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Apollo Endosurgery, Inc. Reports Third Quarter 2017 Results

On October 26, 2017 Apollo Endosurgery, Inc. (“Apollo”) (NASDAQ: APEN), a leader in less invasive medical devices for bariatric and gastrointestinal procedures, reported financial results for the third quarter ended September 30, 2017 (Press release, , OCT 26, 2017, View Source [SID1234521228]).

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Third Quarter 2017 Highlights

Total revenues increased 4.8% compared to the third quarter 2016
Total Endo-bariatric product sales increased 20.6% compared to the third quarter 2016 and were 56.3% of total revenues
Raised $33.6 million in a public equity offering
Todd Newton, CEO of Apollo Endosurgery, said, “The third quarter was a great quarter of accomplishment and performance for our business as we completed an equity offering, received CE Mark approval for Orbera365, and worked through a challenging disruptive event to the U.S. market for intragastric balloons due to an FDA communication in early August. Total revenue in the third quarter increased by 4.8% as worldwide Endo-bariatric product sales increased 20.6% to $9.3 million, representing 56.3% of total revenues on excellent OverStitch demand both in the U.S. and in our direct markets internationally. While Surgical product sales continued to decline, the rate of decline continued to show improvement this quarter.”

Third Quarter 2017 Financial Results

Total sales for the three months ended September 30, 2017 were $16.5 million compared to $15.8 million for the three months ended September 30, 2016 representing growth of 4.8%.

In the U.S., Endo-bariatric product sales, excluding U.S. Orbera starter kit sales were $3.2 million for the three months ended September 30, 2017 versus $2.8 million for the three months ended September 30, 2016, an increase of 14.0%, and $10.1 million for the nine months ended September 30, 2017 versus $8.1 million for the nine months ended September 30, 2016, an increase of 25.1%. As previously announced by the Company in August 2017, the FDA issued a letter to Health Care Professionals relating to potential risks with liquid-filled intragastric balloons. U.S. Endo-bariatric product sales increased at a slower rate in the third quarter compared to the first half of 2017, due to lower demand for Orbera in the aftermath of the FDA’s letter. Overstitch sales growth remained consistent with its year to date trend.

In markets outside the United States (OUS), Endo-bariatric product sales were $6.0 million for the three months ended September 30, 2017 versus $4.5 million for the three months ended September 30, 2016, an increase of 35.3%, and $15.3 million for the nine months ended September 30, 2017 versus $12.5 million for the nine months ended September 30, 2016, an increase of 21.9% primarily due to higher OverStitch sales in our direct markets. Direct market sales were 72.9% and 70.4% of total OUS sales for the three and nine months ended September 30, 2017, respectively, compared to 53.2% and 66.9%, for the same periods in 2016, respectively.

Surgical product sales decreased $0.9 million, or 11.6%, and $3.2 million, or 12.9%, for the three and nine months ended September 30, 2017, respectively, when compared to the same periods in 2016. In the U.S., Surgical product sales decreased $0.9 million, or 16.5%, and $3.0 million or 18.3%, for the three and nine months ended September 30, 2017, respectively, when compared to the same periods in 2016 due to reductions in gastric banding procedures being performed in the U.S. In OUS markets, Surgical product sales decreased by $0.1 million, or 1.9%, and $0.2 million, or 2.5%, for the three and nine months ended September 30, 2017 when compared to the same periods in 2016, respectively.

Gross margin as a percentage of revenues was 63.7% and 63.2% for the three and nine months ended September 30, 2017, respectively, compared to 66.7% and 60.8% for the same periods in 2016, respectively. Gross margin was impacted by the change in inventory reserve which decreased 0.3% and 6.3% as a percentage of total revenue for the three and nine months ended September 30, 2017, respectively, compared to the same periods in 2016. In June 2016, we recorded an inventory impairment charge related to expiring finished good inventory and excess raw materials transferred from Allergen that we were required to purchase in accordance with the transition services agreement. The remaining change in gross margin is due to the ongoing shift in our product sales mix from higher gross margin Surgical products to Endo-bariatric products that realize lower relative gross margins.

