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Valeant Announces Second-Quarter 2017 Results

On August 8, 2017 Valeant Pharmaceuticals International, Inc. (NYSE: VRX) (TSX: VRX) (“Valeant” or the “Company” or “we”) reported its second-quarter 2017 financial results (Press release, Valeant, AUG 8, 2017, http://ir.valeant.com/news-releases/2017/08-08-2017-120421466 [SID1234520078]).

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“The investments we are making in our core business are delivering results,” said Joseph C. Papa, chairman and chief executive officer, Valeant. “The Bausch + Lomb/International segment and Salix business, which together represented 73 percent of our revenue in the quarter, delivered strong organic growth1, and we are continuing to reduce debt and resolve legacy issues.”

“Additionally, we confirm that we are maintaining our 2017 full-year Adjusted EBITDA guidance range despite the impact of divestitures we’ve made this year,” added Mr. Papa.

Company Highlights

Strengthening the Balance Sheet

Completed sale of Dendreon Pharmaceuticals LLC and used net proceeds to pay down $811 million of senior secured term loans

Announced that Valeant will redeem the remaining $500 million aggregate principal amount of our outstanding 6.75% Senior Notes due 2018, using cash on hand, on Aug. 15, 2017. Upon redemption, the Company expects to:

Have reduced total debt by more than $4.8 billion since the end of the first quarter of 2016

Have no debt maturities and no mandatory amortization requirements until 2020

Announced agreements to sell iNova Pharmaceuticals and Obagi Medical Products businesses for $930 million and
$190 million in cash, respectively; both remain on track to close in the second half of 2017

Generated $268 million and $1.222 billion in cash flow from operations in the second quarter and for the six months that ended June 30, 2017, respectively

Delivered GAAP net loss of $38 million and Adjusted EBITDA (non-GAAP) of $951 million

Achieving positive outcomes in resolving and managing litigation and investigations, including settling the Salix
securities class action litigation

Expects to exceed commitment to pay down $5 billion in debt from divestiture proceeds and free cash flow before February 2018

Executing on Core Businesses

Grew revenue in the Salix business by 13% compared to the second quarter of 2016 and organically grew1 revenue in the Salix business by 16% compared to the second quarter of 2016

XIFAXAN (rifaximin) revenues rose by 16% compared to the second quarter of 2016

Strong XIFAXAN growth, with prescriptions up 6% sequentially and 2% versus the second quarter of 2016, and extended Rx unit volume up 4% versus second quarter of 2016

APRISO (mesalamine) prescriptions grew by 7% compared to the second quarter of 2016

RELISTOR (methylnaltrexone bromide) prescriptions grew by 33% compared to the second quarter of 2016

Revenue of the Bausch + Lomb/International segment decreased by 3% compared to the second quarter of 2016; however, the segment revenue increased organically1 by approximately 6% compared to the second quarter of 2016

Grew revenue in the Bausch + Lomb business in China by 4% compared to the second quarter of 2016 despite currency headwinds and organically grew1 revenue in this business by 9%, compared to the second quarter of 2016, driven by volume

Advanced Bausch + Lomb business

Introduced Bausch + Lomb AQUALOX bi-weekly contact lenses in Japan in June

Introduced Bausch + Lomb renu Advanced Formula multi-purpose contact lens solution

Received filing acceptance from the U.S. Food and Drug Administration (FDA) for the New Drug Application (NDA) for Luminesse2 (brimonidine tartrate ophthalmic solution, 0.025%) with a PDUFA action date of Dec. 27, 2017

Received FDA 510(k) clearances for Vitesse and Stellaris Elite Vision Enhancement System

Continued to focus on stabilizing the dermatology business

Launched SILIQ (brodalumab) injection in July as the lowest-priced injectable biologic for moderate-to-severe plaque psoriasis in the United States

Rebranded the business as Ortho Dermatologics in July

Received FDA filing acceptance for the NDA for PLENVU2 (NER1006), a novel, low volume polyethylene glycol-based bowel preparation for colonoscopies

Second-Quarter Revenue Performance
Total revenues were $2.233 billion for the second quarter of 2017, as compared to $2.420 billion in the second quarter of 2016, a decrease of $187 million, or 8%. The decrease was primarily driven by decreases in volume and price in our U.S. Diversified Products segment, attributed to the previously reported loss of exclusivity for a basket of products, and the dermatology business. The decline also reflects the unfavorable impact of divestitures and discontinuations, primarily the skincare divestiture within the Bausch + Lomb/International segment.3

Revenues by segment for the second quarter of 2017 were as follows:
$ in millions
2017
2016
Reported
Change
Reported
Change
Change at
Constant
Currency4
Organic
Growth1
Segment

Bausch + Lomb/International
$1,241
$1,277
$(36)
(3%)
1%
6%
Branded Rx
$636
$653
$(17)
(3%)
(3%)
0%
U.S. Diversified Products
$356
$490
$(134)
(27%)
(27%)
(27%)
Total Revenues
$2,233
$2,420
$(187)
(8%)
(5%)
(3%)

Bausch + Lomb/International Segment
The Bausch + Lomb/International segment revenues were $1.241 billion for the second quarter of 2017, as compared to $1.277 billion for second quarter of 2016, a decrease of $36 million, or 3%. Excluding the impact of the skincare divestiture and foreign exchange, the Bausch + Lomb/International segment organically grew1 by approximately 6% compared to the second quarter of 2016, driven by performance in China, Europe and Africa/Middle East and the Global Ophthalmology business.

