On August 2, 2018 Teva Pharmaceutical Industries Ltd. (NYSE: TEVA, TASE: TEVA) reported results for the quarter ended June 30, 2018 (Press release, Teva, AUG 2, 2018, View Source [SID1234528342]).

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

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

                  Schedule Your 30 min Free Demo!

Mr. Kåre Schultz, Teva’s President and CEO, said, "I am satisfied with our progress in the second quarter. The restructuring program is on schedule, we have already achieved a significant cost base reduction towards our target for the year and we continue to reduce our net debt. COPAXONE maintained its market share and AUSTEDO continued to show solid growth. Given the second quarter results, we have decided to raise our 2018 full year guidance." Mr. Schultz continued, "Our PDUFA action date for fremanezumab is set for mid-September and we are preparing to launch this important product once approved."

Second Quarter 2018 Consolidated Results

Revenues in the second quarter of 2018 were $4.7 billion, a decrease of 18%, or 19% in local currency terms, compared to the second quarter of 2017, mainly due to continued price erosion in our U.S. generics business, generic competition to COPAXONE and loss of revenues following the divestment of certain products and discontinuation of certain activities.

Exchange rate differences between the second quarter of 2018 and the second quarter of 2017 positively impacted our revenues by $92 million, our GAAP operating income by $14 million and our non-GAAP operating income by $19 million.

GAAP gross profit was $2.1 billion in the second quarter of 2018, a decrease of 28% compared to the second quarter of 2017. GAAP gross profit margin was 43.8% in the second quarter of 2018, compared to 49.9% in the second quarter of 2017.

Non-GAAP gross profit was $2.4 billion in the second quarter of 2018, a decline of 27% from the second quarter of 2017. Non-GAAP gross profit margin was 50.4% in the second quarter of 2018, compared to 57.0% in the second quarter of 2017. The decrease in gross profit margin, on both a GAAP and a non-GAAP basis, resulted primarily from price erosion in our U.S. generics business and a decline in COPAXONE revenues due to generic competition, as well as the loss of revenue following the sale of our women’s health business.

Research and Development (R&D) expenses for the second quarter of 2018 were $290 million, a decrease of 38% compared to the second quarter of 2017. R&D expenses excluding equity compensation expenses and other R&D expenses were $281 million, or 6.0% of quarterly revenues in the second quarter of 2018, compared to $433 million, or 7.6%, in the second quarter of 2017. The decrease in R&D expenses resulted primarily from pipeline optimization, phase 3 studies that ended and related headcount reduction.

Selling and Marketing (S&M) expenses in the second quarter of 2018 were $710 million, a decrease of 25% compared to the second quarter of 2017. S&M expenses excluding amortization of purchased intangible assets, equity compensation expenses and other expenses were $662 million, or 14.1% of revenues, in the second quarter of 2018, compared to $891 million, or 15.6% of revenues, in the second quarter of 2017. The decrease was mainly due to cost reductions and efficiency measures as part of the restructuring plan.

General and Administrative (G&A) expenses in the second quarter of 2018 were $316 million, a decrease of 12.9% compared to the second quarter of 2017. G&A expenses, excluding equity compensation expenses and other items, were $292 million in the second quarter of 2018, or 6.2% of quarterly revenues, compared to $365 million, or 6.4% in the second quarter of 2017. The decrease was mainly due to cost reductions and efficiency measures as part of the restructuring plan.

GAAP other income in the second quarter of 2018 was $96 million compared to $24 million in the second quarter of 2017. Non-GAAP other income in the second quarter of 2018 was $106 million, an increase of 324% compared to $25 million in the second quarter of 2017. The increase in other income was mainly due to legal recovery of lost profits, where U.S. patent infringement litigation previously prevented a product’s sales.

GAAP operating loss in the second quarter of 2018 was $14 million, compared to $5.7 billion in the second quarter of 2017. Non-GAAP operating income in the second quarter of 2018 was $1.2 billion, a decrease of 22% compared to the second quarter of 2017. Non-GAAP operating margin was 26.3% in the second quarter of 2018 compared to 27.9% in the second quarter of 2017.

EBITDA (non-GAAP operating income, which excludes amortization and certain other items, as well as excluding depreciation expenses) was $1.4 billion in the second quarter of 2018, down 20% compared to $1.7 billion in the second quarter of 2017.

GAAP financial expenses for the second quarter of 2018 were $236 million, compared to $238 million in the second quarter of 2017. Non-GAAP financial expenses were $238 million in the second quarter of 2018, compared to $235 million in the second quarter of 2017. In the second quarter of 2018, we recognized a tax benefit of $76 million, or 30%, on pre-tax loss of $250 million. In the second quarter of 2017, we recognized a tax benefit of $22 million, on pre-tax loss of $6 billion. Non-GAAP income taxes for the second quarter of 2018 were $127 million, or 13%, on pre-tax non-GAAP income of $1.0 billion. Non-GAAP income taxes in the second quarter of 2017 were $230 million, or 17%, on pre-tax non-GAAP income of $1.4 billion. Our tax rate for the second quarter of 2018 on both GAAP and non-GAAP basis was mainly affected by the mix of products sold in different geographies.

We expect our annual non-GAAP tax rate for 2018 to be 15%, lower than our previous estimates. This is due to changes in the geographical mix of income we expect to earn this year. Our non-GAAP tax rate for 2017 was 15%.

GAAP net loss attributable to ordinary shareholders and GAAP diluted loss per share in the second quarter of 2018 were $241 million and $0.24, respectively, compared to $6.0 billion and $5.94, respectively, in the second quarter of 2017.

