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Thermo Fisher Scientific Reports Third Quarter 2019 Results

On October 23, 2019 Thermo Fisher Scientific Inc. (NYSE: TMO), the world leader in serving science, reported its financial results for the third quarter ended September 28, 2019 (Press release, Thermo Fisher Scientific, OCT 23, 2019, View Source [SID1234542429]).

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Third Quarter 2019 Highlights

Third quarter revenue increased 6% to $6.27 billion.
Third quarter GAAP diluted earnings per share (EPS) increased 7% to $1.88.
Third quarter adjusted EPS increased 12% to $2.94.
Launched innovative new products for clinical, life sciences and bioproduction applications, highlighted by the FDA-cleared Thermo Scientific TSQ Altis and Quantis MD mass spectrometers and the Vanquish MD HPLC for clinical diagnostic laboratories, a new Real-time PCR solution for respiratory pathogen detection, the Thermo Scientific Krios G4 compact electron microscope for structural biology and the Thermo Scientific TruBio Discovery bioproduction automation system.
Strengthened global capabilities to enhance our unique customer value proposition, including opening a new Center of Excellence for transplant diagnostics near Los Angeles and, in China, establishing a new Biosciences Customer Exploration Center in Shanghai and expanding our clinical trials logistics facility in Suzhou.
Completed acquisition of active pharmaceutical ingredient (API) manufacturing facility in Cork, Ireland, from GlaxoSmithKline (GSK) on September 30 to expand global capacity for API development and manufacturing services.
After quarter end, repurchased $750 million worth of shares and completed refinancing of $5.6 billion of debt.
Adjusted EPS, adjusted operating income, adjusted operating margin and free cash flow are non-GAAP measures that exclude certain items detailed later in this press release under the heading "Use of Non-GAAP Financial Measures."

"We’re pleased to continue our strong momentum in the third quarter, with excellent performance on the top and bottom line," said Marc N. Casper, president and chief executive officer of Thermo Fisher Scientific. "Our team executed very well and captured opportunities to gain share and drive growth.

"We continued to enhance our value proposition to be an even stronger partner for our customers. Among the highlights, we launched innovative new products across our analytical instrument, bioproduction and genetic sciences businesses. We further strengthened our global capabilities to support growth, opening new facilities in the U.S. and China. We were also pleased to close our acquisition of the GSK site in Ireland, significantly expanding our API manufacturing network to meet customer demand for our pharma services."

Casper added, "With a strong nine months behind us, we are in a great position to deliver another excellent year."

Third Quarter 2019

Revenue for the quarter grew 6% to $6.27 billion in 2019, versus $5.92 billion in 2018. Organic revenue growth was 7% and currency translation decreased revenue by 1%.

GAAP Earnings Results

GAAP diluted EPS in the third quarter of 2019 increased 7% to $1.88, versus $1.75 in the same quarter last year. GAAP operating income for the third quarter of 2019 grew to $0.95 billion, compared with $0.91 billion in the year-ago quarter. GAAP operating margin was 15.1%, compared with 15.4% in the third quarter of 2018.

Non-GAAP Earnings Results

Adjusted EPS in the third quarter of 2019 increased 12% to $2.94, versus $2.62 in the third quarter of 2018. Adjusted operating income for the third quarter of 2019 grew 9% compared with the year-ago quarter. Adjusted operating margin increased to 22.7%, compared with 22.1% in the third quarter of 2018.

2019 Guidance Update

Thermo Fisher is raising its 2019 revenue and earnings guidance primarily to reflect stronger operational performance and the benefits of refinancing activities, partially offset by a more adverse foreign exchange environment. The company is raising its revenue guidance to a new range of $25.34 to $25.50 billion versus its previous guidance of $25.30 to $25.50 billion. This would result in 4 to 5% revenue growth over 2018. The company is also raising its adjusted EPS guidance to a new range of $12.28 to $12.34, versus its previous guidance of $12.16 to $12.26, for 10 to 11% growth year over year.

Segment Results

Management uses adjusted operating results to monitor and evaluate performance of the company’s four business segments, as highlighted below. Since these results are used for this purpose, they are also considered to be prepared in accordance with GAAP.

