, 711+3A→G, S945L, S977F, R1070W, D1152H, 2789+5G→A, 3272-26A→G, and 3849+10kbC→T.
•
Approval for SYMKEVI in the European Union (EU) is expected in the fourth quarter of 2018.

APPROVED CF MEDICINES
Establishing long-term reimbursement outside of the U.S.
•
On October 1, 2018, Vertex announced that it had entered into an innovative access contract with the Danish pharmaceutical and procurement organization, Amgros. This agreement provides eligible Danish CF patients access to all of Vertex’s current and future CF medicines. An agreement in Austria was also recently secured to provide access to ORKAMBI for all people with CF ages 6 through 11 who have two copies of the F508del mutation.
•
In September 2018, Vertex announced a reimbursement agreement in Australia for the use of ORKAMBI in people with CF ages 6 and older who have two copies of F508del mutation. A pathway to access for future Vertex CF medicine, tezacaftor/ivacaftor, was also established as part of this process.

Treating patients at younger ages with CFTR modulators: The company continues to make significant progress toward gaining approval for its CF medicines to be used earlier in the course of disease progression. Recent highlights include:
•
Vertex plans to submit a supplemental New Drug Application (sNDA) to the FDA in late 2018 based on positive data from a recently completed 24-week single-arm Phase 3 safety study of tezacaftor/ivacaftor in 70 children ages 6 through 11 who have two copies of the F508del mutation or who have one copy of the F508del mutation and one residual function mutation. The primary endpoint of the study was safety. The study met its primary safety endpoint, and safety data from the study showed that the treatment was generally well tolerated and safety data were consistent with those seen in previous Phase 3 studies of tezacaftor/ivacaftor in children ages 12 and older. To support approval in the EU, an eight-week, double-blind, placebo-controlled Phase 3 efficacy study is ongoing to evaluate tezacaftor/ivacaftor in approximately 65 children ages 6 through 11. The primary endpoint of this study is the absolute change in lung clearance index.
•
KALYDECO was approved in August 2018 in the U.S. for children with CF ages 12 to <24 months. On October 19, 2018, Vertex announced that it received a positive opinion from the European CHMP for KALYDECO in this age group. The company expects a decision in the EU in late 2018.
•
On October 18, 2018, Vertex announced positive data from a Phase 3 study evaluating ivacaftor in infants ages 6 to <12 months. These are the first data to demonstrate the potential to treat the underlying cause of CF in patients as young as six months old. The company plans to submit an sNDA to the FDA and a line extension to the EMA in late 2018.
•
ORKAMBI was approved in August 2018 in the U.S. for children with CF ages 2 to 5 years old. A line extension has been submitted to the EMA with a decision anticipated in the first half of 2019.
•
Dosing is underway in Phase 3 study evaluating lumacaftor/ivacaftor in children ages 12 to <24 months.

LATE-STAGE RESEARCH & CLINICAL DEVELOPMENT

Vertex continues to invest to discover and develop transformative medicines in other serious diseases. The company has a portfolio of potential medicines across a range of diseases, including:

Sickle Cell Disease & β-Thalassemia: Vertex and its partner CRISPR Therapeutics are developing the autologous gene-edited hematopoietic stem cell therapy CTX001 for the treatment of β-thalassemia and sickle cell disease.
•
In the U.S., Vertex and CRISPR Therapeutics recently announced that the FDA lifted the clinical hold on the CTX001 Investigational New Drug application (IND) for the treatment of sickle cell disease that was submitted earlier this year. The companies previously received regulatory approval to conduct a Phase 1/2 study in multiple countries in Europe and Canada. Vertex and CRISPR plan to initiate the study in sickle cell disease by the end of 2018. The first two patients in the study will be dosed sequentially and, pending data from these initial two patients, subsequent patients can be dosed concurrently.
•
Enrollment for a Phase 1/2 study in people with β-thalassemia is currently open at multiple clinical trial sites in Europe, and the first patient has now enrolled in this study. The Phase 1/2 trial is designed to assess safety and efficacy in adult transfusion-dependent non-beta zero/beta zero β-thalassemia patients. Similar to the study in sickle cell disease, the first two patients in the study will be dosed sequentially and, pending data from these initial two patients, subsequent patients can be dosed concurrently. This study is designed to enroll up to 45 patients.

Pain: Potential Role of Nav1.8 Inhibition
•
The company is planning to initiate a Phase 2b dose-ranging study evaluating the Nav1.8 inhibitor VX-150 using an oral formulation in patients with acute pain following bunionectomy surgery. The study is designed to evaluate multiple oral doses of VX-150 to potentially support pivotal development in acute pain.
•
Enrollment is complete in a Phase 2 proof-of-concept study evaluating VX-150 for the treatment of pain caused by small fiber neuropathy, and data are expected in early 2019.

Vertex continues to invest to discover other potential pain molecules that target the sodium channel 1.8 (Nav1.8) and other new mechanisms.

Alpha-1 Antitrypsin Deficiency (AAT)
•Vertex has advanced multiple small molecule correctors of AAT through preclinical development and is preparing to initiate clinical development for the first of these potential medicines by the end of 2018. AAT is a genetic disorder that is caused by mutations in a single gene that result in life-shortening systemic complications, primarily in the lung and liver.

Acute Spinal Cord Injury

In October 2014, VRTX in-licensed VX-210 (Cethrin) from BioAxone BioSciences, Inc. as a potential new treatment for spinal cord injury. An interim analysis of a Phase 2b study evaluating VX-210 in patients with certain acute cervical spinal cord injuries was recently conducted and based on the available data, the study’s Data Safety Monitoring Board (DSMB) recommended to stop the study early due to futility. There were no safety concerns noted in the DSMB’s review of the data. Based on the DSMB’s recommendation and Vertex’s review of the data, the company has decided to stop all development of VX-210, and will terminate the Phase 2b study. Vertex will discuss with BioAxone the next steps for the program.

On October 24, 2018 Sarepta Therapeutics, Inc. (NASDAQ: SRPT), a leader in precision genetic medicine for rare diseases,reported financial results for the third quarter of 2018 (Press release, Sarepta Therapeutics, OCT 24, 2018, View Source [SID1234530290]).

