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Lilly Reports Fourth-Quarter and Full-Year 2016 Results

On January 31, 2017 Eli Lilly and Company (NYSE: LLY) reported financial results for the fourth quarter and full year of 2016 (Press release, Eli Lilly, JAN 31, 2017, View Source [SID1234517601]).

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$ in millions, except per share data
Fourth Quarter
%

Full Year
%

2016

2015
Change

2016

2015
Change
Revenue
$
5,760.5

$
5,375.6

7%

$
21,222.1

$
19,958.7

6%

Net Income – Reported
771.8

478.4

61%

2,737.6

2,408.4

14%

EPS – Reported
0.73

0.45

62%

2.58

2.26

14%

Net Income – Non-GAAP
1,013.4

828.2

22%

3,735.6

3,656.3

2%

EPS – Non-GAAP
0.95

0.78

22%

3.52

3.43

3%

Certain financial information for 2016 and 2015 is presented on both a reported and a non-GAAP basis. Some numbers in this press release may not add due to rounding. Reported results were prepared in accordance with generally accepted accounting principles (GAAP) and include all revenue and expenses recognized during the periods. Non-GAAP measures exclude the items described in the reconciliation tables later in the release. The company’s 2017 financial guidance is also being provided on both a reported and a non-GAAP basis. The non-GAAP measures are presented to provide additional insights into the underlying trends in the company’s business.

"Newly launched products – including Trulicity, Cyramza, Jardiance and Taltz – led Lilly’s volume-driven growth in 2016. Pipeline progress also continued with approvals of new products and new indications for existing products in our core therapeutic areas of diabetes, oncology and immunology," said David A. Ricks, Lilly’s president and CEO. "We expect this momentum to continue in 2017 and remain focused on launching new products, improving productivity and advancing our pipeline as we work to bring life-changing medicines to patients."

Key Events Over the Last Three Months

Commercial

Basaglar (insulin glargine injection), part of the company’s alliance with Boehringer Ingelheim, became available by prescription in the U.S.
Galliprant (grapiprant tablets) is now available to veterinarians for once-daily use in dogs with osteoarthritis. Galliprant is part of a collaboration between Lilly and Aratana Therapeutics, Inc.
Regulatory

With respect to products on which we collaborate with Boehringer Ingelheim:
The U.S. Food and Drug Administration (FDA) approved and the company began efforts to promote a new indication for Jardiance (empagliflozin) tablets to reduce the risk of cardiovascular (CV) death in adults with type 2 diabetes and established CV disease.
The FDA approved Synjardy XR (empagliflozin and metformin hydrochloride extended-release) tablets for adults with type 2 diabetes.
The FDA approved supplemental new drug applications for Synjardy (empagliflozin/metformin hydrochloride), Synjardy XR and Glyxambi (empagliflozin/linagliptin) to include data showing empagliflozin reduced the risk for CV death in adults with type 2 diabetes and established CV disease.
The European Commission granted approval to update the Jardiance label including a change to the indication statement and inclusion of data on the reduction of risk of CV death in patients with type 2 diabetes and established CV disease.
The European Commission granted marketing authorization for Glyxambi, a single pill combining Jardiance and Trajenta (linagliptin), for use in adults with type 2 diabetes to improve blood sugar control when metformin and/or sulphonylurea and one of the monocomponents of Glyxambi do not provide adequate blood sugar control, or when a patient is already being treated with the free combination of Jardiance and Trajenta.
The European Commission granted conditional marketing authorization for Lartruvo (olaratumab), in combination with doxorubicin, to treat adults with advanced soft tissue sarcoma not amenable to curative treatment with radiotherapy or surgery and who have not been previously treated with doxorubicin. As part of a conditional marketing authorization, Lilly will need to provide results from an ongoing Phase 3 study. Until availability of the full data, the CHMP will review the benefits and risks of olaratumab annually to determine whether the conditional marketing authorization can be maintained.
The EMA’s CHMP issued a positive opinion, recommending the approval of baricitinib, for the treatment of moderate-to-severe active rheumatoid arthritis in adult patients who have responded inadequately to, or who are intolerant to, one or more disease-modifying anti- rheumatic drugs. Baricitinib may be used as monotherapy or in combination with methotrexate. Baricitinib is part of a development and commercialization collaboration with Incyte.
The FDA extended the review period for the new drug application (NDA) for investigational baricitinib, a once-daily oral medication for the treatment of moderate to severe rheumatoid arthritis. The NDA for baricitinib was submitted to the FDA in January 2016. The FDA extended the action date to allow time to review additional data analyses recently submitted by Lilly in response to the FDA’s information requests. The submission of the additional information has been determined by the FDA to constitute a Major Amendment to the NDA, resulting in an extension of the Prescription Drug User Fee Act goal date by three months.
Clinical