Life Sciences Solutions Segment

In the third quarter of 2019, Life Sciences Solutions Segment revenue grew 13% to $1.70 billion, compared with revenue of $1.50 billion in the third quarter of 2018. Segment adjusted operating margin increased to 34.5%, versus 32.9% in the 2018 quarter.

Analytical Instruments Segment

Analytical Instruments Segment revenue grew 2% to $1.36 billion in the third quarter of 2019, compared with revenue of $1.33 billion in the third quarter of 2018. Segment adjusted operating margin increased to 23.0%, versus 22.0% in the 2018 quarter.

Specialty Diagnostics Segment

Specialty Diagnostics Segment revenue was $0.88 billion in the third quarter of 2019, compared with revenue of $0.89 billion in the third quarter of 2018, reflecting the divestiture of the Anatomical Pathology business in June 2019. Segment adjusted operating margin increased to 25.3%, versus 25.0% in the 2018 quarter.

Laboratory Products and Services Segment

In the third quarter of 2019, Laboratory Products and Services Segment revenue grew 6% to $2.62 billion, compared with revenue of $2.47 billion in the third quarter of 2018. Segment adjusted operating margin was 11.6%, versus 12.1% in the 2018 quarter.

Use of Non-GAAP Financial Measures

In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), we use certain non-GAAP financial measures, including adjusted EPS, adjusted operating income and adjusted operating margin, which exclude certain acquisition-related costs, including charges for the sale of inventories revalued at the date of acquisition and significant transaction costs; restructuring and other costs/income; and amortization of acquisition-related intangible assets. Adjusted EPS also excludes certain other gains and losses that are either isolated or cannot be expected to occur again with any predictability, tax provisions/benefits related to the previous items, the impact of significant tax audits or events and the results of discontinued operations. We exclude the above items because they are outside of our normal operations and/or, in certain cases, are difficult to forecast accurately for future periods. We also use a non-GAAP measure, free cash flow, which is operating cash flow, excluding net capital expenditures, and also excludes operating cash flows from discontinued operations to provide a view of the continuing operations’ ability to generate cash for use in acquisitions and other investing and financing activities. We believe that the use of non-GAAP measures helps investors to gain a better understanding of our core operating results and future prospects, consistent with how management measures and forecasts the company’s performance, especially when comparing such results to previous periods or forecasts.

For example:

We exclude costs and tax effects associated with restructuring activities, such as reducing overhead and consolidating facilities. We believe that the costs related to these restructuring activities are not indicative of our normal operating costs.

We exclude certain acquisition-related costs, including charges for the sale of inventories revalued at the date of acquisition and significant transaction costs. We exclude these costs because we do not believe they are indicative of our normal operating costs.

We exclude the expense and tax effects associated with the amortization of acquisition-related intangible assets because a significant portion of the purchase price for acquisitions may be allocated to intangible assets that have lives of 3 to 20 years. Based on acquisitions closed through the end of the third quarter of 2019, adjusted EPS for full year 2019 will exclude approximately $3.31 of expense for the amortization of acquisition-related intangible assets. Exclusion of the amortization expense allows comparisons of operating results that are consistent over time for both our newly acquired and long-held businesses and with both acquisitive and non-acquisitive peer companies.

We also exclude certain gains/losses and related tax effects, the impact of significant tax audits or events (such as changes in deferred taxes from enacted tax rate changes or the estimated initial impacts of U.S. tax reform legislation), which are either isolated or cannot be expected to occur again with any predictability and that we believe are not indicative of our normal operating gains and losses. For example, we exclude gains/losses from items such as the sale of a business or real estate, gains or losses on significant litigation-related matters, gains on curtailments of pension plans, the early retirement of debt and discontinued operations.

We also report free cash flow, which is operating cash flow, excluding net capital expenditures, and also excludes operating cash flows from discontinued operations to provide a view of the continuing operations’ ability to generate cash for use in acquisitions and other investing and financing activities.

Thermo Fisher’s management uses these non-GAAP measures, in addition to GAAP financial measures, as the basis for measuring the company’s core operating performance and comparing such performance to that of prior periods and to the performance of our competitors. Such measures are also used by management in their financial and operating decision-making and for compensation purposes.