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"We are pleased to report another positive quarter, delivering strong EXONDYS 51 sales and tracking to achieve our full-year sales objectives while both advancing our RNA pipeline and making substantial progress in the creation of an enduring gene therapy engine," stated Doug Ingram, Sarepta’s president and chief executive officer. "We continued this quarter to advance our RNA pipeline, PMOs and next-generation PPMO platform, with urgency. Further, the strides we have taken in service of our gene therapy engine, including unprecedented results in our micro-dystrophin program, rights to what are now 14 gene therapy programs, the addition of manufacturing partners, and the continued hiring of gene therapy talent, speak to our vision. Others may be content with steady progress. We see a revolution and it is our intention to lead that revolution to the benefit of countless genetic disease patients awaiting life-enhancing therapies."

Third Quarter 2018 and Recent Corporate Developments

Lysogene Agreement – Signed a license agreement with Lysogene, a biopharmaceutical company specializing in gene therapy targeting central nervous system (CNS) diseases, for the development of a gene therapy, LYS-SAF302, to treat Mucopolysaccharidosis type IIIA (MPS IIIA), also called Sanfilippo syndrome type A, a rare, severe and fatal inherited neurodegenerative lysosomal storage disorder. The pivotal gene therapy study is scheduled to start by year-end 2018; and the trial will assess the efficacy of LYS-SAF302 in improving or stabilizing the neurodevelopmental status of MPS IIIA patients. Sarepta receives full commercial rights to LYS-SAF302 in the U.S. and other markets outside of Europe, while Lysogene retains full commercial rights in Europe.

Exhibit 99.1

Paragon Bioservices Agreement – Entered into long-term manufacturing partnership with Paragon Bioservices, significantly expanding Sarepta’s commercial capacity for its micro-dystrophin gene therapy program, as well as bolstering the Company’s clinical and commercial capacity for its other pipeline programs.

Nationwide Children’s Hospital Gene Therapy Partnership, Charcot-Marie-Tooth (CMT) Neuropathy – Forged another agreement with Nationwide Children’s Hospital giving Sarepta the certain exclusive rights to the Nationwide Children’s gene therapy candidate, neurotrophin 3 (NT-3), to treat CMT neuropathies, including CMT type 1A. CMT is a group of hereditary, degenerative nerve diseases that can affect motor skills, resulting in muscle weakness, and limiting patients’ ability to walk or use their hands. CMT is the most common inherited neuromuscular disorder, affecting over 2.8 million people worldwide. A clinical trial is scheduled to begin in 2019 in the most prevalent subtype of CMT, CMT type 1A.

Positive Micro-Dystrophin Gene Therapy Clinical Results in DMD Patients Presented at the 23rd International Congress of the World Muscle Society (Mendoza, Argentina) – Jerry Mendell, M.D., of Nationwide Children’s, presented positive updated results from the gene therapy clinical trial assessing AAVrh74.MHCK7.micro-Dystrophin in individuals with Duchenne muscular dystrophy (DMD). Dr. Mendell’s presentation included positive results from the biopsy of the fourth patient showing robust micro-dystrophin expression as measured by Western blot and immunohistochemistry. In all patients, expression of micro-dystrophin was associated with significant expression and up regulation of the dystrophin-associated protein complex, an additional indication of functionality of dystrophin. All patients showed significant decreases of serum creatine kinase (CK) levels at last measure versus baseline, and positive functional improvements were shown across all measures. No serious adverse events (SAEs) were observed.

Clinical Hold Lifted for DMD Micro-dystrophin Gene Therapy Program – The Food and Drug Administration (FDA) lifted the clinical hold for Sarepta’s DMD micro-dystrophin gene therapy program. Sarepta previously announced on July 25, 2018 that the FDA placed the program on clinical hold due to the presence of trace amounts of DNA fragment in research-grade third-party supplied plasmid in a manufacturing lot. In response, and in collaboration with Nationwide Children’s, an action plan was developed and submitted to the FDA, including an audit of the plasmid supplier and a commitment to use GMP-s plasmid for all future production lots.

Exhibit 99.1

Negative CHMP Re-examination Opinion Received for Eteplirsen – The Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) confirmed its May 31, 2018 negative opinion for a Conditional Marketing Application for eteplirsen. Relying upon CHMP advice and input, Sarepta will seek further scientific advice from the EMA on a possible path to bring eteplirsen to patients in Europe.

Conference Call

The Company will be hosting a conference call at 4:30 p.m. Eastern Time, to discuss Sarepta’s financial results and provide a corporate update. The conference call may be accessed by dialing 844-534-7313 for domestic callers and +1-574-990-1451 for international callers. The passcode for the call is 6099548. Please specify to the operator that you would like to join the "Sarepta Third Quarter 2018 Earnings Call." The conference call will be webcast live under the investor relations section of Sarepta’s website at www.sarepta.com and will be archived there following the call for 90 days. Please connect to Sarepta’s website several minutes prior to the start of the broadcast to ensure adequate time for any software download that may be necessary.

Financial Results

On a GAAP basis, Sarepta reported a net loss of $76.4 million and $47.7 million, or $1.15 and $0.78 per basic and diluted share for the third quarter of 2018 and 2017, respectively. On a non-GAAP basis, the net loss for the third quarter of 2018 was $37.1 million, or $0.56 per basic and diluted share, compared to a net loss of $10.7 million for the same period of 2017, or $0.17 per basic and diluted share.

On a GAAP basis, for the nine months ended September 30, 2018, Sarepta reported a net loss of $221.0 million, or $3.38 per basic and diluted share, compared to a net loss of $26.7 million reported for the same period of 2017, or $0.47 per basic and diluted share. On a non-GAAP basis, the net loss for the nine months ended September 30, 2018 was $83.1 million, or $1.27 per basic and diluted share, compared to a net loss of $65.7 million for the same period of 2017, or $1.15 per basic and diluted share.

Net Revenues

For the three months ended September 30, 2018, the Company recorded net revenues of $78.5 million, compared to net revenues of $46.0 million for the same period of 2017, an increase of $32.5 million. For the nine months ended September 30, 2018, the Company recorded net revenues of $216.6 million,

Exhibit 99.1

compared to net revenues of $97.3 million for the same period of 2017, an increase of $119.3 million. The increases primarily reflect increasing demand for EXONDYS 51 in the U.S.

