On May 05, 2016 Emergent BioSolutions Inc. (NYSE:EBS) reported financial results for the quarter ended March 31, 2016 (Press release, Emergent BioSolutions, MAY 5, 2016, View Source;p=RssLanding&cat=news&id=2165800 [SID:1234511995]).

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Q1 2016 FINANCIAL HIGHLIGHTS
Total revenues of $111.0 million
GAAP net income of $4.0 million, or $0.10 per diluted share
Adjusted net income of $7.5 million, or $0.16 per diluted share
EBITDA of $17.3 million, or $0.36 per diluted share
Adjusted EBITDA of $19.6 million, or $0.40 per diluted share
RECENT BUSINESS ACCOMPLISHMENTS

Centers for Disease Control and Prevention (CDC) confirmed intent to award a follow-on procurement contract for BioThrax (Anthrax Vaccine Adsorbed) on October 1, 2016
Supplemental Biologics License Application (sBLA) for Building 55 licensure submitted to the Food and Drug Administration
Form 10 filed with the Securities and Exchange Commission to advance the Company’s spin-off of Aptevo Therapeutics
Emergard (military-grade auto-injector device) selected by the U.S. Department of Defense and Battelle as a platform for nerve agent antidote delivery
RSDL (Reactive Skin Decontamination Lotion Kit) for removal and neutralization of chemical warfare agents approved in Israel
"We achieved strong first quarter financial results and accomplished key operational goals, including submitting the sBLA for Building 55, our large-scale BioThrax manufacturing facility, and filing the Form 10 to advance our spin-off of Aptevo Therapeutics," said Daniel J. Abdun-Nabi, President and Chief Executive Officer of Emergent BioSolutions. "We are extremely pleased that the CDC has now confirmed its intention to award a follow-on BioThrax procurement contract on October 1, 2016. With our large-scale manufacturing facility coming online, we anticipate this will be a multi-year contract requiring significantly increased deliveries in order to satisfy the U.S. government’s stated requirements for a licensed anthrax vaccine in the Strategic National Stockpile."

UPDATE ON CDC BIOTHRAX PROCUREMENT CONTRACT
By letter dated April 1, 2016, the CDC informed the Company of its intent to award a follow-on BioThrax procurement contract, thereby ensuring an uninterrupted supply of BioThrax into the Strategic National Stockpile. The Company’s current BioThrax procurement contract with the CDC is scheduled to expire on September 30, 2016. The CDC reaffirmed their intent in a follow-up letter dated April 26, 2016, in which the CDC stated that their acquisition planning process is ongoing and that they project to issue an award for a follow-on BioThrax procurement contract on October 1, 2016.

In its April 26 letter, the CDC further stated that it anticipates continuing to purchase doses of BioThrax in Q2 and Q3 of 2016 under the Company’s current procurement contract, although it did not specify the number of doses to be purchased. The CDC did state that they anticipate the quantity to be less than the total remaining doses available to be purchased under the current contract. The Company believes these letters from the CDC reflect their transition planning associated with procuring BioThrax manufactured from the Company’s large-scale manufacturing facility, Building 55, under a new multi-year follow-on contract expected to be in place on October 1, 2016.

Until such time as the Company can secure greater clarity on the number of BioThrax doses to be delivered in Q2 and Q3, expected within the next 60 days, the Company believes it is prudent to temporarily postpone its financial guidance for 2016.

2016 FINANCIAL PERFORMANCE
(I) Quarter Ended March 31, 2016 (unaudited)

Revenues

Product Sales
For Q1 2016, product sales were $71.7 million, an increase of 292% as compared to 2015. This increase was driven by an increase in BioThrax sales due to the Company’s decision to suspend shipments to the CDC in the first quarter of 2015 following the discovery of foreign particles in a limited number of vials in two manufactured lots of BioThrax in January 2015. As a result, there were no revenues for BioThrax product sales to the CDC for the three months ended March 31, 2015. The decrease in Other Biodefense revenues is due to a one-time milestone payment of $7 million recognized in 2015 for FDA approval of Anthrasil.

(in millions) Three Months Ended
March 31,
2016 2015 % Change
Product Sales
BioThrax $ 59.10 $ – NA %
Other Biodefense $ 4.70 $ 12.00 (61 )%
Total Biodefense $ 63.80 $ 12.00 433 %
Total Aptevo Products $ 7.90 $ 6.30 26 %
Total Product Sales $ 71.70 $ 18.30 292 %

Contract Manufacturing
For Q1 2016, revenue from the Company’s contract manufacturing operations was $7.6 million, a decrease of 38% as compared to 2015. The decrease was primarily due to the timing of fill/finish services to third parties and revenue from the production of an Ebola vaccine in 2015.

Contracts, Grants and Collaborations
For Q1 2016, contracts, grants and collaborations revenue was $31.7 million, a decrease of 4% as compared to 2015.

Operating Expenses

Cost of Product Sales and Contract Manufacturing
For Q1 2016, cost of product sales and contract manufacturing was $28.5 million, an increase of 52% as compared to 2015. The increase was primarily attributable to increased sales of BioThrax to the CDC.

Research and Development
For Q1 2016, gross research and development (R&D) expenses were $34.2 million, a decrease of 12% as compared to 2015. The decrease primarily reflects lower contract service costs associated with product candidates in the Biodefense business segment and product candidates and technology platform development activities associated with the Aptevo business segment.

For Q1 2016, net R&D expenses were $2.4 million, a decrease of 56% as compared to 2015. Net R&D expenses, which are more representative of the Company’s actual out-of-pocket investment in product development, are calculated as gross research and development expenses less contracts, grants and collaboration revenues.

(in millions) Three Months Ended
March 31,
2016 2015 % Change
Research and Development Expenses (Gross) $ 34.2 $ 38.7 (12 )%
Adjustments:
Contracts, grants and collaborations revenues 31.7 33.1 (4 )%
Net Research and Development Expenses $ 2.4 $ 5.6 (56 )%

Selling, General and Administrative
For Q1 2016, selling, general and administrative expenses were $39.8 million, an increase of 15% as compared to 2015. The increase was primarily attributable to costs associated with the Aptevo spin-off and professional services to support the Company’s strategic growth initiatives.