The non-GAAP financial measures of Thermo Fisher’s results of operations and cash flows included in this press release are not meant to be considered superior to or a substitute for Thermo Fisher’s results of operations prepared in accordance with GAAP. Reconciliations of such non-GAAP financial measures to the most directly comparable GAAP financial measures are set forth in the accompanying tables. Thermo Fisher does not provide GAAP financial measures on a forward-looking basis because we are unable to predict with reasonable certainty and without unreasonable effort items such as the timing and amount of future restructuring actions and acquisition-related charges as well as gains or losses from sales of real estate and businesses, the early retirement of debt and the outcome of legal proceedings. The timing and amount of these items are uncertain and could be material to Thermo Fisher’s results computed in accordance with GAAP.

Conference Call

Thermo Fisher Scientific will hold its earnings conference call today, October 23, 2019, at 8:30 a.m. Eastern time. To listen, dial (877) 273-7122 within the U.S. or (647) 689-5496 outside the U.S. You may also listen to the call live on our website, www.thermofisher.com, by clicking on "Investors." You will find this press release, including the accompanying reconciliation of non-GAAP financial measures and related information, in that section of our website under "Financial Results." An audio archive of the call will be available under "Webcasts and Presentations" through Friday, November 8, 2019.

A-Alpha Bio Closes a $2.8M Seed Round to Launch AlphaSeq for Drug Discovery

On October 22, 2019 A-Alpha Bio, a biotechnology startup that helps pharmaceutical companies characterize protein interactions for accelerated drug development, reported that it has raised $2.8M from leading science-focused venture capital firms and angel investors (Press release, A-Alpha Bio, OCT 22, 2019, View Source [SID1234636897]). The round was led by OS Fund and also includes AME Cloud Ventures, Boom Capital, Madrona Venture Group, Sahsen Ventures, Washington Research Foundation, and leading biotech angel investors. Since 2017, A-Alpha Bio has been supported by CoMotion, the University of Washington’s collaborative innovation hub, the National Science Foundation, and the Bill and Melinda Gates Foundation.

A-Alpha Bio has developed a genetically engineered platform technology, called AlphaSeq, for measuring interactions between proteins that can be used to discover and optimize life-saving drugs. AlphaSeq was invented and developed by A-Alpha Bio’s founders Drs. David Younger and Randolph Lopez, and Scientific Advisors, Drs. David Baker and Eric Klavins, at the University of Washington (UW). AlphaSeq enables the measurement of millions of interactions between proteins with high quantitative accuracy.

"While there are many methods available for screening large biomolecular libraries for a particular binding activity, there are few approaches for assessing in parallel the very large number of possible interactions between biomolecules in two large libraries," said David Baker, who serves as Head of the Institute for Protein Design at the University of Washington and Scientific Advisor to A-Alpha Bio. "A-Alpha Bio’s exciting technology now provides a way to not only quantitatively measure the interactions between all pairs of molecules in two libraries, but also the effect of small molecules and other perturbations on these interactions."

Pharmaceutical companies are pursuing increasingly challenging targets, which often require binding to multiple proteins or specificity between closely related proteins. Drug development currently requires iterative screening against one target at a time. This approach is slow, costly, and often ineffective at producing successful therapeutics. AlphaSeq will allow drug developers and researchers to radically accelerate their screening against thousands of disease targets in a single experimental step.

"A-Alpha Bio’s platform is plug-and-play for partners, facilitating read-outs on drug potency and effectiveness in a much shorter time-frame, solving an important challenge for pharma companies," said Jeff Klunzinger, Co-Founder and General Partner of OS Fund. "We are confident David Younger, Randolph Lopez and the A-Alpha Bio team will be able to accelerate discovery of multi-target protein drugs, such as multi-target antibodies, and small-molecule protein interaction modulators."

The seed financing announced today will support research operations to validate AlphaSeq with many high-impact disease targets, including those for oncology and infectious diseases, and allow A-Alpha Bio to begin drug discovery and optimization partnerships with pharmaceutical companies.

"We are thrilled to have the backing of synthetic biology experts, pharmaceutical industry veterans, and seasoned company builders who will add a tremendous amount of value," said Dr. David Younger, Co-Founder and CEO of A-Alpha Bio. "We have assembled a powerful group of investors, led by OS Fund, who share our passion for disrupting the pharmaceutical industry with breakthrough innovations in synthetic biology."