Non-GAAP net income attributable to ordinary shareholders and non-GAAP diluted EPS in the second quarter of 2018 were $794 million and $0.78, respectively, compared to $1,035 million and $1.02 in the second quarter of 2017.

For the second quarter of 2018, the weighted average outstanding shares for the fully diluted EPS calculation on a GAAP basis was 1,018 million, compared to 1,017 million for the second quarter of 2017. The weighted average outstanding shares for the fully diluted EPS calculation on a non-GAAP basis was 1,021 million, compared to 1,017 million for the second quarter of 2017. Additionally, no account was taken of the potential dilution by the mandatory convertible preferred shares, amounting to 63 million shares (including shares that may be issued due to unpaid dividends to date) for the three months ended June 30, 2018 and 59 million shares for the three months ended June 30 2017, as well as for the convertible senior debentures for the respective periods, since both had an anti-dilutive effect on loss per share.

Non-GAAP information: Net non-GAAP adjustments in the second quarter of 2018 were negative $1,035 million. Non-GAAP net income and non-GAAP EPS for the quarter were adjusted to exclude the following items:

Impairment of long-lived assets and goodwill of $668 million, comprised mainly of impairment of intangible assets of product rights and IPR&D assets related to the Actavis Generics acquisition, goodwill impairment related to Mexico reporting unit and impairment related to the closure of manufacturing sites and other fixed assets.
Amortization of purchased intangible assets totaling $302 million, of which $261 million is included in cost of goods sold and the remaining $41 million in S&M expenses;
Restructuring expenses of $107 million;
Equity compensation expenses of $47 million;
Contingent consideration of $47 million mainly related to a court decision regarding the status of Bendeka as an exclusive orphan drug;
Legal settlements and loss contingencies of $20 million;
Other non-GAAP items of $47 million; and
Tax benefit of $203 million.
Teva believes that excluding such items facilitates investors’ understanding of its business. See the attached tables for a reconciliation of the GAAP results to the adjusted non-GAAP figures. Investors should consider non-GAAP financial measures in addition to, and not as replacement for, or superior to, measures of financial performance prepared in accordance with GAAP.

Cash flow generated from operations during the second quarter of 2018 was $162 million, compared to $435 million in the second quarter of 2017. The decrease was mainly due to higher beneficial interest collected in exchange for securitized trade receivables and higher payments related to the restructuring plan during the second quarter of 2018.

Free cash flow, excluding net capital expenditures, was $0.6 billion in the second quarter of 2018 flat compared to $0.6 billion in the second quarter of 2017.

As of June 30, 2018, our debt was $30.2 billion, compared to $30.8 billion as of March 31, 2018. The decrease was mainly due to exchange rate fluctuations.

The portion of total debt classified as short-term as of June 30, 2018 was 4%, unchanged compared to March 31, 2018.

Segment Results for the Second Quarter 2018

Due to the organizational changes announced in November 2017, we began reporting our financial results under a new structure in the first quarter of 2018, consisting of the following segments:

a) North America segment, which includes the United States and Canada.

b) Europe segment, which includes the European Union and certain other European countries.

c) International Markets segment (previously named "Growth Markets" segment), which includes all countries other than those in our North America and Europe segments.

In addition to these three segments, we have other activities, primarily the sale of API to third parties and certain contract manufacturing services.

Segment profit is comprised of gross profit for the segment, less R&D, S&M, G&A expenses and other income related to each segment. Segment profit does not include amortization and certain other items.

North America Segment

Our North America segment includes the United States and Canada.

Revenues from our North America segment in the second quarter of 2018 were $2.3 billion, a decrease of $906 million, or 29%, compared to the second quarter of 2017, mainly due to a decline in revenues of COPAXONE as well as an equally significant decline in revenues in our U.S. generics business and the loss of revenues from the sale of our women’s health business, partially offset by higher revenues from AUSTEDO and our distribution business.

Revenues in the United States, our largest market, were $2.1 billion in the second quarter of 2018, a decrease of $899 million, or 30%, compared to the second quarter of 2017.

Generic products revenues in our North America segment in the second quarter of 2018 decreased by 29% to $947 million, compared to the second quarter of 2017, mainly due to continued price erosion in our U.S. generics business, additional competition to methylphenidate extended-release tablets (Concerta authorized generic) and portfolio optimization.

In the second quarter of 2018, we led the U.S. generics market in total prescriptions and new prescriptions, with approximately 576 million total prescriptions, representing 15% of total U.S. generic prescriptions according to IQVIA data.

COPAXONE revenues in our North America segment in the second quarter of 2018 decreased by 46% to $464 million, of which $448 million were generated in the United States, compared to the second quarter of 2017, mainly due to generic competition in the United States.

BENDEKA and TREANDA combined revenues in our North America segment in the second quarter of 2018 decreased by 2% to $160 million, compared to the second quarter of 2017, mainly due to lower volumes, partially offset by a higher pricing.

ProAir revenues in our North America segment in the second quarter of 2018 decreased by 7% to $115 million, compared to the second quarter of 2017, mainly due to lower net pricing.

QVAR revenues in our North America segment in the second quarter of 2018 decreased by 69% to $30 million, compared to the second quarter of 2017. The decrease in sales was mainly due to lower volumes in this quarter following wholesaler stocking in the first quarter of 2018 in connection with the launch of QVAR RediHaler. QVAR maintained its second-place position in the inhaled corticosteroids category in the United States.

AUSTEDO revenues in our North America segment in the second quarter of 2018 were $44 million. AUSTEDO was approved by the FDA for the treatment of chorea associated with Huntington disease and was launched in the United States in April 2017. In August 2017, the FDA also approved AUSTEDO for the treatment of tardive dyskinesia.