Net Income

For Q1 2016, GAAP net income was $4.0 million versus a net loss of $21.5 million in 2015. For Q1 2016, GAAP net income per diluted share is computed using the if-converted method. This method requires GAAP net income to be adjusted to reflect the add back of interest expense and amortization of debt issuance cost, both net of tax, associated with the Company’s 2.875% Convertible Senior Notes due 2021. As a result, GAAP net income per diluted share for Q1 2016 is increased in the amount of $0.9 million, from $4.0 million to $4.9 million. With 48.4 million diluted shares outstanding, GAAP net income per diluted share for Q1 2016 was $0.10.

RECONCILIATION OF GAAP NET INCOME/(LOSS) TO ADJUSTED NET INCOME/(LOSS), EBITDA AND ADJUSTED EBITDA

This press release contains three financial measures (Adjusted Net Income/(Loss), EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), and adjusted EBITDA) that are considered "non-GAAP" financial measures under applicable Securities & 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/(Loss) 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. Adjusted EBITDA also excludes specified items that can be highly variable and the non-cash impact of certain purchase accounting adjustments. 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.

Reconciliation of GAAP Net Income/(Loss) to Adjusted Net Income/(Loss)
(in millions, except per share value) Three Months Ended March 31,
2016 2015 Source
GAAP Net Income/(Loss) $ 4.0 $ (21.5 ) NA
Adjustments:
Spin-off and acquisition-related costs (transaction & integration) 2.3 1.1 SG&A
Non-cash amortization charges 2.7 2.6 COGS, SG&A,
Other Income
Impact of purchase accounting on inventory step-up - 0.1 SG&A
Tax effect (1.5 ) (1.1 ) NA
Total Adjustments 3.5 2.7 NA
Adjusted Net Income/(Loss)
Adjusted Net Income/(Loss) per Diluted Share $
$ 7.5
0.16 $
$ (18.8
(0.50 )
) NA

Reconciliation of GAAP Net Income/(Loss) to EBITDA and Adjusted EBITDA
(in millions, except per share value) Three Months Ended
March 31,
2016 2015
GAAP Net Income/(Loss) $ 4.0 $ (21.5 )
Adjustments:
+ Depreciation & Amortization 8.5 8.1
+ Provision For/(Benefit From) Income Taxes 3.3 (8.3 )
+ Total Interest Expense 1.5 1.7
Total Adjustments 13.3 1.5
EBITDA
EBITDA per Diluted Share $
$ 17.3
$0.36 $
$ (20.0
(0.53 )
)
Additional Adjustments:
+ Acquisition-related costs (transaction & integration) 2.3 1.1
+ Impact of purchase accounting on inventory step-up - 0.1
Total Additional Adjustments 2.3 1.2
Adjusted EBITDA
Adjusted EBITDA per Diluted Share $
$ 19.6
0.40 $
$ (18.8
(0.50 )
)

On May 5, 2016 Aviragen Therapeutics, Inc. (NASDAQ:AVIR) (formerly Biota Pharmaceuticals, Inc.) reported its financial results for the three month period ended March 31, 2016, which is the third quarter of the Company’s 2016 fiscal year, and also provided an update on recent corporate and clinical developments (Press release, Nabi Biopharmaceuticals, MAY 5, 2016, View Source [SID:1234512028]).

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"This quarter has been very rewarding and highlights significant efforts by the entire team to position the Company for success. We officially changed the name of the Company from Biota to Aviragen to reflect our shift from a drug discovery and early-stage licensing company to one focused on developing next generation antiviral therapies. On the clinical front, we were encouraged by the emerging profile of our RSV fusion inhibitor, BTA585, that successfully completed single and multiple dose Phase 1 trials. Further validating the potential of BTA585 to address significant unmet clinical needs in children and adults infected with RSV was the FDA’s Fast Track designation. The Phase 2a RSV challenge study of BTA585 and Phase 2b HRV SPIRITUS trial of vapendavir are progressing and we look forward to reporting top-line data from both trials in the second half of this year," remarked Joseph M. Patti, PhD, President and Chief Executive Officer of Aviragen Therapeutics.

"We were also successful this quarter in significantly strengthening our balance sheet by divesting our non-core antibiotic intellectual property portfolio and, shortly after the end of the quarter, by adding $20 million of non-dilutive funds from the monetization of a portion of our Inavir royalty. Our enhanced financial position supports our continued investment in advancing our key late-stage product candidates and anti-viral pipeline."

Recent Corporate Highlights

Completed Royalty Deal with Healthcare Royalty Partners for Proceeds of $20 Million.
In April 2016, received gross proceeds of $20 million from HealthCare Royalty Partners from the sale of an undisclosed portion of the Company’s royalty rights related to Inavir, an inhaled neuraminidase inhibitor that is approved in Japan for the treatment and prevention of influenza.

Transitioned Company Name to Aviragen Therapeutics, Inc. (NASDAQ:AVIR) from Biota Pharmaceuticals, Inc. The name change reflects the strategic shift in the organization’s prior focus on drug discovery and early-stage licensing to clinical development of next generation direct-acting antivirals to treat infections that have limited therapeutic options.

Announced Sale of Antibiotic Assets to Spero Therapeutics. Completed the sale of assets related to the Company’s broad spectrum antibiotic program to a newly formed subsidiary of Spero Therapeutics, LLC, a Cambridge-based biopharmaceutical company founded to develop novel therapies for the treatment of bacterial infections.

Recent Clinical Highlights

Initiated Phase 2a Efficacy Study of BTA585 for the Treatment of Respiratory Syncytial Virus (RSV) Infections. Reported the initiation of a double-blind, placebo-controlled, Phase 2a trial that is designed to evaluate the safety, pharmacokinetics, and antiviral activity of orally-dosed BTA585 in healthy volunteers challenged intranasally with RSV. The primary endpoint of the study is reduction in viral load among subjects who test positive for RSV prior to dosing.