This funding comes following an announcement earlier this year that A-Alpha Bio was awarded a Bill & Melinda Gates Foundation grant to support a feasibility study for the discovery and optimization of therapeutics to protect developing world infants from intestinal pathogens.

SQZ Biotech Announces Clearance of US IND Application for First Clinical Trial

On October 22, 2019 SQZ Biotechnologies (SQZ), a cell therapy company developing innovative treatments for multiple therapeutic areas, reported that the company’s Investigational New Drug (IND) application for SQZ-PBMC-HPV, a novel cellular immunotherapy of antigen presenting cells (APCs) has been cleared after submission to the U.S. Food and Drug Administration (FDA) (Press release, SQZ Biotech, OCT 22, 2019, View Source [SID1234553405]). The trial is investigating the cell therapy comprised of SQZ-engineered APCs to treat HPV+ tumors, titled SQZ-PBMC-HPV. Marking the first program to enter the clinic for the company, SQZ-PBMC-HPV is also the first trial advancing into the clinic in the SQZ-Roche collaboration developing APCs for oncology.

Armon Sharei, PhD, founder and chief executive officer of SQZ, noted, "The FDA’s clearance of our IND is a pivotal moment for the company. SQZ has potential to bring novel cell therapies to patients addressing high unmet medical needs, and this important milestone marks the first clinical translation of our platform."

"SQZ APCs have the potential for broad impact in the oncology space. A cell therapy targeting solid tumors without the need for immune or myeloablative pre-conditioning could possibly shift the paradigm for patients," said Oliver Rosen, MD, chief medical officer of SQZ. "The preclinical data underpinning this program have shown significant tumor reduction driven by high CD8 T cell infiltration into the tumor microenvironment, alongside a favorable preclinical safety profile. We are looking forward to translating this into potentially meaningful results for patients."

The Phase 1 multi-center trial (NCT04084951) is sponsored by SQZ and will enroll in multiple cohorts to assess SQZ-PBMC-HPV as both monotherapy and in combination with Roche’s checkpoint inhibitor, atezolizumab. HLA-A*02+ patients with recurrent, locally advanced or metastatic HPV16+ head & neck, cervical, anal, penile, vulval and vaginal cancers are all eligible for the study.

About SQZ-PBMC-HPV

SQZ-PBMC-HPV is an autologous cell therapy product precisely engineered via SQZ’s Cell Squeeze platform to target HPV+ cancers. It is the first product stemming from the 2018 collaboration expansion between Roche and SQZ to develop SQZ-APCs for oncology. The SQZ APC platform is designed to present tumor antigens to the body’s endogenous CD8 T cells. By enabling presentation of the appropriate target, this approach can potentially induce powerful CD8 T cell responses in patients to attack their tumors.

Intrepida Bio Launches to Develop Novel Medicines that Exploit the Innate Immune System to Fight Disease

On October 22, 2019 Intrepida Bio, Inc. reported as a company dedicated to the discovery and development of medicines that modulate the innate immune system to fight cancer and other diseases reported an initial $9.5 million equity investment from Sofinnova Investments and Canaan will fund investigational new drug (IND) application-enabling studies of Intrepida’s lead oncology program (Press release, Intrepida Bio, OCT 22, 2019, View Source [SID1234550283]).

Intrepida Co-founders Joel F. Martin, Ph.D., president and chief executive officer, and Olivier Laurent, Ph.D., chief scientific officer, together with Biouniversa s.r.l., established Intrepida with worldwide rights to develop the technology based on the unique targets BAG3 and its receptor IFITM-2.

Tumors use BAG3 – IFITM-2 signaling to create an environment that promotes tumor growth and stymies the immune system from attacking the tumor. BAG3 expression is particularly strong in pancreatic ductal adenocarcinoma (PDAC), where it was detected in every single patient tested1, and high levels of BAG3 were associated with poor prognosis1. Intrepida’s anti-BAG3 antibodies block this pathway, eliminating a tumor’s pro-growth environment while encouraging the immune system to attack the tumor2. By blocking BAG3, these antibodies broadly affect an array of mechanisms that support and protect the tumor.