Total operating expenses were $14.8 million and $47.0 million for the three and nine months ended September 30, 2017, respectively, compared to $14.3 million and $43.0 million for the same periods in 2016. For the three months ended September 30, 2017, sales and marketing expenses increased due to higher incentive compensation, Orbera consumer marketing campaign costs and OverStitch physician training program costs. This increase was partially offset by lower general and administration expenses due to transaction costs incurred during the third quarter of 2016 associated with the Lpath merger. The increase for the nine months ended September 30, 2017 was due to higher sales and marketing expenses for the same reasons referenced above and higher general and administrative expenses due to costs incurred to meet our public company filing and corporate governance obligations. Research and development expenses also increased primarily due to costs associated with new product development efforts.

Interest expense decreased $0.5 million and $0.9 million during the three and nine months ended September 30, 2017 when compared to the same periods in 2016 primarily due to reduced cash interest on our senior secured credit facility after principal reductions. The additional decrease for the nine months ended September 30, 2017 was due to the elimination of non-cash interest primarily associated with the convertible notes that converted to equity in December 2016.

Net loss for the three and nine months ended September 30, 2017 was $4.9 million and $20.0 million, respectively, compared to $5.9 million and $21.5 million for the same periods in 2016.

Cash, cash equivalents and restricted cash were $35.5 million as of September 30, 2017.

Capitalization Update

On July 25, 2017, the Company completed a public offering selling 6,542,453 shares at a price of $5.50 per share, including 853,363 shares sold to the underwriters upon exercise of the option to purchase additional shares. The public offering generated net proceeds of approximately $33.6 million, after deducting the underwriting discount and related offering expenses.

Conference Call

Apollo will host a conference call on Thursday, October 26, 2017 at 4:00 p.m. Central Time / 5:00 p.m. Eastern Time to discuss the Company’s operating results for the third quarter ended September 30, 2017.

To participate in the conference call dial (888) 576-4387 for domestic callers and (719) 457-6931 for international callers. The conference ID number is 3769341. A live webcast of the conference call will be made available on the “Events and Presentations” section of our Investor Relations website: ir.apolloendo.com.

A replay of the webcast will remain available on Apollo’s website, apolloendo.com, until Apollo releases its fourth quarter 2017 financial results. In addition, a telephonic replay of the call will be available until November 2, 2017. The replay dial-in numbers are (844) 512-2921 for domestic callers and (412) 317-6671 for international callers. The replay conference ID number is 3769341. A transcript of the earnings call will be made available on the “Events and Presentations” section of our Investor Relations website: ir.apolloendo.com.

Non-GAAP Financial Measures

To supplement our financial results presented on a GAAP basis, we provide certain non-GAAP financial measures including adjusted total revenues, excluding U.S. Orbera starter kit sales. Adjusted total revenues, excluding U.S. Orbera starter kit sales is defined as GAAP total revenues excluding one-time U.S. Orbera starter kit sales. Adjusted total revenues, excluding U.S. Orbera starter kit sales is a supplemental measure of our performance that is not required by, and is not determined in accordance with, GAAP.

Non-GAAP financial information is not a substitute for any financial measure determined in accordance with GAAP and should be read only in conjunction with Apollo’s condensed consolidated financial statements prepared in accordance with GAAP. Apollo’s management uses certain supplemental non-GAAP financial measures internally to understand, manage and evaluate Apollo’s business, and make operating decisions. Reconciliations for each non-GAAP financial measure to its most directly comparable GAAP financial measure is provided in the tables below. Management believes that making non-GAAP financial information available to investors, in addition to GAAP financial information, may facilitate more consistent comparisons between the company’s performance over time with the performance of other companies in the medical device industry, which may use similar financial measures to supplement their GAAP financial information.

OPKO Health Licensee TESARO Announces FDA Approval of VARUBI® IV for Delayed Nausea and Vomiting Associated with Chemotherapy

On October 26, 2017 OPKO Health, Inc. (NASDAQ:OPK) reported that its licensee, TESARO, Inc. (Nasdaq:TSRO), received U.S. Food and Drug Administration (FDA) approval for VARUBI (rolapitant) IV in combination with other antiemetic agents in adults for the prevention of delayed nausea and vomiting associated with initial and repeat courses of emetogenic cancer chemotherapy, including, but not limited to, highly emetogenic chemotherapy (Press release, Opko Health, OCT 26, 2017, View Source [SID1234521224]). Delayed nausea and vomiting can occur anytime between 25 and 120 hours following chemotherapy, and is often extremely debilitating.