Reported Positive Results from Phase 1 Trial for RSV Antiviral BTA585. Reported top-line safety and pharmacokinetic data from a Phase 1 multiple ascending dose (MAD) trial of BTA585. Results from the MAD trial indicated BTA585 was generally well tolerated at all dose levels; there were no serious adverse events, and no drug-related clinically-significant adverse changes were observed in either ECGs or clinical laboratory values.

Received Fast Track Designation for RSV Antiviral BTA585. Granted Fast Track designation by the FDA for BTA585, an oral fusion inhibitor, for the treatment of RSV infections in infants, young children and adults. The FDA Fast Track process is designed to expedite the development and review of drugs for the treatment of serious or life-threatening conditions and which demonstrate potential to address unmet medical needs.

Commenced Dosing in Phase 2 Trial of BTA074 for Topical Treatment of Condyloma. Dosed first subject in a Phase 2 double-blind, randomized, placebo-controlled trial to evaluate the safety, tolerability and efficacy of BTA074 5% gel in male and female patients with condyloma, or anogenital warts, caused by human papillomavirus (HPV) types 6 & 11.

Financial Results for the Three Month Period Ended March 31, 2016

The Company reported a net loss of $5.2 million for the three month period ended March 31, 2016, as compared to net income of $1.2 million in the same quarter of the prior fiscal year. Basic and diluted net loss per share was $0.14 for the three month period ended March 31, 2016, as compared to a basic and diluted net income per share of $0.03 in the same period of 2015.

Revenue decreased to $5.3 million for the three month period ended March 31, 2016 from $5.9 million in the same period in 2015 due to a $0.2 million decrease in royalty revenues from sales of the flu products Relenza and Inavir. The lower royalties were a result of reduced Relenza government stockpiling orders, which were largely offset by higher royalties from Inavir sales in Japan. Also contributing to the lower revenues was a $0.4 million decrease in revenue from services, as a result of the termination of the Company’s contract with BARDA in 2014.

Cost of revenue decreased to zero for the three month period ended March 31, 2016 from $0.3 million in the same period last year due to the termination of the Company’s contract with BARDA in 2014.

Research and development expense increased to $8.5 million for the three month period ended March 31, 2016 from $4.8 million in the same period in 2015. The increase was the result of $4.4 million in higher clinical costs related to: the ongoing Phase 2b SPIRITUS trial for vapendavir; the introduction of BTA585 into clinical trials this year, including a Phase 1 SAD/MAD trial and startup costs for a Phase 2a challenge trial; and expenses for the initiation of a Phase 2 trial for BTA074. These costs were offset in part by a decrease of $0.7 million in depreciation and facility related expenses associated with the closure of the Company’s early-stage research facility in March 2015.

General and administrative expense decreased to $2.3 million for the three month period ended March 31, 2016 from $3.2 million in the same period in 2015, due largely to lower staff-related expenses and the absence this year of professional fees incurred during the acquisition of BTA074 in 2015.

The Company held $50.0 million in cash, cash equivalents, and short and long-term investments as of March 31, 2016. Additionally, in April, the Company received gross proceeds of $20 million from the sale of a portion of the royalties it receives from the flu medication, Inavir, increasing the Company’s available cash to approximately $70 million.

On May 5, 2016 Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN) reported financial results for the first quarter of 2016 and provided a business update (Press release, Regeneron, MAY 5, 2016, View Source [SID:1234512060]).

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Financial Highlights

($ in millions, except per share data)

Three Months Ended
March 31,

2016

2015

% Change
EYLEA U.S. net product sales

$
781

$
541

44%
Total revenues

$
1,201

$
870

38%
Non-GAAP net income(2)

$
293

$
336

(13%)
Non-GAAP net income per share – diluted(2)

$
2.57

$
2.88

(11%)
GAAP net income

$
166

$
76

118%
GAAP net income per share – diluted

$
1.45

$
0.66

120%

"The year is off to a very productive start at Regeneron. This quarter, we saw continued strong sales growth with EYLEA, made additional launch progress with Praluent, prepared for the potential launch of sarilumab, and reported important new data across our pipeline," said Leonard S. Schleifer, M.D., Ph.D., President and Chief Executive Officer of Regeneron. "Our innovative new therapy dupilumab showed positive results across two Phase 3 trials in moderate-to-severe atopic dermatitis, a debilitating disease with very limited treatment options, and we look forward to submitting a Biologics License Application to the U.S. FDA in the third quarter."

Business Highlights

Marketed Product Update

EYLEA (aflibercept) Injection for Intravitreal Injection

In the first quarter of 2016, net sales of EYLEA in the United States increased 44% to $781 million from $541 million in the first quarter of 2015. Overall distributor inventory levels remained within the Company’s one- to two-week targeted range.
Bayer commercializes EYLEA outside the United States. In the first quarter of 2016, net sales of EYLEA outside of the United States(1) were $419 million, compared to $292 million in the first quarter of 2015. In the first quarter of 2016, Regeneron recognized $146 million from its share of net profit from EYLEA sales outside the United States, compared to $89 million in the first quarter of 2015.
A Phase 3 study of EYLEA for the treatment of non-proliferative diabetic retinopathy in patients without diabetic macular edema (DME) was initiated in the first quarter of 2016.
Praluent (alirocumab) Injection for the Treatment of High Low-Density Lipoprotein (LDL) Cholesterol