Cost and Operating Expenses

Cost of sales (excluding amortization of in-licensed rights)

For the three months ended September 30, 2018, cost of sales (excluding amortization of in-licensed rights) was $8.7 million, compared to $3.1 million for the same period of 2017. For the nine months ended September 30, 2018, cost of sales (excluding amortization of in-licensed rights) was $21.1 million, compared to $3.8 million for the same period of 2017. The increase primarily reflects royalty payments to BioMarin Pharmaceuticals (BioMarin) as a result of the execution of the settlement and license agreements with BioMarin in July 2017 as well as higher inventory costs related to increasing demand for EXONDYS 51 during 2018. In addition, prior to the approval of EXONDYS 51, the Company expensed related manufacturing and material costs as research and development expenses.

Research and development

Research and development expenses were $86.6 million for the third quarter of 2018, compared to $34.2 million for the same period of 2017, an increase of $52.4 million. The increase in research and development expenses primarily reflects the following:

$18.0 million increase in up-front and milestone payments. The Company made a milestone payment of $10.0 million to Myonexus Therapeutics (Myonexus) for the achievement of one of the development milestones. In addition, the Company expensed $8.0 million related to the purchase of license to develop, manufacture and commercialize a pre-clinical Pompe product candidate under a license agreement with Lacerta Therapeutics (Lacerta);

$12.8 million increase in clinical and manufacturing expenses primarily due to increased patient enrollment in the on-going ESSENCE trial as well as a ramp-up of manufacturing activities for golodirsen, our micro-dystrophin program and our PPMO platform. These increases were partially offset by a ramp-down of clinical trials in eteplirsen primarily because the PROMOVI trial has been fully enrolled;

$8.1 million increase in compensation and other personnel expenses primarily due to an increase in headcount;

$3.8 million increase in pre-clinical expenses primarily due to the continuing ramp-up of toxicology studies in our PPMO platform;

Exhibit 99.1

$2.6 million increase in facility-related expenses due to our continuing expansion efforts;

$2.6 million increase in sponsored research with institutions such as Duke University and Nationwide Children’s Hospital;

$1.6 million increase in collaboration cost sharing with Summit on its utrophin platform; and

$1.4 million increase in stock-based compensation expense primarily driven by increases in headcount and stock price.

Research and development expenses were $255.6 million for the nine months ended September 30, 2018, compared to $122.3 million for the same period of 2017, an increase of $133.3 million. The increase in research and development expenses primarily reflects the following:

$56.0 million increase in up-front and milestone payments. The Company made an up-front payment of $60.0 million to Myonexus upon execution of the warrant to purchase common stock agreement in May 2018 and a milestone payment of $10.0 million to Myonexus upon achievement of one of the development milestones in September 2018. In addition, the Company expensed $8.0 million related to the purchase of license to develop, manufacture and commercialize a pre-clinical Pompe product candidate under a license agreement with Lacerta. In May 2017, the Company made a milestone payment of $22.0 million to Summit as the milestone of the last patient dosed in the safety arm cohort to the PhaseOut DMD study was achieved;

$25.0 million increase in clinical and manufacturing expenses primarily due to increased patient enrollment in the on-going ESSENCE trial as well as a ramp-up of manufacturing activities for golodirsen, casimersen, our micro-dystrophin program and our PPMO platform. These increases were partially offset by a ramp-down of clinical trials in eteplirsen primarily because the PROMOVI trial has been fully enrolled;

$16.7 million increase in compensation and other personnel expenses primarily due to an increase in headcount;

$7.9 million increase in pre-clinical expenses primarily due to the continuing ramp-up of toxicology studies in our PPMO platform as well as golodirsen and casimersen;

$7.6 million increase in collaboration cost sharing with Summit on its utrophin platform;
rimarily due to continuing accelerated company growth as a result of expansion of our R&D pipeline;

$4.7 million increase in facility-related expenses due to our continuing expansion efforts;

Exhibit 99.1

$4.5 million increase in stock-based compensation expense primarily driven by increases in headcount and stock price as well as achievement of a milestone related to the September 2016 restricted stock awards with a performance condition; and $4.0 million increase in sponsored research with institutions such as Duke University, Genethon and Nationwide Children’s Hospital.

Non-GAAP research and development expenses were $64.2 million and $31.5 million for the third quarter of 2018 and 2017, respectively. Non-GAAP research and development expenses were $164.5 million and $92.2 million for the nine months ended September 30, 2018 and 2017, respectively.

Selling, general and administration

Selling general and administrative expenses were $53.0 million for the third quarter of 2018, compared to $28.2 million for the same period of 2017, an increase of $24.8 million. The increase in selling, general and administrative expenses primarily reflects the following:

$9.8 million and $1.7 million increase in professional services and facility-related expenses, respectively, primarily due to continuing global expansion;

$9.4 million increase in compensation and other personnel expenses primarily due to an increase in headcount; and

$3.0 million increase in stock-based compensation primarily due to increases in headcount and stock price.

Selling general and administrative expenses were $143.5 million for the nine months ended September 30, 2018, compared to $90.5 million for the same period of 2017, an increase of $53.0 million. The increase in selling, general and administrative expenses primarily reflects the following:

$23.1 million increase in compensation and other personnel expenses primarily due to an increase in headcount;

$21.8 million and $2.9 million increase in professional services and facility-related expenses, respectively, primarily due to continuing global expansion;

$11.9 million increase in stock-based compensation primarily due to increases in headcount and stock price, the achievement of a milestone related to the September 2016 restricted stock awards granted with a performance condition, as well as the impact of a revised forfeiture rate assumption for equity awards granted to officers and directors;

Exhibit 99.1

$4.8 million decrease in restructuring expenses due to the relief of cease-use liabilities as a result of the termination of the rental agreement for our Corvallis facility; and

$3.5 million decrease in severance expense as a result of termination of our former CEO in June 2017.

Non-GAAP selling, general and administrative expenses were $42.5 million and $22.2 million for the third quarter of 2018 and 2017, respectively. Non-GAAP selling, general and administrative expenses were $113.5 million and $67.5 million for the nine months ended September 30, 2018 and 2017, respectively.