Branded Rx Segment
The Branded Rx segment revenues were $636 million for the second quarter of 2017, as compared to $653 million for second quarter of 2016, a decrease of $17 million, or 3%. The decrease in sales primarily was due to lower volumes in the dermatology business and the impact of divestitures and discontinuations in the Salix business. The decline was largely offset by 13% revenue growth in the Salix business compared to the second quarter of 2016, despite the impact of the divestiture of Ruconest, and organic growth1 in the Salix business of 16% compared to the second quarter of 2016.

U.S. Diversified Products Segment
The U.S. Diversified Products segment revenues were $356 million for the second quarter of 2017, as compared to $490 million for second quarter of 2016, a decrease of $134 million, or 27%. The decline was primarily driven by decreases in volume and price attributed to the previously reported loss of exclusivity for a basket of products.

Operating Income
Operating income was $175 million for the second quarter of 2017 as compared to $81 million for the second quarter of 2016, an increase of $94 million. The increase in operating income primarily reflects lower asset impairments and amortization charges partially offset by a decrease in contribution margin as a result of the decline in product sales from existing businesses.

Net loss for the three months ended June 30, 2017 was $38 million, as compared to $302 million for the same period in 2016, an improvement of $264 million. The decrease in net loss primarily reflects the increase in recovery for income taxes, increase in operating income and the net change in foreign exchange.

Cash provided by operating activities was $268 million for the second quarter of 2017. Cash flows from operations were negatively affected by $190 million of net payments made in resolution of the Salix securities class action litigation.5 Excluding these payments, the Company generated a normalized cash flow of $458 million.
GAAP Earnings Per Share (EPS) Diluted – for the second quarter of 2017 came in at $(0.11) as compared to $(0.88) in the second quarter of 2016.

Adjusted EBITDA(non-GAAP)
Adjusted EBITDA (non-GAAP) was $951 million for the second quarter of 2017, as compared to $1.087 billion for the second quarter of 2016, a decrease of $136 million, primarily due to lower revenues attributed to the previously reported loss of exclusivity for a basket of products, divestitures and discontinuations, and declines in our dermatology business, partially offset by strong organic growth1 in the Bausch + Lomb/International segment and the Salix business. Adjusted EBITDA grew by 10% sequentially versus the prior quarter.

2017 Guidance
Valeant has updated guidance for 2017, as follows:
Full-Year Revenues in the range of $8.70 – $8.90 billion from $8.90 – $9.10 billion
The Company confirms we will maintain our full-year Adjusted EBITDA (non-GAAP) guidance range of $3.60 – $3.75 billion despite the impact of divestitures that have closed in 2017.

This updated guidance reflects the impact of the sale of the CeraVe, AcneFree and AMBI skincare brands and the sale of Dendreon Pharmaceuticals LLC. This guidance does not reflect the impact of the sales of the iNova Pharmaceuticals and Obagi Medical Products businesses, which are both expected to close in the second half of the year.

Other than with respect to GAAP Revenues, the Company only provides guidance on a non-GAAP basis. The Company does not provide a reconciliation of forward-looking Adjusted EBITDA (non-GAAP) to GAAP net income (loss), due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation. In periods where significant acquisitions or divestitures are not expected, the Company believes it might have a basis for forecasting the GAAP equivalent for certain costs, such as amortization, which would otherwise be treated as non-GAAP to calculate projected GAAP net income (loss). However, because other deductions (such as restructuring, gain or loss on extinguishment of debt and litigation and other matters) used to calculate projected net income (loss) vary dramatically based on actual events, the Company is not able to forecast on a GAAP basis with reasonable certainty all deductions needed in order to provide a GAAP calculation of projected net income (loss) at this time. The amount of these deductions may be material and, therefore, could result in projected GAAP net income (loss) being materially less than projected Adjusted EBITDA (non-GAAP).

Additional Highlights
Valeant’s cash, cash equivalents and restricted cash were $2.025 billion at June 30, 2017
The Company’s availability under the Revolving Credit Facility was approximately $930 million at June 30, 2017
Valeant’s corporate credit ratings remained unchanged during the second quarter of 2017
John Paulson, president of Paulson & Co., Inc., a New York-based investment firm, joined the Company’s Board of Directors

10-Q – Quarterly report [Sections 13 or 15(d)]

Dynavax Technologies has filed a 10-Q – Quarterly report [Sections 13 or 15(d)] with the U.S. Securities and Exchange Commission .