Distribution revenues in our North America segment in the second quarter of 2018 generated by Anda increased by 16% to $320 million, compared to the second quarter of 2017.

North America Gross Profit

Gross profit from our North America segment in the second quarter of 2018 was $1.2 billion, a decrease of 42% compared to $2.1 billion in the second quarter of 2017. The decrease was mainly due to lower revenues from COPAXONE and generic products.

Gross profit margin for our North America segment in the second quarter of 2018 decreased to 53.2%, compared to 64.9% in the second quarter of 2017. This decrease was mainly due to lower COPAXONE revenues and continued price erosion of generic products.

North America Profit

Profit from our North America segment in the second quarter of 2018 was $722 million, a decrease of 42% compared to $1.3 billion in the second quarter of 2017. The decrease was mainly due to lower revenues from COPAXONE and generic products, partially offset by cost reductions and efficiency measures as part of the restructuring plan and higher other income.

Europe Segment

Our Europe segment includes the European Union and certain other European countries.

neric products revenues in our Europe segment in the second quarter of 2018, including OTC products, increased by 10% to $907 million, compared to the second quarter of 2017. In local currency terms, revenues increased by 3%, mainly due to new product launches, partially offset by price reductions.

COPAXONE revenues in our Europe segment in the second quarter of 2018 increased by 1% to $140 million, compared to the second quarter of 2017. In local currency terms, revenues decreased by 7%, mainly due to price reductions resulting from the entry of generic competition.

Respiratory products revenues in our Europe segment in the second quarter of 2018 increased by 26% to $106 million, compared to the second quarter of 2017. In local currency terms, revenues increased by 18%, mainly due to the launch of BRALTUS in 2017.

Europe Gross Profit

Gross profit from our Europe segment in the second quarter of 2018 was $731 million, an increase of 6% compared to $692 million in the second quarter of 2017. The increase was mainly due to the positive impact of currency fluctuations, partially offset by the loss of revenues from the sale of our women’s health business.

Gross profit margin for our Europe segment in the second quarter of 2018 increased to 55.0%, compared to 53.4% in the second quarter of 2017. This increase was mainly due to the closure of our distribution business in Hungary.

Europe Profit

Profit from our Europe segment in the second quarter of 2018 was $346 million, an increase of 58% compared to $219 million in the second quarter of 2017. The increase was mainly due to cost reductions and efficiency measures as part of the restructuring plan.

International Markets Segment

Our International Markets segment includes all countries other than those in our North America and Europe segments. The key markets in this segment are Japan, Israel and Russia.

Generic products revenues in our International Markets segment in the second quarter of 2018, which include OTC products, decreased by 11% to $537 million, compared to the second quarter of 2017. In local currency terms, revenues decreased by 9%, mainly due to lower sales in Russia and the effect of the deconsolidation of our subsidiaries in Venezuela.

COPAXONE revenues in our International Markets segment in the second quarter of 2018 decreased by 15% to $22 million, compared to the second quarter of 2017. In local currency terms, revenues decreased by 4%.

Distribution revenues in our International Markets segment in the second quarter of 2018 increased by 14% to $154 million, compared to the second quarter of 2017. In local currency terms, revenues increased by 14%, mainly due to higher sales in Israel.

International Markets Gross Profit

Gross profit from our International Markets segment in the second quarter of 2018 was $328 million, a decrease of 18% compared to $400 million in the second quarter of 2017. This decrease was mainly due to lower gross profit in Japan and Russia and the deconsolidation of our subsidiaries in Venezuela, partially offset by higher gross profit in Israel and certain Latin American markets.

Gross profit margin for our International Markets segment in the second quarter of 2018 decreased to 41.6%, compared to 45.2% in the second quarter of 2017.

International Markets Profit

Profit from our International Markets segment in the second quarter of 2018 was $139 million, compared to $121 million in the second quarter of 2017. The increase was mainly due to cost reductions and efficiency measures as part of the restructuring plan.

Profit as a percentage of International Markets revenues in the second quarter of 2018 was 18%, compared to 14% in the second quarter of 2017. This increase was mainly due to lower operating expenses as part of the restructuring plan.

During the fourth quarter of 2017, we deconsolidated our subsidiaries in Venezuela from our financial results. Consequently, results of operations of our subsidiaries in Venezuela are not included in the second quarter of 2018.

Other Activities

We have other sources of revenues, primarily the sale of API to third parties and certain contract manufacturing services. These other activities are not included in our North America, Europe or International Markets segments.

Our revenues from other activities in the second quarter of 2018 decreased by 13.5% to $321 million, compared to the second quarter of 2017. In local currency terms, revenues decreased by 16%, mainly due to lower API sales to third parties.

API sales to third parties in the second quarter of 2018 decreased by 9% to $186 million, compared to the second quarter of 2017. In local currency terms, revenues decreased by 9%.

These estimates reflect management’s current expectations for Teva’s performance in 2018. Actual results may vary, whether as a result of exchange rate differences, market conditions or other factors. In addition, the non-GAAP measures exclude the amortization of purchased intangible assets, costs related to certain regulatory actions, inventory step-up, legal settlements and reserves, impairments and related tax effects.

See "Non-GAAP Financial Measures" below.

Conference Call

Teva will host a conference call and live webcast along with a slide presentation on Thursday, August 2, 2018 at 8:00 a.m. ET to discuss its second quarter 2018 results and overall business environment. A question & answer session will follow.

United States 1-877-391-1148

International +44 (0) 1452 580733

For a list of other international toll-free numbers, click here.

Passcode: 6984104

A live webcast of the call will also be available on Teva’s website at: ir.tevapharm.com. Please log in at least 10 minutes prior to the conference call in order to download the applicable software.