TESARO licensed exclusive rights for the development, manufacture, commercialization, and distribution of VARUBI (rolapitant) from OPKO Health in December 2010. TESARO previously launched an oral version of VARUBI in November 2015. OPKO Health will receive tiered double-digit royalties on sales of VARUBI IV. In addition, OPKO Health is eligible to receive additional commercial milestone payments of up to $85 million upon achievement of certain sales thresholds. TESARO is expected to launch VARUBI IV in November 2017.

“We are especially pleased that our partner, TESARO, has received FDA approval for VARUBI IV. This is particularly important as IV treatments for chemotherapy induced nausea and vomiting account for 90% of the market. We look forward to TESARO’s continued success in commercializing the VARUBI product line,” said Philip Frost, M.D., Chairman and Chief Executive Officer of OPKO Health.

About VARUBI

VARUBI is a highly selective and competitive antagonist of human substance P/neurokinin 1 (NK-1) receptors, which play an important role in the delayed phase of chemotherapy induced nausea and vomiting (CINV). With a long plasma half-life of approximately seven days, a single dose of VARUBI, as part of an antiemetic regimen, significantly improved complete response (CR) rates in the delayed phase of CINV. Results from three Phase 3 trials of VARUBI oral tablets demonstrated a significant reduction in episodes of vomiting or use of rescue medication during the 25- to 120-hour period following administration of highly emetogenic and moderately emetogenic chemotherapy regimens. In addition, patients who received VARUBI reported experiencing less nausea that interfered with normal daily life and fewer episodes of vomiting or retching over multiple cycles of chemotherapy. Results from a bioequivalence trial demonstrated comparability of the IV and oral formulations of VARUBI.

VARUBI is available by prescription only. Please see full prescribing information, including additional important safety information, available at www.varubirx.com.

MabVax Therapeutics to Present Three Posters at the AACR-NCI-EORTC International Conference on Molecular Targets and Cancer Therapeutics

On October 26, 2017 MabVax Therapeutics Holdings, Inc. (NASDAQ: MBVX), a clinical-stage oncology drug development company focused on the development of antibody-based products to address unmet medical needs in the treatment of cancer, reported that it will present three posters highlighting both new clinical findings and preclinical research accomplishments at the AACR (Free AACR Whitepaper)-NCI-EORTC AACR-NCI-EORTC (Free AACR-NCI-EORTC Whitepaper) International Conference on Molecular Targets and Cancer Therapeutics (EORTC-NCI-AACR) (Free ASGCT Whitepaper) (Free EORTC-NCI-AACR Whitepaper) being held October 26 – 30, 2017 in Philadelphia, Pennsylvania (Press release, MabVax, OCT 26, 2017, View Source [SID1234521221]).

Paul Maffuid, Ph.D., Executive Vice President of Research and Development of MabVax, stated, “We look forward to sharing the significant progress we have made through these clinical and preclinical investigations. We will report new clinical data from our ongoing Phase 1 clinical trial and report on our most advanced preclinical program that demonstrates our growing expertise in the development of fully human antibodies targeting carbohydrate antigens expressed on many solid tumor cancers.”

The Company will present the following posters during the meeting:

Presenting Author: Paul Maffuid, Ph.D., Executive Vice President Research and Development, MabVax Therapeutics
Title: Using CA19-9 as a translational biomarker for sLea targeted agents MVT-5873 and MVT-1075 in cancer
Date & Time: Saturday, October 28, 2017 at 12:30 PM
Session: Poster Session A: Biomarkers
Location: Hall E, Pennsylvania Convention Center
Poster No.: 62
Abstract No.: A062

The poster summarizes preclinical development activities including a survey of CA19-9 positive cancers in patient tissue microarrays and patient sera samples treated with the anti-CA19-9 antibody MVT-5873 with potential utility as a translational biomarker.

Presenting Author: Paul Maffuid, Ph.D., Executive Vice President Research and Development, MabVax Therapeutics
Title: Preliminary Phase 1 data comparing HuMab-5B1 (MVT-5873), a monoclonal antibody targeting sLea, as a single agent and in combination with first line nab-paclitaxel and gemcitabine in patients with CA19-9 positive pancreatic cancer
Date & Time: Sunday, October 29, 2017 at 12:30 PM
Session: Late Breaking Poster Session B: Therapeutic Agents: Biological
Location: Hall E, Pennsylvania Convention Center
Poster No.: LB-25
Abstract No.: LB-B25

The poster summarizes interim data from the ongoing Phase 1 trial of MVT-5873 used as a single agent and in combination with a first line therapy in newly diagnosed patients with CA19-9 positive pancreatic cancer.