EXONDYS 51 litigation and license charges

As a result of the execution of the settlement and license agreements with BioMarin in July 2017, the Company recognized litigation and license charges of $25.6 million and $28.4 million during the three and nine months ended September 30, 2017, respectively. There was no such a transaction in 2018.

Amortization of in-licensed rights

For the three and nine months ended September 30, 2018, the Company recorded amortization of in-licensed rights of approximately $0.2 million and $0.6 million, respectively. For both the three and nine months ended September 30, 2017, the Company recorded amortization of in-licensed rights of approximately $0.8 million.

Other (loss) income

Gain from sale of Priority Review Voucher

In connection with the completion of the sale of the Priority Review Voucher (PRV) in March 2017, the Company recorded a gain of $125.0 from sale of the PRV in the first quarter of 2017.

Interest (expense) income and other, net

For the three and nine months ended September 30, 2018, the Company recorded $7.0 million and $16.7 million, respectively, of interest expense and other, net. For the same periods of 2017, the Company recorded $0.2 million and $0.7 million, respectively, of interest income and other, net. The period over period unfavorable change primarily reflects the interest expense accrued on the convertible notes issued in November 2017 partially offset by interest income from higher balances of cash, cash equivalents and investments.

Cash, Cash Equivalents, Investments and Restricted Investment

Exhibit 99.1

The Company had approximately $793.9 million in cash, cash equivalents and investments as of September 30, 2018 compared to $1.1 billion as of December 31, 2017. The decrease is primarily driven by the use of cash to fund the Company’s ongoing operations during the first three quarters of 2018.

Use of Non-GAAP Measures

In addition to the GAAP financial measures set forth in this press release, the Company has included certain non-GAAP measurements. The non-GAAP loss is defined by the Company as GAAP net loss excluding interest expense/(income), income tax expense/(benefit), depreciation and amortization expense, stock-based compensation expense, restructuring expense and other items. Non-GAAP research and development expenses are defined by the Company as GAAP research and development expenses excluding depreciation and amortization expense, stock-based compensation expense, restructuring expense and other items. Non-GAAP selling, general and administrative expenses are defined by the Company as GAAP selling, general and administrative expenses excluding depreciation and amortization expense, stock-based compensation expense, restructuring expense and other items.

1. Interest, tax, depreciation and amortization

Interest income and expense amounts can vary substantially from period to period due to changes in cash and debt balances and interest rates driven by market conditions outside of the Company’s operations. Tax amounts can vary substantially from period to period due to tax adjustments that are not directly related to underlying operating performance. Depreciation expense can vary substantially from period to period as the purchases of property and equipment may vary significantly from period to period and without any direct correlation to the Company’s operating performance. Amortization expense associated with in-licensed rights as well as patent costs are amortized over a period of several years after acquisition or patent application or renewal and generally cannot be changed or influenced by management.

2. Stock-based compensation expenses

Stock-based compensation expenses represent non-cash charges related to equity awards granted by Sarepta. Although these are recurring charges to operations, management believes the measurement of these amounts can vary substantially from period to period and depend significantly on factors that are not a direct consequence of operating performance that is within management’s control. Therefore, management believes that excluding these charges facilitates comparisons of the Company’s operational performance in different periods.

Exhibit 99.1

3. Restructuring expenses

The Company believes that adjusting for these items more closely represents the Company’s ongoing operating performance and financial results.

4. Other items

The Company evaluates other items of expense and income on an individual basis. It takes into consideration quantitative and qualitative characteristics of each item, including (a) nature, (b) whether the items relates to the Company’s ongoing business operations, and (c) whether the Company expects the items to continue on a regular basis. These other items include the aforementioned gain from the sale of the Company’s PRV and up-front and milestone payments.

The Company uses these non-GAAP measures as key performance measures for the purpose of evaluating operational performance and cash requirements internally. The Company also believes these non-GAAP measures increase comparability of period-to-period results and are useful to investors as they provide a similar basis for evaluating the Company’s performance as is applied by management. These non-GAAP measures are not intended to be considered in isolation or to replace the presentation of the Company’s financial results in accordance with GAAP. Use of the terms non-GAAP research and development expenses, non-GAAP selling, general and administrative expenses, non-GAAP other income and loss adjustments, non-GAAP income tax expense, non-GAAP net loss, and non-GAAP basic and diluted net loss per share may differ from similar measures reported by other companies, which may limit comparability, and are not based on any comprehensive set of accounting rules or principles. All relevant non-GAAP measures are reconciled from their respective GAAP measures in the attached table "Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures."

About EXONDYS 51

EXONDYS 51 uses Sarepta’s proprietary phosphorodiamidate morpholino oligomer (PMO) chemistry and exon-skipping technology to skip exon 51 of the dystrophin gene. EXONDYS 51 is designed to bind to exon 51 of dystrophin pre-mRNA, resulting in exclusion of this exon during mRNA processing in patients with genetic mutations that are amenable to exon 51 skipping. Exon skipping is intended to allow for production of an internally truncated dystrophin protein.

Important Safety Information About EXONDYS 51

Exhibit 99.1

Hypersensitivity reactions, including rash and urticaria, pyrexia, flushing, cough, dyspnea, bronchospasm, and hypotension, have occurred in patients who were treated with EXONDYS 51. If a hypersensitivity reaction occurs, institute appropriate medical treatment and consider slowing the infusion or interrupting the EXONDYS 51 therapy.

Adverse reactions in DMD patients (N=8) treated with EXONDYS 51 30 or 50 mg/kg/week by intravenous (IV) infusion with an incidence of at least 25% more than placebo (N=4) (Study 1, 24 weeks) were (EXONDYS 51, placebo): balance disorder (38%, 0%), vomiting (38%, 0%) and contact dermatitis (25%, 0%). The most common adverse reactions were balance disorder and vomiting. Because of the small numbers of patients, these represent crude frequencies that may not reflect the frequencies observed in practice. The 50 mg/kg once weekly dosing regimen of EXONDYS 51 is not recommended.