In the first quarter of 2016, net sales of Praluent were $13 million. Product sales for Praluent are recorded by Sanofi, and the Company shares in any profits or losses from the commercialization of Praluent. Praluent was launched in the United States in the third quarter of 2015 and in certain countries in the European Union commencing in the fourth quarter of 2015.
In March 2016, the Company and Sanofi reported data from the Phase 3 ODYSSEY ESCAPE study in patients with heterozygous familial hypercholesterolemia (HeFH) who were undergoing LDL apheresis therapy. The trial achieved its primary endpoint, demonstrating that patients who added Praluent to their existing treatment regimen significantly reduced the frequency of their apheresis therapy by 75%, compared to placebo.
In the first quarter of 2016, the Data Monitoring Committee (DMC) of the ODYSSEY OUTCOMES study for Praluent completed the first interim analysis. In accordance with the protocol, the DMC performed a futility assessment. The DMC recommended the study continue with no changes. Regeneron remains blinded to the actual results of this analysis. The ongoing ODYSSEY OUTCOMES trial is assessing the potential of Praluent to demonstrate cardiovascular benefit.
Pipeline Progress

Regeneron has thirteen product candidates in clinical development. These consist of EYLEA and twelve fully human monoclonal antibodies generated using the Company’s VelocImmune technology, including four in collaboration with Sanofi. In addition to EYLEA and Praluent, highlights from the antibody pipeline include:

Sarilumab, the Company’s antibody targeting IL-6R for rheumatoid arthritis, is currently being studied in the global Phase 3 SARIL-RA program.

In March 2016, the Company and Sanofi reported results from the 24-week Phase 3 SARIL-RA-MONARCH study in adult patients with active rheumatoid arthritis who were inadequate responders to, intolerant of, or inappropriate candidates for methotrexate (MTX) therapy. The study met its primary endpoint, demonstrating that sarilumab monotherapy was superior to adalimumab monotherapy (marketed by AbbVie Inc. as HUMIRA).
In December 2015, the U.S. Food and Drug Administration (FDA) accepted for review a Biologics License Application (BLA) for sarilumab, with a target action date of October 30, 2016.
Dupilumab, the Company’s antibody that blocks signaling of IL-4 and IL-13, is currently being studied in atopic dermatitis, asthma, nasal polyps, and eosinophilic esophagitis.

In April 2016, the Company and Sanofi reported that the Phase 3 LIBERTY AD SOLO 1 and SOLO 2 trials evaluating dupilumab in adult patients with inadequately controlled moderate-to-severe atopic dermatitis met their primary endpoints.
A Phase 2 study of dupilumab in pediatric patients (6-17 years of age) with moderate-to-severe atopic dermatitis is fully enrolled and ongoing.
A Phase 3 pivotal study of dupilumab in patients with uncontrolled persistent asthma continues to enroll patients.
A Phase 2 study of dupilumab in eosinophilic esophagitis is ongoing.
Fasinumab, the Company’s antibody targeting Nerve Growth Factor (NGF), is currently being studied in patients with pain due to osteoarthritis and lower back pain.

The Company recently reported results from a Phase 2/3 study evaluating fasinumab in patients with moderate-to-severe osteoarthritis pain of the hip or knee who have a history of inadequate pain relief or intolerance to current analgesic therapies. The study met its primary endpoint at 16 weeks.
In the first quarter of 2016, the Company initiated a Phase 3 long-term safety and efficacy study of fasinumab in patients with pain due to osteoarthritis of the knee or hip, and this trial is currently enrolling patients.
In the first quarter of 2016, the Company also initiated a Phase 2b/3 study of fasinumab in chronic lower back pain.
REGN2810, an antibody to programmed cell death protein 1 (PD-1), entered a potentially pivotal clinical study for the treatment of advanced cutaneous squamous cell carcinoma in the second quarter of 2016.

Nesvacumab/aflibercept, a combination product comprised of an antibody to angiopoietin-2 (Ang2) co-formulated with aflibercept for intravitreal injection for use in ophthalmology, entered Phase 2 clinical development for the treatment of neovascular age-related macular degeneration (wet AMD) and DME in the first quarter of 2016.

Evinacumab, an antibody to Angptl-3, was granted orphan-drug designation by the FDA in the first quarter of 2016. Clinical studies are ongoing for the treatment of homozygous familial hypercholesterolemia and severe forms of hyperlipidemia.

Select Upcoming 2016 Milestones

Clinical Programs

Milestones
REGN2176-3 (PDGFR-beta
Antibody co-formulated with
aflibercept)
•
Report results from Phase 2 study

Praluent
•
DMC interim analysis of ODYSSEY OUTCOMES trial
•
Ongoing launch in additional countries

Sarilumab (IL-6R Antibody)
•
FDA target action date of October 30, 2016
•
File for regulatory approvals outside the United States

Dupilumab (IL-4R Antibody)
•
Report primary endpoint results from Phase 3
CHRONOS study in atopic dermatitis
•
Complete rolling BLA submission for atopic dermatitis in
the United States
•
Initiate Phase 3 study in pediatric patients in atopic
dermatitis

REGN2810 (PD-1 Antibody)
•
Report data from Phase 1 study in patients with cancer
Human Genetics Initiative

In the first quarter of 2016, the New England Journal of Medicine published a Regeneron Genetics Center paper showing that inactivating mutations of the angiopoeitin-like 4 (ANGPTL4) gene are associated with a significantly reduced risk of coronary artery disease in humans. ANGPTL4 and ANGPTL3 are thought to be related inhibitors of lipoprotein lipase (LPL).
Business Development Update

In March 2016, the Company and Bayer entered into a collaboration agreement to jointly develop a combination therapy of the Ang2 antibody nesvacumab and aflibercept for the treatment of serious eye diseases.
In April 2016, the Company and Intellia Therapeutics, Inc. entered into a license and collaboration agreement to advance CRISPR/Cas gene-editing technology for in vivo therapeutic development. In addition to the discovery, development and commercialization of new therapies, the companies will focus on technology development of the CRISPR/Cas platform.
First Quarter 2016 Financial Results

Product Revenues: Net product sales were $784 million in the first quarter of 2016, compared to $545 million in the first quarter of 2015. EYLEA net product sales in the United States were $781 million in the first quarter of 2016, compared to $541 million in the first quarter of 2015.