Presenting Author: G. Jonah Rainey, Ph.D., Executive Director Antibody Research, MabVax Therapeutics
Title: A therapeutic antibody candidate against the broadly expressed Tn and sTn carbohydrate cancer antigens
Date & Time: Sunday, October 29, 2017 at 12:30 PM
Session: Poster Session B: Therapeutic Agents: Biological
Location: Hall E, Pennsylvania Convention Center
Poster No.: 104
Abstract No.: B104

The poster summarizes the discovery, optimization, and target validation for the Company’s fully human antibodies targeting the Thomsen-nouveau (Tn) and the sialyl Tn (sTn) carbohydrate antigens for patients with ovarian and breast cancers.

Innovation Pharmaceuticals Aims to Develop First Drug for Approval in Prevention of Oral Mucositis in Head and Neck Cancer Patients as Phase 2 Clinical Trial of Brilacidin Completes

On October 26, 2017 Innovation Pharmaceuticals Inc. (OTCQB:IPIX) (“the Company”), a clinical stage biopharmaceutical company, is pleased to report the completion of the Phase 2 trial (see link NCT02324335) of Brilacidin-OM for the prevention and treatment of Oral Mucositis (OM) in Head and Neck Cancer (HNC) patients receiving chemoradiation therapy (CRT). The final patient in the Phase 2 randomized, placebo-controlled clinical trial completed their post-therapy follow-up examination this week (Press release, Innovation Pharmaceuticals, OCT 26, 2017, View Source [SID1234521220]). The Company has begun the process of closing trial study sites and is now aggregating patient data for top-line analysis, to be reported this quarter.

The primary objectives of the trial are the evaluation of the efficacy of Brilacidin-OM in reducing the incidence of severe OM (WHO Grade ≥3) compared to placebo during seven weeks of study treatment/CRT, and assessment of the safety and tolerability of this novel OM oral rinse therapy. A secondary objective includes evaluating the efficacy of Brilacidin in reducing the duration of severe OM.

The completion of the trial represents an important milestone, positioning the Company to address a significant unmet medical need. There are currently no FDA-approved drugs for preventing OM in patients with Head and Neck Cancer receiving chemoradiation. This painful condition affects upwards of 90 percent of patients in this population as well as a large number of patients receiving CRT for other cancers.

The Company believes that a successful Phase 2 trial would be a major breakthrough. Fast Track designation by the Food and Drug Administration (FDA) for Brilacidin-OM has already been awarded. In addition, the Company plans to apply for FDA Breakthrough Therapy Designation should top-line end of study results reflect similar efficacy (and safety) to that observed at interim, in which patients treated with Brilacidin-OM experienced a markedly reduced rate of severe OM compared to those on placebo.

“By 2030, the global annual incidence of Head and Neck Cancer is expected to exceed 1 million cases,” commented Leo Ehrlich, Chief Executive Officer at Innovation Pharmaceuticals. “It’s a horribly debilitating condition that causes tremendous suffering and leads to corresponding delays in clinical care, adding to costs and complications, for those who experience it. We look forward to compiling and releasing the topline Brilacidin-OM data, toward advancing it into a potential pivotal Phase 3 clinical trial—a final step toward Brilacidin-OM possibly emerging as the world’s first-ever approved preventative treatment for Oral Mucositis in this population.”

West Announces Third-Quarter 2017 Results

On October 26, 2017 West Pharmaceutical Services, Inc. (NYSE: WST) reported its financial results for the third quarter of 2017, updated financial guidance for the full-year 2017, introduced sales growth outlook for full-year 2018 and reaffirmed long-term financial targets (Press release, West Pharmaceutical Services, OCT 26, 2017, View Source [SID1234521219]).