Following the conclusion of the call, a replay of the webcast will be available within 24 hours on the Company’s website. The replay can also be accessed until August 30, 2018, 9:00 a.m. ET by calling United States 1 (866) 331-1332 or International +44 (0) 3333009785; passcode: 698410

On August 2, 2018 Emergent BioSolutions Inc. (NYSE: EBS) reported financial results for the quarter and six months ended June 30, 2018 (Press release, Emergent BioSolutions, AUG 2, 2018, View Source;p=RssLanding&cat=news&id=2361890 [SID1234528361])

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

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

                  Schedule Your 30 min Free Demo!

Q2 2018 AND RECENT BUSINESS ACCOMPLISHMENTS

Completed Mutual Recognition Procedure for market authorization of BioThrax (Anthrax Vaccine Adsorbed) in five Concerned Member States within the European Union – Italy, the Netherlands, Poland, the U.K. and France; to date, BioThrax has received market authorization in four of the five countries.
Initiated an investment of up to $50 million over the next three years in the Camden fill/finish facility located in Baltimore, an expansion project that will significantly enhance the capabilities of this key site within the Company’s CDMO Business Unit.
Announced Framework Partnering Agreement under which the Company will provide technical and manufacturing support for the development and manufacture of a vaccine against Nipah virus in collaboration with Profectus BioSciences, Inc. and CEPI (Coalition for Epidemic Preparedness Innovations); under a separate agreement with Profectus, Emergent will retain the exclusive option to license and assume control of development activities for the Nipah virus vaccine from Profectus.
Initiated a Phase 1 clinical study of ZIKV-IG, the Company’s anti-Zika virus immune globulin being developed as a therapeutic intervention against Zika virus disease; the candidate was granted Fast Track designation by the U.S. Food and Drug Administration in December 2017.
2018 FINANCIAL PERFORMANCE

(I) Quarter Ended June 30, 2018 (Unaudited)

Revenues

Total Revenues

For Q2 2018, total revenues were $220.2 million, an increase of 118% over 2017. Total revenues reflect a significant increase in product sales.

Product Sales

For Q2 2018, product sales were $180.1 million, an increase of 183% as compared to 2017. The increase is principally attributable to sales of BioThrax and ACAM2000, (Smallpox (Vaccinia) Vaccine Live) previously expected in the first quarter as well as continued sales of both products in the second quarter.

Contract Manufacturing

For Q2 2018, revenue from the Company’s contract manufacturing operations was $23.6 million, an increase of 46% as compared to 2017. The increase primarily reflects manufacturing services at the Company’s Canton site.

Contracts and Grants

For Q2 2018, revenue from the Company’s development-based contracts and grants was $16.5 million, a decrease of 21% as compared to 2017. The decrease primarily reflects a reduction in R&D activities related to certain ongoing funded development programs.

Operating Expenses

Cost of Product Sales and Contract Manufacturing

For Q2 2018, cost of product sales and contract manufacturing was $89.2 million, an increase of 158% as compared to 2017. The increase was primarily attributable to the increase in product sales and contract manufacturing activities at the Company’s Bayview and Canton facilities.

Research and Development (Gross and Net)

For Q2 2018, gross R&D expenses were $24.7 million, a decrease of 4% as compared to 2017. The decrease primarily reflects lower costs associated with contract development services.

For Q2 2018, net R&D expense (calculated as gross research and development expenses minus contracts and grants revenue) was $8.2 million, an increase of $3.4 million as compared to 2017, reflecting increased investment in development-stage programs not currently funded in whole or in part by third-party partners. These include costs associated with the Raxibacumab (Anthrax Monoclonal Antibody) technology transfer and the SIAN device, an intranasal antidote spray device for the treatment of known or suspected acute cyanide poisoning.

Selling, General and Administrative

For Q2 2018, selling, general and administrative expenses were $39.5 million, an increase of 24% as compared to 2017, attributable primarily to increased professional services and compensation-related costs.

Income Taxes

For Q2 2018, the provision for income tax expense in the amount of $15.7 million includes a discrete benefit of $0.9 million primarily related to stock compensation activity resulting in an effective tax rate of 24%. Excluding the discrete benefit, the Q2 2018 effective tax rate was 25%.

Net Income & Adjusted Net Income

For Q2 2018, the Company recorded net income of $50.1 million, or $0.98 per diluted share, versus net income of $4.6 million, or $0.11 per diluted share, in 2017. (1).

For Q2 2018, the Company recorded adjusted net income of $54.7 million, or $1.07 per diluted share, versus adjusted net income of $6.6 million, or $0.13 per diluted share, in 2017. (1) (2)

(I) Six Months Ended June 30, 2018 (Unaudited)

Revenues

Total Revenues

For the six months of 2018, total revenues were $338.0 million, an increase of 55% over 2017. Total revenues reflect a significant increase in product sales.

Product Sales

For the six months of 2018, product sales were $255.8 million, an increase of 76% as compared to 2017. The increase is principally attributable to sales of ACAM2000 and Raxibacumab, both of which were acquired in Q4 2017.

Selling, General and Administrative

For the six months of 2018, selling, general and administrative expenses were $79.7 million, an increase of 19% as compared to 2017, attributable primarily to increased professional services and compensation-related costs.

Income Taxes

For the six months of 2018, the provision for income tax expense in the amount of $11.2 million includes a discrete benefit of $3.2 million primarily related to stock compensation activity resulting in an effective tax rate of 20%. Excluding the discrete benefit, the six months of 2018 effective tax rate was 25%.