In the 88 patients who received ≥30 mg/kg/week of EXONDYS 51 for up to 208 weeks in clinical studies, the following events were reported in ≥10% of patients and occurred more frequently than on the same dose in Study 1: vomiting, contusion, excoriation, arthralgia, rash, catheter site pain, and upper respiratory tract infection.

On October 24, 2018 Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) reported financial results for the third quarter of 2018 (Press release, Alexion, OCT 24, 2018, View Source [SID1234530306]). Total revenues in the third quarter were $1,026.5 million, a 20 percent increase compared to the same period in 2017. The negative impact of foreign currency on total revenues year-over-year was 1 percent, or $8.9 million, inclusive of hedging activities. On a GAAP basis, diluted earnings per share (EPS) in the quarter was $1.47 per share. The third quarter of 2018 included $18.2 million of restructuring and related expenses compared to $164.7 million in the third quarter of 2017. Non-GAAP diluted EPS for the third quarter of 2018 was $2.02 per share, a 40 percent increase versus the third quarter of 2017.

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"We continued to execute on our key objectives this quarter, further strengthening our core business and again delivering strong top and bottom-line growth," said Ludwig Hantson, Ph.D., Chief Executive Officer of Alexion. "Following the groundbreaking Phase 3 results of eculizumab in NMOSD, we are moving quickly to prepare global regulatory submissions, which could make it the first approved therapy for patients with this devastating disease. Our teams continue to demonstrate launch excellence with sustained growth of Soliris in gMG. In addition, we made significant progress diversifying our portfolio with the anticipated acquisition of Syntimmune and our collaboration with Dicerna. We continue to look for additional opportunities while advancing internal programs to position us for further long-term growth."

Third Quarter 2018 Financial Highlights

Total net product sales were $1,026.5 million in the third quarter of 2018, compared to $1,044.7 million in the second quarter of 2018. Second quarter revenue benefited from favorable timing of orders from certain non-U.S. markets that access Alexion medicines through a tender process as well as approximately $18.2 million related to order timing ahead of the July 4th holiday in the United States, compared to the third quarter of 2018.
Soliris (eculizumab) net product sales were $888.0 million, compared to $755.4 million in the third quarter of 2017, representing an 18 percent increase. Soliris volume increased 24 percent year-over-year.
Strensiq (asfotase alfa) net product sales were $113.2 million, compared to $87.0 million in the third quarter of 2017, representing a 30 percent increase. Strensiq volume increased 37 percent year-over-year.
Kanuma (sebelipase alfa) net product sales were $25.3 million, compared to $16.4 million in the third quarter of 2017, representing a 54 percent increase. Kanuma volume increased 74 percent year-over-year.
GAAP cost of sales was $90.6 million, compared to $157.0 million in the same quarter last year. Non-GAAP cost of sales was $87.3 million, compared to $70.8 million in the same quarter last year.
GAAP R&D expense was $174.8 million, compared to $195.7 million in the same quarter last year. Non-GAAP R&D expense was $162.3 million, compared to $175.7 million in the same quarter last year.
GAAP SG&A expense was $258.7 million, compared to $270.6 million in the same quarter last year. Non-GAAP SG&A expense was $224.5 million, compared to $229.0 million in the same quarter last year.
GAAP income tax expense was $11.2 million, compared to an income tax benefit of $19.8 million in the same quarter last year. Non-GAAP income tax expense was $75.8 million, compared to $35.7 million in the same quarter last year. Both GAAP and non-GAAP income tax benefit /expense for the third quarter of 2017 included a benefit from the conclusion of a routine IRS audit for the 2013-2014 years.
GAAP diluted EPS was $1.47 per share, compared to $0.35 per share in the same quarter last year. The third quarter of 2018 included $18.2 million of restructuring and related expenses compared to $164.7 million in the third quarter of 2017. Non-GAAP diluted EPS was $2.02 per share, compared to $1.44 per share in the third quarter of 2017.
Research and Development

PHASE 3

Ultomiris TM – Paroxysmal Nocturnal Hemoglobinuria (PNH): Applications for the approval of UltomirisTM (also known as ALXN1210) in adults with PNH have been accepted by regulatory authorities in the U.S., the European Union (EU) and Japan. The U.S. Food and Drug Administration (FDA) has set a Prescription Drug User Fee Act (PDUFA) date of February 18, 2019, as part of an expedited eight-month review following the company’s use of a rare disease priority review voucher. The applications are supported by comprehensive data from two rigorous Phase 3 clinical studies. In September 2018, UltomirisTM was granted Orphan Drug Designation in Japan. In addition, a Phase 3 study of UltomirisTM in children and adolescents with PNH is currently underway.
ALXN1210 – Atypical Hemolytic Uremic Syndrome (aHUS): Enrollment is complete in the Phase 3 trial of ALXN1210 administered intravenously every eight weeks in complement inhibitor treatment-naïve adolescent and adult patients with aHUS. Results from this study are expected in early 2019. Alexion intends to file for regulatory approval in aHUS following approval in PNH. A Phase 3 study of ALXN1210 in children with aHUS is currently underway.
ALXN1210 – Subcutaneous: In late 2018, Alexion plans to initiate a single, PK-based Phase 3 study of ALXN1210 delivered subcutaneously once per week to support registration in PNH and aHUS.
Eculizumab – Relapsing Neuromyelitis Optica Spectrum Disorder (NMOSD): In September 2018, Alexion announced positive results from the Phase 3 PREVENT study, in which patients with anti-aquaporin-4 (AQP4) auto antibody-positive NMOSD received eculizumab or placebo on top of stable standard-of-care therapy. The study met its primary endpoint of time to first adjudicated on-trial relapse, demonstrating that treatment with eculizumab reduced the risk of relapse by 94.2 percent compared to placebo (p<0.0001). At 48 weeks, 97.9 percent of patients receiving eculizumab were free of relapse compared to 63.2 percent of patients receiving placebo. No cases of meningococcal infection were observed. Eculizumab was generally well tolerated with a safety profile consistent with that seen in previous clinical studies and real-world use in its three approved indications. Based on the significant need for an approved treatment, the company is rapidly preparing regulatory submissions in the U.S., EU and Japan, and expects to submit applications in early 2019.
WTX101 – Wilson Disease: Enrollment is underway in a Phase 3 study of WTX101 in Wilson disease, a rare genetic disorder with devastating hepatic and neurological consequences. The study is now powered for superiority. WTX101 is a first-in-class oral copper-binding agent with a unique mechanism of action to access and bind to serum copper and promote its removal from the liver.
PHASE 1/2