The prospect of BAG3 as an anti-cancer target was discovered and preclinically validated by the team at Biouniversa, led by Dr. Maria Caterina Turco, professor at the University of Salerno and chairwoman of the Intrepida Scientific Advisory Board. "In vivo and in vitro studies demonstrate that Intrepida’s anti-BAG3 antibodies slow tumor growth, decrease metastases and improve survival," said Joel Martin, Ph.D., co-founder, president and chief executive officer of Intrepida Bio. "We’ve seized this exceptional opportunity to fully develop these compounds with a goal to begin clinical trials with our lead candidate IB001 in 2021."

"Joel and Olivier searched for and found truly novel, validated targets that alter the body’s first line of defense – the innate immune system – to fight disease. I am confident the Intrepida team will conduct a rigorous program to build the clinical evidence around BAG3," said Mike Powell, Ph.D., general partner at Sofinnova Investments and chairman of the Intrepida Board of Directors.

In addition to Dr. Powell, existing Intrepida directors include David Kabakoff, Ph.D., executive partner of Sofinnova; Nina Kjellson, general partner at Canaan; Ellen Lubman, chief business officer at Impel NeuroPharma; and Dr. Martin. New directors include Elizabeth Robinson, Ph.D., co-founder and vice chairman of Indaco Venture Partners SGR and Giovanni Rizzo, Ph.D., chief executive officer of Biouniversa. Biouniversa’s original investors, Indaco Venture Partners and Vertis SGR, have joined Intrepida’s investor syndicate. The Indaco and Vertis investments were led by Dr. Robinson and Mauro Odorico, respectively.

1Expression of the antiapoptotic protein BAG3 is a feature of pancreatic adenocarcinoma and its overexpression is associated with poorer survival. Rosati, Alessandra et al., Am J Pathol. 2012 Nov;181(5):1524-9.
2BAG3 promotes pancreatic ductal adenocarcinoma growth by activating stromal macrophages. Rosati, Alessandra et al., Nat Commun. 2015 Nov 2;6:8695.

OPKO Health, Inc. Announces Proposed Offering of Common Stock

On October 22, 2019 OPKO Health, Inc. ("OPKO Health" or the "Company") (NASDAQ:OPK) reported that, subject to market and other conditions, it intends to offer and sell up to $100 million of shares of its common stock (the "Shares") in an underwritten public offering (Press release, Opko Health, OCT 22, 2019, View Source [SID1234542443]). The Company intends to grant the underwriters an option for a period of 30 days to purchase up to an additional 15% of the number of Shares to be issued and sold in the offering.

The Company intends to use the net proceeds received from the offering of the Shares to fund research and development to further develop and commercialize its portfolio of proprietary pharmaceutical and diagnostic products and for working capital, capital expenditures, acquisitions and other general corporate purposes.

Jefferies LLC, Piper Jaffray & Co. and Guggenheim Securities, LLC will act as joint book-running managers for the offering.

The offering of the Shares will be made by means of a prospectus supplement to the prospectus forming a part of the Company’s effective shelf registration statement on Form S-3 (Registration No. 333-229400) filed with the Securities and Exchange Commission (the "SEC") on January 28, 2019 and other related documents. You may obtain these documents for free by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, copies of the preliminary prospectus supplement may be obtained from Jefferies LLC, Attention: Equity Syndicate Prospectus Department, 520 Madison Avenue, 2nd Floor, New York, NY, 10022, by email at [email protected] or by phone at +1 877 821 7388; Piper Jaffray & Co., Attention: Prospectus Department, 800 Nicollet Mall, J12S03, Minneapolis, MN 55402, by email at [email protected] or by phone: 1-800-747-3924; and Guggenheim Securities, LLC, Attention: Equity Syndicate Department, 330 Madison Avenue, 8th Floor, New York, NY 10017, by email at [email protected] or by phone at +1 212 518 5548. Before you invest, you should read the prospectus supplement and the accompanying base prospectus along with other documents that the Company has filed with the SEC for more complete information about the Company and these offerings.

This press release shall not constitute an offer to sell, or a solicitation of an offer to buy, the Shares or any other securities, nor will there be any sale of the Shares or any other securities in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or other jurisdiction.