Total Revenues: Total revenues, which include product revenues described above, increased by 38% to $1.201 billion in the first quarter of 2016, compared to $870 million in the first quarter of 2015. Total revenues also include collaboration revenues of $399 million in the first quarter of 2016, compared to $297 million in the first quarter of 2015. Collaboration revenues in the first quarter of 2016 increased primarily due to higher reimbursement of the Company’s research and development expenses under its antibody collaboration with Sanofi, an increase in the Company’s net profit from commercialization of EYLEA outside the United States, and reimbursement of the Company’s research and development expenses and amortization of up-front payments received in connection with the Company’s July 2015 immuno-oncology collaboration with Sanofi.

Refer to Table 4 for a summary of collaboration revenue.

Research and Development (R&D) Expenses: GAAP R&D expenses were $470 million in the first quarter of 2016, compared to $343 million in the first quarter of 2015. The higher R&D expenses in the first quarter of 2016 were principally due to higher development costs primarily related to dupilumab and fasinumab, and higher headcount to support the Company’s increased R&D activities, partly offset by lower development costs primarily related to Praluent. In addition, in the first quarter of 2016, R&D-related non-cash share-based compensation expense was $78 million, compared to $60 million in the first quarter of 2015.

Selling, General, and Administrative (SG&A) Expenses: GAAP SG&A expenses were $290 million in the first quarter of 2016, compared to $159 million in the first quarter of 2015. The increase was primarily due to higher headcount, and higher commercialization expenses related to EYLEA and Praluent. In addition, in the first quarter of 2016, SG&A-related non-cash share-based compensation expense was $60 million, compared to $42 million in the first quarter of 2015.

Cost of Goods Sold (COGS): GAAP COGS was $79 million in the first quarter of 2016, compared to $43 million in the first quarter of 2015. COGS primarily consists of royalties as well as costs in connection with producing U.S. EYLEA commercial supplies, and various start-up costs in connection with the Company’s Limerick, Ireland commercial manufacturing facility. COGS increased principally due to the increase in U.S. EYLEA net product sales, as well as an increase in Limerick start-up costs.

Income Tax Expense: In the first quarter of 2016, GAAP income tax expense was $164 million and the effective tax rate was 49.8%, compared to $201 million and 72.5% in the first quarter of 2015. The effective tax rate for the first quarter of 2016 was negatively impacted, compared to the U.S. federal statutory rate, by losses incurred in foreign jurisdictions with rates lower than the federal statutory rate and the non-tax deductible Branded Prescription Drug Fee, partly offset by the federal tax credit for increased research activities and the domestic manufacturing deduction. The effective tax rate for the first quarter of 2015 was negatively impacted primarily by losses incurred in foreign jurisdictions with rates lower than the federal statutory rate, the non-tax deductible Branded Prescription Drug Fee, and expiration, at the end of 2014, of the federal tax credit for increased research activities.

The non-GAAP income tax adjustment in the first quarter of 2016 is primarily related to the cash taxes the Company expects to be paid or payable in 2016 in connection with the immuno-oncology up-front payment that the Company received in 2015, partly offset by the excess tax benefit associated with stock option exercises. The non-GAAP income tax adjustment in the first quarter of 2015 was primarily related to the Company’s tax credit carry-forwards available for tax purposes and excess tax benefits in connection with stock option exercises.

Non-GAAP and GAAP Net Income: The Company reported non-GAAP net income of $293 million, or $2.81 per basic share and $2.57 per diluted share, in the first quarter of 2016, compared to non-GAAP net income of $336 million, or $3.28 per basic share and $2.88 per diluted share, in the first quarter of 2015.

The Company reported GAAP net income of $166 million, or $1.59 per basic share and $1.45 per diluted share, in the first quarter of 2016, compared to GAAP net income of $76 million, or $0.74 per basic share and $0.66 per diluted share, in the first quarter of 2015.

A reconciliation of the Company’s GAAP to non-GAAP results is included in Table 3 of this press release.

AMG 714 is a human monoclonal antibody that binds to Interleukin-15 (IL-15), a cytokine molecule appearing early in the cascade of events that ultimately leads to inflammatory disease (Company Pipeline, Genmab, MAY 5, 2016, View Source [SID:1234511965]). AMG 714 was created by Genmab, as HuMax-IL15, under a collaboration with Amgen. Amgen has sub-licensed AMG 714 to a private company, Celimmune, LLC. Celimmune is developing AMG 714 for nonresponsive and refractory celiac disease.

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On May 5, 2016 Endo International plc (NASDAQ: ENDP) (TSX: ENL) reported first quarter 2016 financial results, including:
Revenues of $964 million including new product revenues from its 2015 acquisitions of Auxilium and Par Pharmaceutical, a 35 percent increase compared to first quarter 2015 revenues of $714 million (Press release, Endo, MAY 5, 2016, View Source;p=RssLanding&cat=news&id=2165734 [SID:1234511996]).

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Reported loss from continuing operations of $89 million compared to first quarter 2015 reported income from continuing operations of $150 million.

Reported diluted loss per share from continuing operations of $0.40 compared to first quarter 2015 reported diluted earnings per share from continuing operations of $0.85.

Adjusted income from continuing operations of $241 million, a 16 percent increase compared to first quarter 2015 adjusted income from continuing operations of $207 million.

Adjusted diluted EPS from continuing operations of $1.08 compared to first quarter 2015 adjusted diluted EPS from continuing operations of $1.17.

"Despite increasing competitive and pricing pressures across both our Generics and Branded businesses, Endo was able to deliver first quarter results largely in line with our expectations," said Rajiv De Silva, President and CEO of Endo. "However, as we move further into 2016, we are rebasing our full-year financial expectations due to the impact of several previously unanticipated headwinds: new competitive entrants, including for Voltaren Gel; greater than expected price erosion across the Generics sector; and delays on regulatory actions related to certain Endo products. We are also continuing to evolve Endo’s corporate strategy and are taking decisive action to best position the Company for a return to long-term, organic growth within a rapidly changing market environment. We look forward to executing on this evolved strategy to deliver products that improve patients’ lives while creating value for our shareholders."