SYNT001: In September 2018, Alexion announced an agreement to acquire Syntimmune. Pending relevant regulatory approvals, the acquisition is expected to close in the fourth quarter of 2018. The acquisition will add anti-FcRn antibody SYNT001 to the company’s clinical pipeline. SYNT001 is currently in Phase 1b/2a development in patients with warm autoimmune hemolytic anemia (WAIHA) and in patients with pemphigus vulgaris (PV) or pemphigus foliaceus (PF). In 2019, the company plans to initiate two pivotal trials – one in WAIHA following successful completion of the current Phase 1b/2a study, and one in an undisclosed indication.
ALXN1810 – Subcutaneous: Alexion initiated a Phase 1 study of subcutaneous ALXN1210 co-administered with Halozyme’s ENHANZE drug-delivery technology, PH20, in the third quarter of 2018. Pending co-formulation data, this next-generation subcutaneous formulation will be called ALXN1810 and has the potential to further extend the dosing interval to once every two weeks or once per month.
PRE-CLINICAL

Dicerna – GalXC TM : In October 2018, Alexion began a collaboration with Dicerna Pharmaceuticals, Inc. to jointly discover and develop up to four subcutaneously delivered GalXCTM RNA interference (RNAi) candidates, currently in pre-clinical development, for the treatment of complement-mediated diseases.
Complement Pharma – CP010: Alexion is collaborating with Complement Pharma to co-develop CP010, a pre-clinical C6 inhibitor that has the potential to treat multiple neurological disorders.
2018 Financial Guidance

A foreign currency headwind, net of hedging activities, of approximately $10 million.
Unfavorable Soliris revenue impact of $90 to $110 million from ALXN1210 and other clinical trial recruitment versus prior year.
GAAP guidance reflects the preliminary financial impact of the announced agreement to acquire Syntimmune and the recently announced collaboration with Dicerna. Alexion expects to account for Syntimmune as an asset acquisition during the fourth quarter of 2018. In addition, non-GAAP financial guidance includes the preliminary impact of operating expenses for Syntimmune.
GAAP effective tax rate of 70 to 150 percent impacted by non-deductible pre-tax acquisition charges; non-GAAP effective tax rate of 14 to 15 percent.
Alexion expects to incur additional restructuring and related expenses in 2018 of up to approximately $125 million related to the Company’s 2017 restructuring activities.

Alexion’s financial guidance is based on current foreign exchange rates net of hedging activities and does not include the effect of acquisitions, license and collaboration agreements, intangible asset impairments, litigation charges, changes in fair value of contingent consideration or restructuring and related activity outside of the previously announced activities that may occur after the issuance of this press release.

Conference Call/Webcast Information:

Alexion will host a conference call/audio webcast to discuss the third quarter 2018 results today at 8:00 a.m. Eastern Time. To participate in the call, dial 866-762-3111 (USA) or 210-874-7712 (International), conference ID 5947065 shortly before 8:00 a.m. Eastern Time. A replay of the call will be available for a limited period following the call. The audio webcast can be accessed on the Investor page of Alexion’s website at: View Source

On October 24, 2018 Myovant Sciences (NYSE: MYOV) reported it has completed patient enrollment in its pivotal Phase 3 clinical trial, HERO, which is evaluating the safety and efficacy of relugolix for the treatment of men with advanced prostate cancer (Press release, Myovant Sciences, OCT 24, 2018, http://investors.myovant.com/news-releases/2018/10-24-2018-133055538 [SID1234530139]). The HERO study is designed to support approval by the U.S. Food and Drug Administration (FDA), the European Medicines Agency (EMA) and the Japanese Pharmaceuticals and Medical Devices Agency.

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"Completion of enrollment in HERO is a critical milestone for our prostate cancer program," said Lynn Seely, M.D., President and CEO of Myovant. "We look forward to reporting top-line efficacy and safety data for HERO in the fourth quarter of 2019. Relugolix is the only oral gonadotropin-releasing hormone, or GnRH, receptor antagonist in development to lower testosterone and prostate-specific antigen, or PSA, in men with prostate cancer."

Pending positive Phase 3 results, Myovant expects to submit a New Drug Application for relugolix with the FDA in early 2020. If approved, relugolix has the potential to be the first oral GnRH receptor antagonist approved for the treatment of advanced prostate cancer. Relugolix is administered as one pill once-daily and has been shown to decrease testosterone and PSA levels within days in Phase 1 and 2 clinical studies.

About the HERO Study
This randomized, open-label, parallel-group, international Phase 3 clinical trial is evaluating the safety and efficacy of relugolix in men with androgen-sensitive advanced prostate cancer who require at least one year of continuous androgen deprivation therapy. Patients enrolled in the study were randomized 2:1 to receive a single loading dose of relugolix 360 mg followed by relugolix 120 mg once daily or to treatment with leuprolide acetate 3-month depot injection, respectively. The primary efficacy outcome of the study is the ability of relugolix to achieve and maintain serum testosterone suppression to castrate levels (≤50 ng/dL [1.7 nmol/L]) for 48 weeks. A total of 934 patients have been enrolled in the HERO study in North and South America, Europe and the Asia-Pacific region.

About Advanced Prostate Cancer
Prostate cancer is the second most prevalent form of cancer in men and the second leading cause of death due to cancer in men in the United States. According to the National Cancer Institute, approximately 2.9 million men in the United States are currently living with prostate cancer, and approximately 165,000 men are estimated to be newly diagnosed in 2018. Treatment for advanced prostate cancer typically involves treatment with androgen deprivation therapy, which reduces testosterone to very low levels, commonly referred to as castration levels. GnRH agonists, such as leuprolide depot, or slow-release injections are the current standard of care for medical castration. However, GnRH agonists may be associated with mechanism-of-action limitations, including the potentially detrimental initial rise in testosterone levels that can exacerbate clinical symptoms, which is known as clinical or hormonal flare, and delayed testosterone recovery if the drug is discontinued.