Third-Quarter 2017 Highlights

Reported net sales of $398.2 million grew 5.7% over the prior-year quarter. Net sales at constant currency (organic) grew by 3.7%.
Third-quarter 2017 reported-diluted EPS was $0.67, compared to reported-diluted EPS of $0.50 and adjusted-diluted EPS of $0.53, both in the prior-year quarter. There were no adjustments made in the third-quarter 2017.
Hurricanes in Puerto Rico had a negative impact on third-quarter 2017 sales of approximately $2 million. At current low levels of operations at both our Puerto Rican contract manufacturing facility and Biologics customers located in the area, we estimate fourth-quarter 2017 sales to be adversely impacted by approximately $5 million.
Raising full-year 2017 sales and adjusted-diluted EPS guidance. Full-year 2017 sales guidance is expected to be in a range between $1.595 billion and $1.605 billion, compared to the prior guidance range between $1.585 billion and $1.600 billion. This includes hurricane-related impacts in Puerto Rico. Full-year 2017 adjusted-diluted EPS guidance is expected to be in a range between $2.74 and $2.79, compared to the prior guidance range between $2.66 and $2.73. This includes an estimated fourth-quarter 2017 adjusted-diluted EPS negative impact of $0.03 from hurricane-related issues in Puerto Rico. Both current and prior guidance ranges include the favorable impact from tax-related benefits associated with share-based payment transactions that have been recognized during the first nine months of 2017.
Providing long-term financial objectives consistent with prior plans.
“Adjusted-diluted EPS” and “net sales at constant currency” are Non-GAAP measurements. See discussion under the heading “Non-GAAP Financial Measures” in this release.

Executive Commentary

“Our third-quarter performance was in line with our expectations,” said Eric M. Green, President and Chief Executive Officer. “We are on track to finish 2017 with strong organic sales growth led by high-value product growth in the Biologics and Generics market units.

“Looking to the future, we continue to see positive fundamentals in the markets we serve. We see unit volume growth from existing injectable drugs, future new drug approvals, and new generics and biosimilars that are entering the market. There is continued growth potential for high-value product (HVP) adoption in all our market units – Pharma, Generics and Biologics – as customers strive for higher quality and increasingly adopt zero-defect strategic imperatives. We have successfully focused our Contract-Manufactured Product segment on serving injectable medicines and diagnostic customers, and our consumer goods business continues to become a smaller part of that segment’s sales.”

Mr. Green concluded, “I am proud of our employees and their dedication to safety, quality and innovation. All of us at West are aware of the critical importance that our products play in the integrated containment and delivery of injectable medicines. I am especially proud of their response during this severe hurricane season. With a strong global team, focused on helping our customers, we are well-positioned for the future.”

Third-Quarter 2017 Financial Results (comparisons to prior-year period)

Reported net sales were $398.2 million, compared to $376.7 million. Reported net sales growth was 5.7%. On a constant-currency basis, organic sales growth was 3.7%.

Proprietary Products segment reported net sales were $308.9 million, compared to $298.1 million. Reported net sales growth was 3.6%. Organic sales growth was 1.5%, led by low-single digit growth in the Biologics and Generics market units. Biologics sales growth was lower than anticipated due to customers in Puerto Rico unable to receive shipments. Excluding this impact, Biologics organic sales growth would have been in the mid-single digit range. Generics market unit organic sales growth was positive after three consecutive quarters of declines. Pharma market unit sales declined low-single digits after a strong first-half 2017 performance.

Committed orders in the Proprietary Products segment at September 30, 2017, were $375 million, a decrease of 6% at constant currency compared to September 30, 2016.

Contract-Manufactured Products segment reported net sales were $89.3 million, compared to $79.0 million. Reported net sales growth was 13.1%, and organic sales growth was 11.5%.

Gross profit margin was 31.4%, a decrease of 70 basis points. Proprietary Products segment gross profit margin was 35.8%, a decrease of 60 basis points due to lower sales growth of high-value products, increased labor and overhead costs, partially offset by production efficiencies. Contract-Manufactured Products segment gross profit margin was 16.3%, an increase of 30 basis points due to a favorable mix of products sold and higher sales volume, partially offset by increased labor and overhead costs.

Third-quarter 2017 reported operating profit was $63.9 million, which represented an operating profit margin of 16.1%, an increase of 250 basis points from the prior-year quarter. The major driver of margin expansion was Proprietary Products other (income) expense, as the Company recognized $9.1 million of income for reimbursed costs associated with a technology that was subsequently licensed to a third party.