Net Income & Adjusted Net Income

For the six months of 2018, the Company recorded net income of $45.2 million, or $0.89 per diluted share, versus net income of $15.1 million, or $0.35 per diluted share, in 2017. (1)

For the six months of 2018, the Company recorded adjusted net income of $53.1 million, or $1.04 per diluted share, versus adjusted net income of $20.8 million, or $0.42 per diluted share, in 2017. (1) (2)

2018 FINANCIAL FORECAST & OPERATIONAL GOALS

The Company is reaffirming its full year 2018 financial performance forecast:

Total Revenue
$715 million to $755 million
Pre-Tax Income
$120 million to $140 million
Net Income (3)
$95 million to $110 million
Adjusted Net Income (2) (3)
$110 million to $125 million
EBITDA (2) (3)
$175 million to $190 million
The Company is also reaffirming its full year 2018 operational goals:

Advance NuThrax development to enable Emergency Use Authorization filing with the FDA in 2018
Complete ACAM2000 deliveries; establish a multi-year follow-on contract with the U.S. government
Deliver Raxibacumab doses under current contract; advance technology transfer to the Company’s Bayview facility in Baltimore, Maryland
Progress pipeline to have at least four product candidates in advanced development
Complete an acquisition that generates revenue within 12 months of closing
Q3 2018 FINANCIAL FORECAST

The Company forecast for Q3 2018 total revenue is $165 million to $190 million.

FOOTNOTES

(1) See "Calculation of Diluted Earnings Per Share."
(2) See "Reconciliation of Net Income to Adjusted Net Income and EBITDA" for a definition of terms and a reconciliation table.
(3) Reflects an estimated tax rate that includes the expected effects of the United States Tax Cuts and Jobs Act of 2017 on the Company’s 2018 income tax provision.

CONFERENCE CALL AND WEBCAST INFORMATION

Company management will host a conference call at 5:00 pm (Eastern Time) today, August 2, 2018, to discuss these financial results. This conference call can be accessed live by telephone or through Emergent’s website:

Live Teleconference Information:
Dial in: [US] (855) 766-6521; [International] (262) 912-6157
Conference ID: 93342423
Live Webcast Information:
Visit View Source for the live webcast feed.
A replay of the call can be accessed at www.emergentbiosolutions.com under "Investors."

ABOUT EMERGENT BIOSOLUTIONS INC.

Emergent BioSolutions Inc. is a global life sciences company seeking to protect and enhance life by focusing on providing specialty products for civilian and military populations that address accidental, intentional, and naturally occurring public health threats. Through our work, we envision protecting and enhancing 50 million lives with our products by 2025. Additional information about the company may be found at www.emergentbiosolutions.com. Follow us on Twitter @emergentbiosolu and Instagram @life_at_emergent.

SAFE HARBOR STATEMENT

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements, other than statements of historical fact, including, without limitation, our financial guidance, and any other statements containing the words "will," "believes," "expects," "anticipates," "intends," "plans," "targets," "forecasts," "estimates" and similar expressions in conjunction with, among other things, discussions of the Company’s outlook, financial performance or financial condition, financial and operation goals, strategic goals, growth strategy, acquisition strategy, product sales, government development or procurement contracts or awards, government appropriations, manufacturing capabilities, product development and delivery timeline, and Emergency Use Authorization (EUA) and the timing of other regulatory approvals or expenditures are forward-looking statements. These forward-looking statements are based on our current intentions, beliefs and expectations regarding future events. We cannot guarantee that any forward-looking statement will be accurate. Investors should realize that if underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results could differ materially from our expectations. Investors are, therefore, cautioned not to place undue reliance on any forward-looking statement. Any forward-looking statement speaks only as of the date of this press release, and, except as required by law, we do not undertake to update any forward-looking statement to reflect new information, events or circumstances.

There are a number of important factors that could cause the Company’s actual results to differ materially from those indicated by such forward-looking statements, including the availability of funding and the exercise of options under our BioThrax and NuThrax contracts; appropriations for the procurement of our products; our ability to secure EUA pre-authorization approval and licensure of NuThrax from the FDA within the anticipated timeframe, if at all; availability of funding for our U.S. government grants and contracts; our ability to complete expected deliveries of BioThrax, ACAM2000 and Raxibacumab; our ability to establish a multi-year follow-on contract for ACAM2000; our ability to advance the technology transfer of Raxibacumab to the Company’s Bayview facility; our ability to identify and acquire or in-license products or product candidates that satisfy our selection criteria; our ability to successfully integrate and develop the products or product candidates, programs, operations and personnel of any entities, businesses or products that we may acquire; whether anticipated synergies and benefits from an acquisition or in-license will be realized within expected time periods, if at all; our ability to utilize our manufacturing facilities and expand our capabilities; our ability and the ability of our contractors and suppliers to maintain compliance with Current Good Manufacturing Practices and other regulatory obligations; the results of regulatory inspections; the outcome of the class action lawsuit filed against us and possible other future material legal proceedings; the success of our ongoing and planned development programs; the timing and results of clinical trials; the timing of and our ability to obtain and maintain regulatory approvals for our product candidates; and our commercialization, marketing and manufacturing capabilities and strategy. The foregoing sets forth many, but not all, of the factors that could cause actual results to differ from our expectations in any forward-looking statement. Investors should consider this cautionary statement, as well as the risk factors identified in our periodic reports filed with the Securities and Exchange Commission, when evaluating our forward-looking statements.

RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME AND EBITDA

This press release contains two financial measures (Adjusted Net Income and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)) that are considered "non-GAAP" financial measures under applicable Securities and Exchange Commission rules and regulations. These non-GAAP financial measures should be considered supplemental to and not a substitute for financial information prepared in accordance with generally accepted accounting principles. The Company’s definition of these non-GAAP measures may differ from similarly titled measures used by others. Adjusted Net Income adjusts for specified items that can be highly variable or difficult to predict, or reflect the non-cash impact of charges resulting from purchase accounting. EBITDA reflects net income excluding the impact of depreciation, amortization, interest expense and provision for income taxes. The Company views these non-GAAP financial measures as a means to facilitate management’s financial and operational decision-making, including evaluation of the Company’s historical operating results and comparison to competitors’ operating results. These non-GAAP financial measures reflect an additional way of viewing aspects of the Company’s operations that, when viewed with GAAP results and the reconciliations to the corresponding GAAP financial measure, may provide a more complete understanding of factors and trends affecting the Company’s business.

The determination of the amounts that are excluded from these non-GAAP financial measures are a matter of management judgment and depend upon, among other factors, the nature of the underlying expense or income amounts. Because non-GAAP financial measures exclude the effect of items that will increase or decrease the Company’s reported results of operations, management strongly encourages investors to review the Company’s consolidated financial statements and publicly filed reports in their entirety.

On August 2, 2018 Karyopharm Therapeutics Inc. (Nasdaq:KPTI), a clinical-stage pharmaceutical company, reported that members of the Company’s management team will participate in the following upcoming investor conferences (Press release, Karyopharm, AUG 2, 2018, View Source [SID1234528380]):

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

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

                  Schedule Your 30 min Free Demo!

The Canaccord Genuity 38th Annual Growth Conference on Thursday, August 9, 2018 at 1:00 p.m. ET.

The 2018 Wedbush PacGrow Healthcare Conference on Tuesday, August 14, 2018 at 8:00 a.m. ET.

A live webcast of each of these events will be available on the "Events & Presentations" page in the Investors section of the Company’s website at View Source A replay of each webcast will be archived on the Company’s website for 90 days following the presentation.

On August 2, 2018 Cytori Therapeutics, Inc. (NASDAQ: CYTX) reported that it will provide a live webcast of its second quarter financial results and business update on Tuesday, August 14, 2018 at 5:30 PM Eastern Time (Press release, Cytori Therapeutics, AUG 2, 2018, View Source [SID1234529751]).

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

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

                  Schedule Your 30 min Free Demo!

The dial-in information is as follows:
Dial-In Number: +1.877.402.3914
Conference ID: 4075028

Prior to the webcast at approximately 4:30 PM Eastern Time on August 14, Cytori will issue its second quarter earnings release which will review Cytori’s second quarter performance. The webcast will be available both live and by replay two hours after the call in the "Webcasts" section of the company’s investor relations website.

On August 2, 2018 BioMarin Pharmaceutical Inc. (NASDAQ: BMRN) (BioMarin or the Company) reported financial results for the second quarter ended June 30, 2018 (Press release, BioMarin, AUG 2, 2018, View Source [SID1234528316]). The financial results that follow represent a comparison of the second quarter of 2018 to the second quarter of 2017. Total revenues were $372.8 million for the quarter ended June 30, 2018 compared to $317.4 million for the quarter ended June 30, 2017, an increase of 17%. GAAP Net Loss for the quarter ended June 30, 2018 was $16.8 million, or $0.09 loss per basic and diluted share compared to GAAP Net Loss of $36.8 million, or $0.21 loss per basic and diluted share for the quarter ended June 30, 2017.

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

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

                  Schedule Your 30 min Free Demo!

Net product sales for the second quarter of 2018 were $367.8 million, compared to $315.9 million in the second quarter of 2017. The increase in net product sales was attributed to the following:

Vimizim: increased by $24.4 million, or 24%, due primarily to an increase in the number of commercial patients;
Brineura: launched in the second quarter of 2017, and contributed $10.6 million to increased net product revenues;
Kuvan: increased $7.0 million, or 7%, driven by an increase in the number of commercial patients;
Naglazyme: increased $5.4 million, or 6%, primarily due to government ordering patterns in certain countries and an increase in the number of commercial patients; and
Aldurazyme: increased $4.1 million, or 21%, primarily as a result of increased volume.
The decrease in GAAP Net Loss was primarily due to the following:

Increased gross profit primarily driven by increased Vimizim, Brineura and Kuvan net product revenues; and
A gain on the sale of intangible assets totaling $20.0 million received from Pfizer Inc. (Pfizer) associated with the achievement of two regulatory milestones, triggered by the U.S. Food and Drug Administration (FDA) acceptance of the New Drug Application submission for talazoparib (which BioMarin sold to Medivation Inc. prior to Pfizer’s acquisition of Medivation Inc.) and the European Medicines Agency acceptance of Pfizer’s submission of a Marketing Authorization Application for talazoparib; partially offset by
Higher research and development (R&D) expense for the expansion of our clinical programs related to tralesinidase alfa (formally referred to as BMN-250), vosoritide and valoctocogene roxaparvovec and higher selling, general and administrative (SG&A) expense in support of the preparation for the commercial launch of Palynziq (formerly known as pegvaliase) and the continued commercial expansion of Brineura.
Non-GAAP Income for the second quarter of 2018 was $19.9 million, compared to Non-GAAP Income of $26.6 million in the second quarter of 2017. The decrease in Non-GAAP income in the second quarter of 2018 is primarily attributed to higher R&D and SG&A expenses, partially offset by increased gross profit from revenues.

As of June 30, 2018, BioMarin had cash, cash equivalents and investments totaling approximately $1.6 billion, as compared to $1.8 billion on December 31, 2017. Our 0.75% senior subordinated convertible notes due 2018 are scheduled to mature in October 2018. Holders have the right to convert their notes at maturity, and with respect to any such conversions we have elected to settle in cash up to the principal amount of the notes, shares of our common stock in respect of conversion value in excess thereof, and cash in lieu of any fractional shares.