10-Q – Quarterly report [Sections 13 or 15(d)]

Mannkind has filed a 10-Q – Quarterly report [Sections 13 or 15(d)] with the U.S. Securities and Exchange Commission (Filing, 10-Q, Mannkind, 2017, AUG 7, 2017, View Source [SID1234521710]).

Daiichi Sankyo to Collaborate on Commercialization of Generic Transdermal Fentanyl Citrate Patches for Long-Acting Cancer Pain Relief

On August 7, 2017 Daiichi Sankyo Company, Limited (hereafter, Daiichi Sankyo) reported a collaboration with Kyukyu Pharmaceutical Co., Ltd. (hereafter, Kyukyu Pharmaceutical) to commercialize generic transdermal fentanyl citrate patches for long-acting cancer pain relief (Press release, Daiichi Sankyo, AUG 7, 2017, View Source [SID1234520062]).

The fentanyl citrate patches are a once-daily transdermal opioid analgesic for treatment of moderate to severe cancer pain, and are a generic formulation of Fentos Tape.

Kyukyu Pharmaceutical is currently applying for marketing authorization from the Japanese Ministry of Health, Labour and Welfare. Following the successful obtainment of that authorization, Kyukyu Pharmaceutical will handle manufacturing, and Daiichi Sankyo will handle marketing and promotion activities, for this product.

Daiichi Sankyo expects that the commercialization of generic transdermal fentanyl citrate patches will help to expand our product lineup of opioid analgesics and will offer a novel treatment option to cancer patients and healthcare providers in Japan.

SignalRx Awarded $2M Phase II STTR Grant from the National Cancer Institute for the Development of Epigenetic-Kinase Inhibitors as Anticancer Agents

On August 7, 2017 SignalRx Pharmaceuticals Inc., a clinical-stage company developing novel small-molecules therapeutics to inhibit key orthogonal and synergistic oncotargets for the treatment of cancer, reported that it has received $2-million non-dilutive funding to advance the preclinical development of their proprietary and first-in-class small-molecule epigenetic-kinase inhibitors as anticancer therapeutics (Press release, SignalRx, AUG 7, 2017, http://www.ireachcontent.com/news-releases/signalrx-awarded-2m-phase-ii-sttr-grant-from-the-national-cancer-institute-for-the-development-of-epigenetic-kinase-inhibitors-as-anticancer-agents-638966263.html [SID1234527321]).

SignalRx was awarded a Phase II Small Business Technology Transfer Research (STTR) grant from the National Cancer Institute (NCI), a division of the National Institutes of Health (NIH), to support further preclinical development of SignalRx’s novel epigenetic-kinase inhibitors targeting PI3 kinase (PI3K) and the bromodomain protein BRD4. The principal investigator on the STTR grant is SignalRx’s scientific advisor Dr. Donald Durden, MD, PhD who also serves as the academic collaborator for the grant while in his capacity as the Associate Director for Pediatric Oncology at the Moores UCSD Cancer Center at the University of California, San Diego.

Highlights of the dual BRD4-PI3K inhibition approach include:

Demonstrated efficacy in several mouse tumor models.
Demonstrated to be much safer in vivo over combinations of individual BRD4 & PI3K inhibitors.
Overcomes barrier of additive toxicity to combining drugs.
Overcomes cancer resistance mechanisms.
Increases potential patient population.
Provides maximal pharmacodynamic inhibition in individual cancer cells (8X greater).
Molecular chemotypes distinct from existing competitor single agents.
Opportunity to develop more complex anticancer drug combinations.
"This large STTR grant award by the NCI follows on the heels of our proof-of-concept publication recently in PNAS and supports a change in cancer-development dogma from one-molecule one-target approaches to develop a single molecule that inhibits carefully-selected multi-targets resulting in augmented anti-cancer efficacy with less toxicity" said Donald L. Durden, MD, PhD. "This new approach paves the way for more sophisticated and cost-effective combinations in cancer patients resulting in longer duration of benefits in more patients."

"There is an unmet need in oncology for more effective and especially more durable treatments. Despite new drugs aimed at new exciting cancer targets, these drugs only benefit the patient for a short time" said Dr. Joe Garlich, Chief Scientific Officer at SignalRx. "More durable treatments are now recognized to require combinations of drugs, but optimal combinations of drugs are not achievable due to additive toxicities of the individual drugs in the combination. Our technology, creating single drugs with multiple mechanisms of action mimicking drug combinations, allows for effective combinations of drug mechanisms to be used with less toxicity and potentially more durability (long lasting)."

SignalRx is interested in partnering discussions to take these novel small molecules through clinical trials together with companion diagnostics for streamlined development and approval.