Income tax expense in the quarter was $14.0 million, which represented an effective tax rate of 22.3%. The effective tax rate reflects the impact of a tax benefit of $4.8 million associated with tax benefits from the adoption of guidance issued by the FASB regarding share-based payment transactions. Excluding the impact, the effective tax rate would have been approximately 30%.

Full-Year 2017 Financial Guidance

The Company is maintaining its full-year 2017 constant-currency (organic) sales growth guidance of approximately 6%.

West’s expected full-year 2017 net sales, margin and EPS guidance are as follows:

(in millions, except EPS)
2017 Updated
Guidance
Prior Guidance
Consolidated net sales
$1,595 to $1,605
$1,585 to $1,600
Consolidated gross profit margin (% of net sales)
32.6% to 32.8%
32.7% to 33.3%
Proprietary Products net sales
$1,250 to $1,255
$1,240 to $1,250
Contract-Manufactured Products net sales
$345 to $350
$345 to $350
Full-Year adjusted-diluted EPS*
$2.74 to $2.79
$2.66 to $2.73
*Includes the reported-diluted EPS impact of $0.40 for the first nine months of 2017 tax-benefit associated with the previously-discussed adoption of FASB-issued guidance. Also includes an estimated adverse impact due to severe-weather issues in Puerto Rico of approximately $5 million of net sales (and impact to consolidated gross margins) and $0.03 of adjusted-diluted EPS.
The principal currency assumption used in preparing these estimates is the translation of the euro at $1.18 for the remainder of 2017, compared to a prior assumption of $1.14 per euro.

Excluding the impact from tax benefits associated with the previously-discussed adoption of FASB-issued guidance, the Company expects that its annual effective tax rate will be approximately 30%. The Company does not plan on forecasting future benefits as they could vary quarter to quarter with the time and size of stock option exercises. Instead, the Company will include the impacts with each reported period. As a point of reference, the Company would have had $0.8 million of net income benefit in the third quarter of 2016 and would have had $18 million for the full-year 2016, resulting in an EPS benefit of $0.01 in the third-quarter 2016 and $0.24 for the full-year 2016.

The Company estimates its 2017 capital spending to be approximately $150 million.

2018 Sales Outlook and Long-Term Financial Construct

The Company expects 2018 constant-currency, organic sales growth to be in the range of 6% to 8% as a result of market volume growth and continued HVP conversions. Biologics and Generics market units are expected to return to more typical levels, with growth moderation in Contract-Manufactured Products following a strong 2017 and continued portfolio management of the consumer goods business.

The Company’s long-term financial construct remains consistent with prior plans, with 6% to 8% annual constant-currency, organic sales growth. We expect incremental sales growth from proprietary delivery systems such as SmartDose and Crystal Zenith, as their relative sales base increases over time. Favorable product mix shift, coupled with operational excellence and optimization programs, are expected to expand operating profit margins by approximately 100 basis points per year. Annual capital spending is expected to remain in a range of between $150 million and $175 million.

The Company updates and shares its high-level, long-term objectives in order to help investors, employees and other stakeholders better understand the strategic value of current and planned capital and research and development investments. As such, the revenue and profitability goals are not intended to predict or estimate actual results in any future period, but to indicate management’s view of what it believes to be achievable in that time frame.

Third-Quarter Conference Call

The Company will host a conference call to discuss the results and business expectations at 9:00 a.m. Eastern Time today. To participate on the call please dial 877-930-8295 (U.S.) or 253-336-8738 (International). The conference ID is 94093362.

A live broadcast of the conference call will be available at the Company’s website, www.westpharma.com, in the “Investors” section. Management will refer to a slide presentation during the call, which will be made available on the day of the call. To view the presentation, select “Presentations” in the “Investors” section of the Company’s website.

An online archive of the broadcast will be available at the website three hours after the live call and will be available through Thursday, November 2, 2017, by dialing 855-859-2056 (U.S.) or 404-537-3406 (International) and entering conference ID 94093362.