The company announced that solanezumab did not meet the primary endpoint in a Phase 3 study of people with mild dementia due to Alzheimer’s disease. Lilly will not pursue regulatory submissions for solanezumab for the treatment of mild dementia due to Alzheimer’s disease.
Business Development/Other

The company announced an agreement to acquire CoLucid Pharmaceuticals, Inc. for $46.50 per share or approximately $960 million. Lilly will add lasmiditan, in development for the acute treatment of migraine, to its Phase 3 pipeline.
The company completed the acquisition of Boehringer Ingelheim Vetmedica, Inc.’s U.S. feline, canine and rabies vaccines portfolio.
The U.S. Court of Appeals for the Federal Circuit upheld the decision of the U.S. District Court for the Southern District of Indiana and ruled in the company’s favor regarding validity and infringement of the vitamin regimen patent for Alimta (pemetrexed for injection).
The company and AstraZeneca announced a worldwide agreement to co-develop MEDI1814, an antibody selective for amyloid-beta 42, which is currently in Phase 1 trials as a potential disease-modifying treatment for Alzheimer’s disease.
The company announced the expansion of an existing immuno-oncology collaboration with Merck to add a new study of Lilly’s Lartruvo with Keytruda (pembrolizumab) in patients with previously treated advanced or metastatic soft tissue sarcoma.
The company announced that people who use Lilly insulin can access discounted prices for their purchases starting January 1, 2017. The discounts, provided by Lilly through a partnership with Express Scripts, may reduce costs for people who pay full retail prices at U.S. pharmacies, such as those who have no insurance or are in the deductible phase of their high-deductible insurance plans.
As part of its previously announced share repurchase program, the company paid $300 million to repurchase company stock in the fourth quarter of 2016. For the full year 2016, the company returned $2.8 billion in cash to shareholders through both its dividend and share repurchase program.
Fourth-Quarter Reported Results

In the fourth quarter of 2016, worldwide revenue was $5.760 billion, an increase of 7 percent compared with the fourth quarter of 2015. The revenue increase was driven by an 8 percent increase due to volume, a 1 percent favorable impact of foreign exchange rates, and a realized price decrease of 1 percent, primarily due to lower realized prices outside the U.S. The increase in worldwide volume was driven by Trulicity and other new pharmaceutical products, including Jardiance, Taltz, Cyramza and Basaglar. The increase in volume was also driven by Humalog, Humulin and companion animal products. The total volume increase was partially offset by decreased volumes for Alimta, Zyprexa and Cymbalta.

Revenue in the U.S. increased 14 percent to $3.223 billion, driven primarily by increased volumes for Trulicity, Humalog, Taltz, Jardiance, Humulin and companion animal products. Realized prices increased U.S. revenue by 1 percent, reflecting a favorable adjustment of approximately $130 million related to changes in estimates for rebates and discounts, primarily related to Humalog.

Revenue outside the U.S. decreased 1 percent to $2.537 billion, as lower realized prices and volume from the loss of exclusivity for Alimta in several countries, Zyprexa in Japan, and Cymbalta in Europe and Canada were largely offset by increased volume for several new pharmaceutical products, including Cyramza, Trulicity, Basaglar and Jardiance, and the favorable impact of foreign exchange rates, primarily the Japanese yen, partially offset by other foreign currencies.

Gross margin increased 8 percent to $4.295 billion in the fourth quarter of 2016 compared with the fourth quarter of 2015. Gross margin as a percent of revenue was 74.6 percent, an increase of 0.4 percentage points compared with the fourth quarter of 2015. The increase in gross margin percent was primarily due to increased volume in the U.S. and efficiencies in manufacturing processes.

Operating expenses in the fourth quarter of 2016, defined as the sum of research and development, and marketing, selling and administrative expenses, remained flat at $3.241 billion. Research and development expenses were flat at $1.451 billion, or 25.2 percent of revenue. Marketing, selling and administrative expenses remained flat at $1.790 billion, as reduced spending on late-life-cycle products was largely offset by increased expenses related to new products.

In the fourth quarter of 2016, the company recognized an acquired in-process research and development charge of $30.0 million associated with an agreement with AstraZeneca to co-develop MEDI1814. In the fourth quarter of 2015, the company recognized acquired in-process research and development charges of $199.0 million, primarily associated with the acquisition of worldwide rights to an intranasal glucagon from Locemia Solutions.