FINANCIAL PERFORMANCE
($ in thousands, except per share amounts)

1st Quarter

2016

2015

Change
Total Revenues
$
963,539

$
714,128

35
%
Reported (Loss) Income from Continuing Operations
$
(88,763)

$
150,492

NM

Reported Diluted (Loss) Income per Share from Continuing Operations
$
(0.40)

$
0.85

NM

Adjusted Income from Continuing Operations
$
240,731

$
207,360

16
%
Adjusted Diluted Weighted Average Shares
223,180

176,825

26
%
Adjusted Diluted EPS from Continuing Operations
$
1.08

$
1.17

(8)
%
U.S. BRANDED PHARMACEUTICALS
During first quarter 2016, the U.S. Branded Pharmaceuticals business unit continued to deliver growth for prioritized products including XIAFLEX, commercially launched its Schedule III product BELBUCA and mitigated the impact of earlier-than-anticipated generic competition on Voltaren Gel.
First quarter 2016 U.S. Branded Pharmaceuticals results include:
Revenues of $309 million, a 9 percent increase compared to first quarter 2015; this increase was primarily attributable to the acquisition of Auxilium Pharmaceuticals.
Net sales of XIAFLEX increased 57 percent compared to first quarter 2015; this increase was attributable to the full quarter of revenues reported by Endo as well as continued demand growth for the product.
Net sales of Voltaren Gel decreased 21 percent compared to first quarter 2015; this decrease was attributable to a new generic entrant.
The Branded pain product portfolio was unfavorably impacted by public policy pressures related to the prescribing of opioids that have created a shift in pain market dynamics.
U.S. GENERIC PHARMACEUTICALS
During first quarter 2016, the U.S. Generic Pharmaceuticals business unit continued the integration of Par Pharmaceutical Holdings, Inc., which was acquired by Endo in September 2015, while executing on its sales and marketing, R&D and manufacturing plans for the year.
First quarter 2016 U.S. Generic Pharmaceuticals results include:
Revenues of $583 million, a 63 percent increase compared to first quarter 2015; this increase was primarily attributable to growth from the addition of sales from the Company’s acquisition of Par, as well as underlying growth of certain products.
Compared to previous expectations, revenues in U.S. Generic Pharmaceuticals were unfavorably impacted by delayed regulatory actions related to certain 505(b)(2) products, as well as increased pricing pressure due to increased competition across pain and other commoditized products within the legacy Qualitest portfolio.
The legacy Par portfolio of products continues to perform on-track with original internal expectations.
INTERNATIONAL PHARMACEUTICALS
During first quarter 2016, the International Pharmaceuticals business unit focused on the integration by Litha of the recent acquisition of pharmaceutical products and research and development (R&D) programs from the Aspen Group as well as managing the expected loss of exclusivity for certain Paladin products.
First quarter 2016 International Pharmaceuticals results include:
Revenues of $71 million, a 2 percent decrease over first quarter 2015 but an 11 percent increase excluding an unfavorable currency impact of $10 million; this increase was primarily attributable to Paladin and Somar.
Paladin revenues were $27 million, a 3 percent increase over first quarter 2015, and emerging market revenues from Litha and Somar were $37 million, an 11 percent decrease over first quarter 2015 but a 7 percent increase excluding an unfavorable currency impact of $7 million.
2016 Financial Guidance
For the full twelve months ended December 31, 2016, at current exchange rates, Endo is providing revised financial guidance. The Company estimates:
Total revenues to be between $3.87 billion and $4.03 billion;
Reported diluted (GAAP) EPS from continuing operations to be between $0.25 and $0.55;
Adjusted diluted EPS from continuing operations to be between $4.50 to $4.80 ; and
The Company’s 2016 financial guidance is based on the following assumptions:
Adjusted gross margin of approximately 59 percent to 60 percent;
Adjusted operating expenses as a percentage of revenues to be approximately 21.5 percent to 22 percent;
Adjusted interest expense of approximately $455 million;
Adjusted effective tax rate of approximately zero to 2 percent; and
Adjusted diluted EPS from continuing operations assume full year adjusted diluted shares outstanding of approximately 223 million shares.
Balance Sheet and Liquidity Updates
As of March 31, 2016, the Company had $222.0 million in unrestricted cash; net debt of approximately $8.6 billion and a net debt to pro forma adjusted EBITDA ratio of 4.61.
As previously expected and announced around its fourth quarter 2015 financial results, the Company received tax refunds in April 2016.
First quarter 2016 reported cash used in operating activities was $49.8 million and was impacted by the following non-core or infrequent items: mesh-related product liability and other litigation matter payments of $213.9 million, severance and restructuring payments of $19.4 million and transaction costs and certain integration charges paid in connection with acquisitions of $30.5 million.
The Company expects to maintain a net debt to adjusted EBITDA leverage ratio in the high four times range with quarter to quarter fluctuations in 2016 and remains committed to achieving a ratio of three to four times in the future.
During the three months ended March 31, 2016, we recorded pre-tax, non-cash impairment charges of $129.6 million primarily related to our 2016 U.S. Generic Pharmaceuticals restructuring initiative, which resulted in the discontinuation of certain commercial products and the abandonment of certain IPR&D projects. As a result of these decisions and other market conditions, the Company also recorded a pre-tax, non-cash charge of $45 million to increase its excess inventory reserves.
Board Appointments
In a separate press release issued today, Endo also announced the appointment of two new members to its Board of Directors: Douglas S. Ingram, former president of Allergan, Inc. and current CEO of Chase Pharmaceuticals Corporation, and Todd B. Sisitsky, managing partner of TPG Capital, to its Board of Directors.
Simultaneously with Mr. Sisitsky joining the Board, Endo has amended the existing standstill agreement with TPG, enabling TPG to purchase additional Endo shares on the open market, subject to certain limitations and other regulatory requirements.
Corporate Strategy & Business Updates
Endo’s corporate strategy continues to evolve to meet current challenges and capitalize on opportunities. Today, Endo is outlining key steps it is taking in 2016 and beyond that are focused on returning the Company to organic growth through investment in R&D and growth products, improving margins and increasing cash generation to de-lever the Company in the medium-term. Specific priorities include, but are not limited to, the following:
Branded Pharmaceuticals commercial operations: Endo continues to prioritize its investment on key near-term growth opportunities: XIAFLEX and BELBUCA.
Branded Pharmaceuticals R&D Pipeline: Endo is also accelerating timelines for its XIAFLEX R&D pipeline with plans to move at least five programs into clinical trials this year.
Generics manufacturing operations: As part of Endo’s ongoing Generics business integration and optimization efforts, the Company is announcing an accelerated restructuring of its Generics product and R&D portfolio, as well as its manufacturing facility network. This restructuring is expected to result in approximately $60 million in net run rate cost savings in 2017 and is expected to result in the closure of the Company’s facility in Charlotte, North Carolina, and a workforce reduction at its facility in Huntsville, Alabama.
Generics R&D: the Company reiterated its intention to launch approximately 30 products from its newly combined pipeline in 2016 and to file approximately 25 to 30 abbreviated new drug applications with U.S. Food and Drug Administration.
Corporate: Endo will focus on opportunities to continue to optimize its business, fund investment in new growth opportunities and to de-lever in the medium term.
"While Endo is facing challenges in 2016, we see this as a period of substantial opportunity for the Company, the patients and physicians we serve, and our shareholders," said Mr. De Silva. "We are restructuring our business to successfully meet these challenges and to position Endo for future growth. We believe in the potential of our core long-term growth drivers: XIAFLEX, including its related pipeline, BELBUCA and the Par generics pipeline and sterile injectables business." Mr. De Silva continued, "We have attractive assets and a resilient organization that we can rely on to return the Company to organic growth, improve margins and increase cash generation over time. We strongly believe in Endo’s future and in our ability to generate long-term value for our shareholders."
Conference Call Information
Endo will conduct a conference call with financial analysts to discuss this press release today at 4:30 p.m. ET. The dial-in number to access the call is U.S./Canada (866) 497-0462, International (678) 509-7598, and the passcode is 91618118. Please dial in 10 minutes prior to the scheduled start time.
A replay of the call will be available from May 5, 2016 at 7:30 p.m. ET until 11:59 p.m. ET on May 19, 2016 by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International) and entering the passcode 91618118.
A simultaneous webcast of the call can be accessed by visiting www.endo.com. In addition, a replay of the webcast will be available until 11:59 p.m. ET on May 19, 2016. The replay can be accessed by clicking on "Upcoming Events" in the Investor Relations section of the Endo website.