Forward-Looking Statements

Certain forward-looking statements are included in this release. They use such words as “expected,” “reflects,” “continue,” “raising,” “see,” “increase,” “plan,” “will,” “estimated,” “remain,” “may,” “believes,” “expect,” “include,” “estimate,” and other similar terminology. These statements reflect management’s current expectations regarding future events and operating performance and speak only as of the date of this release. There is no certainty that actual results will be achieved in-line with current expectations. These forward-looking statements involve a number of risks and uncertainties. The following are some of the factors that could cause our actual results to differ materially from those expressed in or underlying our forward-looking statements: customers’ changing inventory requirements and manufacturing plans; customer decisions to move forward with our new products and product categories; average profitability, or mix, of the products we sell; dependence on third-party suppliers and partners; interruptions or weaknesses in our supply chain; increased raw material costs; fluctuations in currency exchange; and the ability to meet development milestones with key customers. This list of important factors is not all inclusive. For a description of certain additional factors that could cause the Company’s future results to differ from those expressed in any such forward-looking statements, see Item 1A, entitled “Risk Factors,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Except as required by law or regulation, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise.

Non-GAAP Financial Measures

This press release and the preceding discussion of the Company’s results, financial guidance, and the accompanying financial tables use the following financial measures that have not been calculated in accordance with U.S. generally accepted accounting principles (GAAP), and therefore are referred to as Non-GAAP financial measures:

Net sales at constant currency (organic sales growth)
Adjusted operating profit
Adjusted operating profit margin
Adjusted income tax expense
Adjusted net income
Adjusted diluted EPS
Net debt
Total invested capital
Net debt-to-total invested capital
The Company believes that these Non-GAAP measures of financial results provide useful information to management and investors regarding business trends, results of operations, and the Company’s overall performance and financial position. The Company’s executive management team uses these financial measures to evaluate the performance of the Company in terms of profitability and efficiency, to compare operating results to prior periods, to evaluate changes in the operating results of each segment, and to measure and allocate financial resources to its segments. The Company believes that the use of these Non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends in comparing its financial measures with other companies.

The Company’s executive management does not consider such Non-GAAP measures in isolation or as an alternative to such measures determined in accordance with GAAP. The principal limitation of these financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management about which items are excluded. In order to compensate for these limitations, Non-GAAP financial measures are presented in connection with GAAP results. The Company urges investors and potential investors to review the reconciliations of its Non-GAAP financial measures to the comparable GAAP financial measures, and not to rely on any single financial measure to evaluate the Company’s business.

Net sales at constant currency translates the current-period reported sales of subsidiaries whose functional currency is other than the U.S. dollar at the applicable foreign exchange rates in effect during the comparable prior-year period. In calculating adjusted operating profit, adjusted operating profit margin, adjusted income tax expense, adjusted net income and adjusted diluted EPS, the Company excludes the impact of items that are not considered representative of ongoing operations. Such items may include restructuring and related costs, certain asset impairments, other specifically-identified gains or losses, and discrete income tax items. A reconciliation of these adjusted Non-GAAP measures to the comparable GAAP financial measures is included in the accompanying tables.

The following is a description of the items excluded from adjusted operating profit, adjusted income tax expense, adjusted net income, and adjusted diluted EPS for the three and nine months presented in the accompanying tables:

Venezuela deconsolidation – During the nine months ended September 30, 2017, as a result of the continued deterioration of conditions in Venezuela, as well as its continued reduced access to U.S. Dollar settlement controlled by the Venezuelan government, the Company recorded a charge of $11.1 million related to the deconsolidation of its Venezuelan subsidiary, following its determination that it no longer met the GAAP criteria for control of that subsidiary. As of April 1, 2017, the Company’s consolidated financial statements exclude the results of its Venezuelan subsidiary.

Restructuring and related charges – During the three months ended September 30, 2016, the Company recorded $2.3 million in restructuring and related charges, consisting of $1.4 million for severance charges and $0.9 million for a non-cash asset write-down associated with the discontinued use of certain equipment. During the nine months ended September 30, 2016, the Company incurred $23.7 million in restructuring and related charges, consisting of $7.8 million for severance charges and $15.9 million for non-cash asset write-downs associated with the discontinued use of certain trademarks and certain equipment.

Venezuela currency devaluation – During the nine months ended September 30, 2016, the Company recorded a charge of $2.7 million related to the devaluation of the Venezuelan Bolivar from the previously-prevailing official exchange rate of 6.3 Bolivars to USD to 10.0 Bolivars to USD.

Discrete tax item – During the three and nine months ended September 30, 2016, the Company recorded a discrete tax charge of $0.3 million resulting from the impact of a change in the enacted tax rate in the United Kingdom on its previously-recorded deferred tax asset balances.