Commenting on second quarter results, Jean-Jacques Bienaimé, Chairman and Chief Executive Officer of BioMarin, said, "In the quarter, BioMarin achieved numerous value-creating events on both the commercial and regulatory fronts. On May 24 we received standard FDA approval of Palynziq, an important new therapy that helps address a significant unmet need in adults with phenylketonuria (PKU) who have been unable to control their blood Phe levels with current treatment options. We are very happy with the pace of the initial commercial launch of Palynziq and look forward to providing an update on launch metrics in the third quarter of this year."

"In clinical development, we provided two years of clinical data with the 6e13 vg/kg dose of valoctocogene roxaparvovec gene therapy for severe Hemophilia A from the ongoing Phase 1/2 study in at the World Federation of Hemophilia (WFH) 2018 World Congress in Glasgow, Scotland. The updated data demonstrated the elimination of need for prophylaxis and no spontaneous bleeds in two years. In addition, we amended the protocol for the global GENEr8-1 (Phase 3) pivotal study to evaluate superiority compared to the current standard of care. The number of participants has been increased to 130 and we now anticipate completing enrollment during the first quarter of 2019."

Mr. Bienaimé continued, "With seven commercial products expected to generate approximately $1.5 billion in revenues this year, two potentially $1.0 billion plus late-stage clinical product opportunities, whose pivotal studies are expected to be fully enrolled later this year and in Q1 2019, I believe BioMarin’s commercial prospects have never been better."

All Financial Guidance items are calculated based on US GAAP with the exception of Non-GAAP Income. Refer to Non-GAAP Information beginning on page 9 of this press release for a complete discussion of the Company’s Non-GAAP financial information and reconciliations to the comparable GAAP reported information.

Key Program Highlights

Palynziq for phenylketonuria: On May 24, 2018, the Company announced that it had received standard approval from the FDA for Palynziq, an injection to reduce blood Phe concentrations in adult patients with phenylketonuria, who have uncontrolled blood Phe concentrations greater than 600 micromoles/L on existing management. Palynziq, a PEGylated recombinant phenylalanine ammonia lyase enzyme, is the first approved enzyme substitution therapy to target the underlying cause of PKU by helping the body to break down Phe. In the U.S., Palynziq is only available through a restricted program under a Risk Evaluation and Mitigation Strategy (REMS) called the Palynziq REMS Program. Palynziq is BioMarin’s second approved treatment for this important condition and its seventh commercialized product.

In March 2018, the European Medicines Agency accepted BioMarin’s submission of a Marketing Authorization Application for Palynziq.

Valoctocogene roxaparvovec gene therapy for hemophilia A:
On May 22, the Company provided an update to its previously reported results of an open-label Phase 1/2 study of valoctocogene roxaparvovec, an investigational gene therapy treatment for severe hemophilia A. The updated results were presented during an oral presentation at the WFH 2018 World Congress in Glasgow, Scotland by Dr. John Pasi, M.B., Ch.B., Ph.D., from Barts and The London School of Medicine and Dentistry and primary investigator for this Phase 1/2 study. The data presented at WFH is the most current data (April 16, 2018 cut off) and includes 104 weeks of data for the 6e13 vg/kg cohort and 52 weeks of data for the 4e13 vg/kg cohort.

In the 6e13 vg/kg cohort, the data showed continued and substantial reductions in bleeding requiring Factor VIII infusions with a 97% reduction in mean Annualized Bleed Rate (ABR), with no spontaneous bleeds and elimination of all bleeds in target joints in the second year. 71% and 86% of participants had zero bleeds requiring Factor VIII infusions in years 1 and 2 respectively compared to 14%, who had zero bleeds requiring Factor VIII infusions for a year at baseline. There was a 96% reduction in mean FVIII usage through week 104. Mean Factor VIII activity levels from week 20 through 104 were consistently within the normal or near normal range and no participant was above the upper limit of normal at week 104, expressed as a percentage of normal factor activity in blood. At 104 weeks post-infusion, mean Factor VIII activity level of the 6e13 vg/kg cohort was within the normal range at 59%, and the median was near normal at 46%.

Quality of life as measured by the six-domain Haemo-QoL-A instrument rapidly improved across all domains by up to 17.3 points in mean over baseline through the second year. This is well above the 5.2 point increase considered to be the minimal clinically important difference. The next data update on the Phase 1/2 study with the 6e13 vg/kg cohort is expected to be at the end of year three, in the May 2019 timeframe.

The 4e13 vg/kg cohort also showed a substantial reduction in bleeding requiring Factor VIII infusions with a 92% reduction in ABR. 83% of participants had zero bleeds requiring Factor VIII infusions following treatment for a year compared to 17%, who had zero bleeds requiring Factor VIII infusions for a year at baseline. Mean Factor VIII usage decreased by 98%. Consistent with the reduction in ABR and FVIII usage, quality of life showed mean improvement by 3.8 to 6.3 points.

The global Phase 3 program includes two studies with valoctocogene roxaparvovec, one with the 6e13 vg/kg dose (GENEr8-1) and one with the 4e13 vg/kg dose (GENEr8-2). Enrollment completion in the newly amended GENEr8-1 study is now expected in the first quarter of 2019. GENEr8-2, the ongoing Phase 3 study with the 4e13 vg/kg dose, remains unchanged with an N=40 and is expected to complete enrollment one to two quarters after GENEr8-1 in 2019.

The Company updated the protocol for the GENEr8-1 study evaluating the 6e13 vg/kg dose and has powered the study to evaluate superiority to the current standard of care, Factor VIII prophylaxis. The study will now include 130 participants (an increase of 90 from the original 40).