Supplemental Financial Information
The following tables provide a reconciliation of our reported (GAAP) statements of operations to our adjusted statements of operations (Non-GAAP) for each of the three months ended March 31, 2016 and 2015 (in thousands, except per share data):
Three Months Ended March 31, 2016 (unaudited)
Actual
Reported
(GAAP)

Adjustments

Non-GAAP Adjusted
REVENUES
$
963,539

$
—

$
963,539

COSTS AND EXPENSES:

Cost of revenues
688,705

(298,639)

(1)

390,066

Selling, general and administrative
178,355

(3,179)

(2)

175,176

Research and development
41,692

(2,100)

(3)

39,592

Litigation-related and other contingencies, net
5,200

(5,200)

(4)

—

Asset impairment charges
129,625

(129,625)

(5)

—

Acquisition-related and integration items
12,554

(12,554)

(6)

—

OPERATING (LOSS) INCOME FROM CONTINUING OPERATIONS
$
(92,592)

$
451,297

$
358,705

INTEREST EXPENSE, NET
116,793

(4,092)

(7)

112,701

LOSS ON EXTINGUISHMENT OF DEBT
—

—

—

OTHER INCOME, NET
(1,907)

(1,319)

(8)

(3,226)

(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX
$
(207,478)

$
456,708

$
249,230

INCOME TAX (BENEFIT) EXPENSE
(118,715)

127,214

(9)

8,499

(LOSS) INCOME FROM CONTINUING OPERATIONS
$
(88,763)

$
329,494

$
240,731

DISCONTINUED OPERATIONS, NET OF TAX
(45,108)

45,108

(10)

—

CONSOLIDATED NET (LOSS) INCOME
$
(133,871)

$
374,602

$
240,731

Less: Net loss attributable to noncontrolling interests
(2)

—

(2)

NET (LOSS) INCOME ATTRIBUTABLE TO ENDO INTERNATIONAL PLC
$
(133,869)

$
374,602

$
240,733

DILUTED (LOSS) EARNINGS PER SHARE DATA ATTRIBUTABLE TO ENDO INTERNATIONAL PLC ORDINARY SHAREHOLDERS:

Continuing operations
$
(0.40)

$
1.08

Discontinued operations
(0.20)

—

DILUTED (LOSS) EARNINGS PER SHARE
$
(0.60)

$
1.08

DILUTED WEIGHTED AVERAGE SHARES
222,302

223,180

Notes to reconciliation of our GAAP statements of operations to our adjusted statements of operations:

(1)
To exclude amortization of commercial intangible assets related to developed technology of $211,669, a fair value step-up in inventory and certain excess manufacturing costs that will be eliminated pursuant to integration plans of $67,126, accruals for milestone payments to partners of $667, and charges to increase inventory reserve levels related to the 2016 U.S. Generic Pharmaceuticals restructuring initiative of $26,927, offset by a $(7,750) reversal of the remaining Voltaren Gel minimum royalty obligations as a result of a generic entrant.
(2)
Primarily to exclude certain separation benefits and other costs incurred in connection with continued efforts to enhance the Company’s operations.
(3)
To exclude milestone payments to partners and certain other costs.
(4)
To exclude the net impact of certain litigation settlement charges.
(5)
To exclude asset impairment charges.
(6)
To exclude acquisition and integration costs of $23,228, primarily associated with the Par acquisition, offset by a net decrease in the fair value of contingent consideration of $(10,674).
(7)
To exclude one-time, non-core interest charges.
(8)
Primarily to exclude the foreign currency impact related to the re-measurement of intercompany debt instruments of $1,255 and other miscellaneous expense.
(9)
Reflects tax savings from acquired tax attributes and the effect of the pre-tax adjustments above at applicable rates.
(10)
To exclude the Astora business reported as Discontinued operations, net of tax.