On October 24, 2018 LabCorp (or the Company) (NYSE: LH) reported results for the third quarter ended September 30, 2018, and updated its 2018 guidance (Press release, LabCorp, OCT 24, 2018, View Source;p=RssLanding&cat=news&id=2373135 [SID1234530177]).

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"We are pleased with our performance in the quarter, highlighted by excellent results in our Covance Drug Development business and solid results in LabCorp Diagnostics," said David P. King, chairman and chief executive officer. "Covance delivered growth in net orders, a strong book to bill and significant margin expansion, while Diagnostics continued its consistent organic revenue and volume growth. In addition, we made progress on our three strategic objectives, and initiated LaunchPad Phase II in Diagnostics to continue streamlining the business and reducing the fixed cost base. Despite the dynamically changing market, we have two strong businesses, outstanding cash flow and a strong balance sheet, positioning us well to deliver growth for the balance of this year and in the years ahead."

Effective January 1, 2018, the Company adopted the FASB-issued converged standard on revenue recognition (ASC 606), using the full retrospective method. Unless otherwise indicated, all financial results in 2017 and comparisons to financial results in 2017 have been restated in this press release as if the Company had adopted ASC 606 on January 1, 2017.

Consolidated Results

Third Quarter Results

Revenue for the quarter was $2.83 billion, an increase of 8.0% compared to $2.62 billion in the third quarter of 2017. The increase in revenue was primarily due to growth from acquisitions of 6.5% and organic growth of 2.8%, partially offset by the negative impact from the disposition of businesses of 1.1% and foreign currency translation of approximately 30 basis points. Revenue growth was negatively impacted by approximately 50 basis points due to the ransomware attack and Hurricane Florence (hereinafter "Business Disruptions") during the quarter.

Operating income for the quarter was $343.4 million, or 12.1% of revenue, compared to $326.7 million, or 12.5%, in the third quarter of 2017. The increase in operating income was primarily due to acquisitions, organic revenue growth, the Company’s LaunchPad business process improvement initiative, and fewer restructuring charges and special items. These drivers were partially offset by lower Medicare pricing as a result of the implementation of PAMA, costs related to the ransomware attack, the disposition of businesses, and personnel costs. The Company recorded restructuring charges, special items, and amortization which together totaled $85.8 million in the quarter, compared to $105.2 million during the same period in 2017. Adjusted operating income (excluding amortization, restructuring charges, and special items) for the quarter was $429.2 million, or 15.2% of revenue, compared to $431.9 million, or 16.5%, in the third quarter of 2017. The decline in adjusted operating margin was primarily due to the implementation of PAMA, the negative impact from the Business Disruptions, as well as the mix impact from the acquisition of Chiltern.

Net earnings in the quarter were $318.8 million, compared to $171.6 million in the third quarter of 2017. Diluted EPS were $3.10 in the quarter, an increase of 187.9% compared to $1.65 in the same period in 2017. Net earnings and diluted EPS in the quarter benefitted from the net gain on disposition of businesses of $125.3 million and $1.22 per share, respectively. Adjusted EPS (excluding amortization, restructuring charges, special items, and the net gain on disposition of businesses) were $2.74 in the quarter, an increase of 15.6% compared to $2.37 in the third quarter of 2017. The Company’s adjusted earnings in the quarter were reduced by approximately $0.10 per diluted share due to the impact from the Business Disruptions, primarily due to lower volume.

Operating cash flow for the quarter was $251.9 million, down from $350.5 million in the third quarter of 2017, as the benefit of higher cash earnings was more than offset by an increase in working capital, a discretionary pension contribution, and the impact from the Business Disruptions. Capital expenditures totaled $97.9 million, compared to $75.3 million a year ago. As a result, free cash flow (operating cash flow less capital expenditures) was $154.0 million, compared to $275.2 million in the third quarter of 2017.

At the end of the quarter, the Company’s cash balance and total debt were $892.6 million and $6.5 billion, respectively. During the quarter, the Company repurchased $150.0 million of stock representing approximately 0.8 million shares. The Company had $843.5 million of authorization remaining under its share repurchase program at the end of the quarter.

Year-To-Date Results

Revenue was $8.55 billion, an increase of 13.0% over last year’s $7.56 billion. The increase in revenue was due to growth from acquisitions of 10.0%, organic growth of 2.7%, and the benefit from foreign currency translation of approximately 60 basis points, partially offset by the impact from the disposition of businesses of 0.4%.

Operating income was $1,018.0 million, or 11.9% of revenue, compared to $974.7 million, or 12.9%, in the first nine months of 2017. The increase in operating income was primarily due to acquisitions, organic revenue growth, and the Company’s LaunchPad initiative, partially offset by the implementation of PAMA, costs related to the ransomware attack, and personnel costs. The decline in operating margin was primarily due to the implementation of PAMA, the negative impact from the Business Disruptions, as well as the mix impact from the acquisition of Chiltern. The Company recorded restructuring charges, special items, and amortization which together totaled $310.4 million in the first nine months of the year, compared to $265.1 million during the same period in 2017. This increase was primarily due to higher amortization expense, and the payment of a one-time bonus to non-bonus-eligible employees following the implementation of the Tax Cuts and Jobs Act of 2017. Adjusted operating income (excluding amortization, restructuring charges, and special items) was $1.33 billion, or 15.5% of revenue, compared to $1.24 billion, or 16.4%, in the first nine months of 2017.

Net earnings in the first nine months of 2018 were $725.8 million, or $7.04 per diluted share, compared to $539.4 million, or $5.19 per diluted share, last year. Net earnings and diluted EPS in the first nine months of 2018 benefitted from the net gain on disposition of businesses of $125.3 million and $1.22 per share, respectively. Adjusted EPS (excluding amortization, restructuring, special items, and the net gain on disposition of businesses) were $8.50, an increase of 22.7% compared to $6.93 in the first nine months of 2017.

Operating cash flow was $819.0 million, compared to $933.1 million in the first nine months of 2017, as the benefit of higher cash earnings was more than offset by an increase in working capital, a discretionary pension contribution, and the impact from the Business Disruptions. Capital expenditures totaled $257.6 million, compared to $216.8 million during the same period in 2017. As a result, free cash flow (operating cash flow less capital expenditures) was $561.4 million, compared to $716.3 million in the first nine months of 2017.