During the quarter, the Company began a Phase 1/2 study with the 6e13kg/vg dose of valoctocogene roxaparvovec in up to approximately 10 participants with pre-existing AAV5 antibodies. In addition to that study and the ongoing global Phase 3 studies, GENEr8-1 and GENEr8-2, BioMarin has two additional clinical studies underway in its comprehensive gene therapy program for the treatment of severe hemophilia A. One to study seroprevalence in people with severe hemophilia A and one non-interventional study to determine baseline characteristics in people with hemophilia A, are ongoing around the world. Also, participants in the Phase 1/2 dose escalation study updated in the quarter at WFH will continue to be monitored as part of the global program underway.

Vosoritide for achondroplasia: On May 11, 2018, the FDA held an advisory committee meeting to discuss drug development for the treatment of children with achondroplasia, the most common form of disproportionate short stature in humans. It was a joint meeting of the Pediatric Advisory Committee and Endocrinologic and Metabolic Drugs Advisory Committee. The committees agreed that annualized growth velocity is the appropriate primary endpoint to use in clinical trials for the treatment of achondroplasia. The committees also expressed support for evaluating secondary endpoints in drug development for achondroplasia including, quality of life, and effects on sleep apnea, hearing loss, and ear infection.

BioMarin’s Phase 3 product candidate, vosoritide, an analog of C-type natriuretic peptide (CNP), is being studied in children with achondroplasia. Vosoritide has demonstrated sustained increase in average growth velocity over 30 months of treatment in 10 children, who completed 30 months of daily dosing at 15 µg/kg/day. Over this period of time, patients experienced a mean cumulative height increase of approximately 4 cm over what their baseline growth velocity would have predicted.

The Company’s multi-pronged program was developed to demonstrate the ability to improve clinical outcomes in children with achondroplasia. The program includes four distinct areas of focus to support global approval. Currently enrolling, the global Phase 3 study is a randomized, placebo-controlled study of vosoritide in approximately 110 children with achondroplasia ages 5-14 for 52 weeks. The study will be followed by a subsequent open-label extension. Children in this study will have completed a minimum six-month baseline study to determine their respective baseline growth velocity prior to entering the Phase 3 study. The baseline study is fully enrolled and the Company expects to complete enrollment of the Phase 3 study in September or October of this year. In addition, the Company expects to have over 5 years of clinical data from the long-term, open-label Phase 2 program to corroborate maintenance of effect.

Given the importance of early intervention in this indication, on June 14, 2018, the Company began an infant/toddler study in 0 to 5 year-old children and dosed the first participant in the global Phase 2 study. Finally, the Company has undertaken a Natural History program to augment clinical understanding of outcomes of untreated patients for comparison to treated patients.
Other Ongoing Clinical Development Programs:

Tralesinidase alfa (formerly referred to as BMN 250) for MPS IIIB (Sanfilippo Syndrome, Type B): Earlier in the year, at the WORLDSymposium 2018, the Company updated preliminary results from the Phase 1/2 trial with tralesinidase alfa, an investigational enzyme replacement therapy using a novel fusion of recombinant human alpha-N-acetylglucosaminidase (NAGLU) with a peptide derived from insulin-like growth factor 2 (IGF2) for the treatment of Sanfilippo B syndrome or mucopolysaccharidosis IIIB (MPS IIIB). These data suggest that tralesinidase alfa, which is administered via intracerebroventricular (ICV) infusion, reaches the peripheral circulation and has activity in somatic organs. Development Quotient (DQ), a measure of cognitive function normalized to age, was also monitored. Preliminary data suggest stabilization of cognitive DQ at the high dose of tralesinidase alfa in some subjects. Patients with untreated Sanfilippo B syndrome usually show progressive decline in DQ.

BMN 290 for Friedreich’s Ataxia: In late 2017, BioMarin announced that it had selected as its next clinical drug development candidate, BMN 290, a selective chromatin modulation therapy intended for treatment of Friedreich’s ataxia. Friedreich’s ataxia is a rare autosomal recessive disorder that results in disabling neurologic and cardiac progressive decline associated with a deficiency in frataxin. Prior to the lead compound being acquired by BioMarin from Repligen Corporation (Repligen), it demonstrated increases in frataxin in Friedreich’s ataxia patients. In preclinical models conducted by BioMarin, BMN 290, a compound derived from the original Repligen compound, increases frataxin message expression in brain and cardiac tissues more than two-fold. Currently, there are no approved disease modifying therapies for Friedreich’s ataxia. The Company expects to complete IND-enabling evaluations with a view to submitting an IND application for BMN 290 during the second half of 2018.

Gene therapy product candidate for phenylketonuria (PKU): In April 2018, the Company announced that it expects to submit an investigational new drug (IND) application for a gene therapy product for the treatment of PKU in 2019 (after BMN 290 for Friedreich’s ataxia). PKU is an autosomal recessive disorder in which phenylalanine hydroxylase, the enzyme that metabolizes the amino acid phenylalanine (Phe), is deficient. PKU leads to high levels of neurotoxic phenylalanine, which affects neurocognitive development and function, if left untreated. In preclinical models, BioMarin’s PKU gene therapy product candidate demonstrated sustained, normalized Phe levels in an ongoing study and out to 60 weeks at the last observation. The product candidate will be an AAV vector containing the DNA sequence that codes for the phenylalanine hydroxylase enzyme that is deficient in people with PKU.
BioMarin will host a conference call and webcast to discuss second quarter 2018 financial results today, Thursday, August 2, 2018 at 4:30 p.m. ET. This event can be accessed on the investor section of the BioMarin website at www.biomarin.com.