Three Months Ended March 31, 2015 (unaudited)
Actual Reported
(GAAP)

Adjustments

Non-GAAP Adjusted
REVENUES
$
714,128

$
—

$
714,128

COSTS AND EXPENSES:

Cost of revenues
384,266

(135,789)

(1)

248,477

Selling, general and administrative
211,578

(79,410)

(2)

132,168

Research and development
17,897

(2,063)

(3)

15,834

Litigation-related and other contingencies, net
13,000

(13,000)

(4)

—

Asset impairment charges
7,000

(7,000)

(5)

—

Acquisition-related and integration items
34,640

(34,640)

(6)

—

OPERATING INCOME FROM CONTINUING OPERATIONS
$
45,747

$
271,902

$
317,649

INTEREST EXPENSE, NET
73,139

(1,379)

(7)

71,760

LOSS ON EXTINGUISHMENT OF DEBT
980

(980)

(8)

—

OTHER INCOME, NET
(11,995)

10,134

(9)

(1,861)

(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX
$
(16,377)

$
264,127

$
247,750

INCOME TAX (BENEFIT) EXPENSE
(166,869)

207,259

(10)

40,390

INCOME FROM CONTINUING OPERATIONS
$
150,492

$
56,868

$
207,360

DISCONTINUED OPERATIONS, NET OF TAX
(226,210)

246,865

(11)

20,655

CONSOLIDATED NET (LOSS) INCOME
$
(75,718)

$
303,733

$
228,015

Less: Net income attributable to noncontrolling interests
—

—

—

NET (LOSS) INCOME ATTRIBUTABLE TO ENDO INTERNATIONAL PLC
$
(75,718)

$
303,733

$
228,015

DILUTED EARNINGS PER SHARE DATA ATTRIBUTABLE TO ENDO INTERNATIONAL PLC ORDINARY SHAREHOLDERS:

Continuing operations
$
0.85

$
1.17

Discontinued operations
(1.28)

0.12

DILUTED (LOSS) EARNINGS PER SHARE
$
(0.43)

$
1.29

DILUTED WEIGHTED AVERAGE SHARES
176,825

176,825

Notes to reconciliation of our GAAP statements of operations to our adjusted statements of operations:

(1)
To exclude amortization of commercial intangible assets related to developed technology of $95,269, a fair value step-up in inventory of $37,554, certain excess costs that will be eliminated pursuant to the integration plans of $2,362 and accruals for milestone payments to partners of $604.
(2)
To exclude certain separation benefits and other costs incurred in connection with continued efforts to enhance the Company’s operations of $41,807 and a charge of $37,603 related to the acceleration of Auxilium employee equity awards at closing.
(3)
To exclude milestone payments to partners of $2,063.
(4)
To exclude the impact of certain net litigation charges.
(5)
To exclude asset impairment charges.
(6)
To exclude acquisition and integration costs, primarily associated with the Auxilium acquisition.
(7)
To exclude additional non-cash interest expense.
(8)
To exclude a loss on extinguishment of debt in connection with debt refinancing activity.
(9)
To exclude the foreign currency impact related to the remeasurement of intercompany debt instruments of $(21,090), costs associated with unused financing commitments of $11,810 and other miscellaneous income of $(854).
(10)
Primarily to reflect the cash tax savings from acquired tax attributes and the tax effect of the pre-tax adjustments above at applicable tax rates. Additionally, included within this amount is an adjustment to exclude approximately $159,700 of tax benefit resulting from the then expected realization of deferred tax assets in the future related to certain components of our AMS business, which was listed as held for sale during the first quarter of 2015.
(11)
Primarily to exclude certain items related to the AMS businesses, reported as Discontinued operations, net of tax, including an impairment charge of $222,753 based on the estimated fair values of the underlying businesses being sold, less costs to sell.

Non-GAAP adjusted net income and its components and Non-GAAP adjusted diluted earnings per share amounts are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted earnings per share amounts. Despite the importance of these measures to management in goal setting and performance measurement, we stress that these are Non-GAAP financial measures that have no standardized meaning prescribed by U.S. GAAP and, therefore, have limits in their usefulness to investors. Because of the non-standardized definitions, Non-GAAP adjusted net income and its components (unlike U.S. GAAP net income and its components) may not be comparable to the calculation of similar measures of other companies. These Non-GAAP financial measures are presented solely to permit investors to more fully understand how management assesses performance. See Endo’s Current Report on Form 8-K furnished today to the Securities and Exchange Commission for an explanation of Endo’s reasons for using non-GAAP measures.

Reconciliation of Projected GAAP Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share Guidance for 2016

Year Ending

December 31, 2016
Projected GAAP diluted income per ordinary share
$
0.25

To
$
0.55

Amortization of commercial intangible assets
3.55

3.55

Inventory step-up
0.53

0.53

Upfront and milestone-related payments to partners
(0.01)

(0.01)

Acquisition related, integration and restructuring charges and certain excess costs that will be eliminated pursuant to integration plans
0.59

0.59

Asset impairment charges
0.58

0.58

Charges for litigation and other legal matters
0.02

0.02

Tax effect of pre-tax adjustments at the applicable tax rates and certain other expected tax savings from acquired tax attributes
(1.01)

(1.01)

Diluted adjusted income per ordinary share guidance
$
4.50

To
$
4.80

The Company’s guidance is being issued based on certain assumptions including:
Certain of the above amounts are based on estimates and there can be no assurance that Endo will achieve these results.
Includes all completed business development transactions as of May 5, 2016.