***

The following segment results reflect the Company’s retrospective adoption of ASC 606 on January 1, 2017, and exclude amortization, restructuring charges, special items and unallocated corporate expenses.

Third Quarter Segment Results

LabCorp Diagnostics

Revenue for the quarter was $1.75 billion, a decrease of 0.2% from $1.75 billion in the third quarter of 2017. Revenue benefitted from acquisitions and organic volume (measured by requisitions), offset by the negative impact from the disposition of businesses (described below) and the implementation of PAMA. In addition, foreign currency translation reduced revenue by approximately 20 basis points.

The Company’s Food Solutions business was divested on August 1, 2018, and the Company’s UK-based forensic laboratory testing business was divested on August 7, 2018. These divested businesses contributed $14.6 million in revenue in the quarter, compared to $43.0 million during the third quarter of 2017. Excluding the disposition of businesses, revenue for the quarter would have been $1.74 billion, an increase of 1.4% over $1.71 billion last year.

Excluding the disposition of businesses, revenue per requisition decreased by 0.4% and total volume (measured by requisitions) increased by 2.0%, of which organic volume was 1.3% and acquisition volume was 0.8%. Volume growth was negatively impacted by 0.6% due to the Business Disruptions.

Adjusted operating income (excluding amortization, restructuring charges and special items) for the quarter was $331.5 million, or 18.9% of revenue, compared to $374.3 million, or 21.3%, in the third quarter of 2017. Operating income and margin declined primarily due to the negative impact from PAMA, the ransomware attack, the disposition of businesses, and personnel costs, partially offset by acquisitions and organic volume growth.

Covance Drug Development

Revenue for the quarter was $1.08 billion, an increase of 24.7% over $867 million in the third quarter of 2017. The increase in revenue was primarily due to growth from acquisitions of 17.9%, and organic growth of 7.3%, partially offset by the impact from foreign currency translation of approximately 50 basis points.

Adjusted operating income (excluding amortization, restructuring charges and special items) for the quarter was $131.3 million, or 12.1% of revenue, compared to $93.8 million, or 10.8%, in the third quarter of 2017. The increase in operating income and margin were primarily due to organic demand, LaunchPad savings and acquisitions, partially offset by personnel costs. The Company expects to deliver $150 million of net savings from LaunchPad by the end of 2020, and $30 million of cost synergies from the integration of Chiltern by the end of 2019.

Net orders and net book-to-bill during the trailing twelve months were $5.26 billion and 1.25, respectively. Backlog at the end of the quarter was $9.40 billion compared to $8.97 billion last quarter, and the Company expects approximately $3.8 billion of its backlog to convert into revenue in the next twelve months.

Outlook for 2018

In the following guidance, all financial results in 2017 and comparisons to financial results in 2017 have been restated in this press release as if the Company had adopted ASC 606 on January 1, 2017. The guidance assumes foreign exchange rates effective as of September 30, 2018 for the remainder of the year, and includes capital allocation.

Revenue growth of 10.5% to 11.0% over 2017 revenue of $10.31 billion, which includes the benefit of approximately 40 basis points of foreign currency translation. This is a narrowing of the range from the prior guidance of 10.5% to 11.5%, and includes the impact from Business Disruptions of 10 basis points, as well as the 10 basis point unfavorable change in currency translation.
Revenue growth in LabCorp Diagnostics of 3.0% to 3.5% over 2017 revenue of $6.86 billion, which includes the negative impact of PAMA as well as the benefit of approximately 10 basis points of foreign currency translation. This is a narrowing of the range from the prior guidance of 3.0% to 4.5%, and now includes the impact from the Business Disruptions of 20 basis points, and the 10 basis point unfavorable change in currency translation.
Revenue growth in Covance Drug Development of 24.0% to 26.0% over 2017 revenue of $3.45 billion, which includes the benefit of approximately 110 basis points of foreign currency translation. This is a narrowing of the range from the prior guidance of 23.0% to 26.0%.
Adjusted EPS of $11.25 to $11.45, which is an increase of approximately 22.3% to 24.4% over 2017 adjusted EPS of $9.20. This is lower than the prior guidance of $11.35 to $11.65 primarily due to the negative impact from the Business Disruptions of $0.10 per share as well as third quarter performance.
Free cash flow (operating cash flow less capital expenditures) of $975 million to $1,025 million, compared to $1.1 billion in 2017. This is lower than the prior guidance of $1.1 billion to $1.2 billion primarily due to the upcoming tax payment of approximately $125 million related to the disposition of the Food Solutions business, which was not included in the prior guidance.
Use of Adjusted Measures

The Company has provided in this press release and accompanying tables "adjusted" financial information that has not been prepared in accordance with GAAP, including adjusted EPS, adjusted operating income, free cash flow, and certain segment information. The Company believes these adjusted measures are useful to investors as a supplement to, but not as a substitute for, GAAP measures, in evaluating the Company’s operational performance. The Company further believes that the use of these non-GAAP financial measures provides an additional tool for investors in evaluating operating results and trends, and growth and shareholder returns, as well as in comparing the Company’s financial results with the financial results of other companies. However, the Company notes that these adjusted measures may be different from and not directly comparable to the measures presented by other companies. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in the tables accompanying this press release.

The Company today is furnishing a Current Report on Form 8-K that will include additional information on its business and operations. This information will also be available in the investor relations section of the Company’s website at View Source." target="_blank" title="View Source." rel="nofollow">View Source Analysts and investors are directed to the Current Report on Form 8-K and the website to review this supplemental information.

A conference call discussing LabCorp’s quarterly results will be held today at 9:00 a.m. EDT and is available by dialing 844-634-1444 (615-247-0253 for international callers). The access code is 7398818. A telephone replay of the call will be available through November 7, 2018, and can be heard by dialing 855-859-2056 (404-537-3406 for international callers). The access code for the replay is 7398818. A live online broadcast of LabCorp’s quarterly conference call on October 24, 2018, will be available at View Source or at View Source beginning at 9:00 a.m. EDT. This webcast will be archived and accessible through October 18, 2019.