In the fourth quarter of 2016, the company recognized asset impairment, restructuring and other special charges of $147.6 million. The charges are primarily associated with global severance costs and integration costs related to the acquisition of Novartis Animal Health. In the fourth quarter of 2015, the company recognized asset impairment, restructuring and other special charges of $144.9 million, comprised of severance costs, integration costs related to the acquisition of Novartis Animal Health and asset impairments.

Operating income in the fourth quarter of 2016 was $876.2 million, an increase of $476.3 million compared with the fourth quarter of 2015, due to higher revenue and lower acquired in-process research and development charges.

Other income (expense) was income of $15.8 million in the fourth quarter of 2016, compared with income of $44.7 million in the fourth quarter of 2015.

The effective tax rate was an expense of 13.5 percent in the fourth quarter of 2016, compared with a benefit of 7.6 percent in the fourth quarter of 2015. The lower effective tax rate in the fourth quarter of 2015 is primarily due to the inclusion of full-year benefits for certain U.S. tax provisions, including the R&D tax credit, reinstated in the fourth quarter of 2015, and the favorable tax impact of the acquired in-process research and development charges. The effective tax rate in the fourth quarter of 2016 was reduced by a net discrete tax benefit, including a tax benefit of approximately $40 million for the early adoption of the new accounting standard related to stock-based compensation.

In the fourth quarter of 2016, net income increased 61 percent to $771.8 million, and earnings per share increased 62 percent to $0.73, compared with $478.4 million and $0.45, respectively, in the fourth quarter of 2015. The increases in net income and earnings per share were driven by higher operating income, partially offset by a higher effective tax rate.

Fourth-Quarter Non-GAAP Measures

On a non-GAAP basis, fourth quarter 2016 gross margin increased 7 percent to $4.457 billion. Gross margin as a percent of revenue was 77.4 percent, an increase of 0.1 percentage point compared with the fourth quarter of 2015. The increase in gross margin percent was primarily due to increased volume in the U.S. and efficiencies in manufacturing processes.

Operating income increased $305.5 million, or 33 percent, to $1.218 billion in the fourth quarter of 2016, due to higher revenue.

The effective tax rate increased 4.4 percentage points to 17.9 percent compared with the fourth quarter of 2015. The higher effective tax rate is primarily due to the inclusion of full-year benefits for certain U.S. tax provisions, including the R&D tax credit, reinstated in the fourth quarter of 2015, partially offset by a higher net discrete tax benefit in the fourth quarter of 2016.

In the fourth quarter of 2016, net income and earnings per share increased 22 percent to $1.013 billion, and $0.95, respectively, compared with $828.2 million, and $0.78, respectively, in the fourth quarter of 2015. The increases in net income and earnings per share were driven by higher operating income, partially offset by a higher effective tax rate.

For further detail of non-GAAP measures, see the reconciliation below as well as the Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information table later in this press release.

Fourth Quarter

2016

2015
% Change
Earnings per share (reported)
$
0.73

$
0.45

62%
Amortization of intangible assets
.11

.11

Asset impairment, restructuring and other special charges
.10

.10

Acquired in-process research and development
.02

.12

Earnings per share (non-GAAP)
$
0.95

$
0.78

22%

Numbers may not add due to rounding.

Full-Year Reported Results

For the full year 2016, worldwide revenue increased 6 percent compared with 2015 to $21.222 billion. Higher revenue was due to increased volume, as realized prices and the impact of foreign exchange rates were relatively flat. The worldwide volume increase was primarily driven by Trulicity and other new pharmaceutical products, including Cyramza, Jardiance and Taltz, as well as Humalog and Erbitux (due to the transfer of commercialization rights in North America to Lilly). The volume increases were partially offset by the impact of the loss of exclusivity for Cymbalta in Europe and Canada, Zyprexa in Japan, and Alimta in several countries.

Revenue in the U.S. increased 14 percent to $11.506 billion, driven by increased volume for several pharmaceutical products, including Trulicity, Humalog, Erbitux (due to the transfer of commercialization rights in North America to Lilly), Taltz and Jardiance, partially offset by lower volumes for Zyprexa. U.S. revenue also benefited from reductions to the Cymbalta reserve for expected product returns of approximately $175 million in 2016, favorably affecting both volume and price.

Revenue outside the U.S. decreased 1 percent to $9.716 billion as lower realized prices and volume from the losses of exclusivity for Cymbalta in Europe and Canada, Zyprexa in Japan, and Alimta in several countries were largely offset by increased volume for several new pharmaceutical products, including Cyramza and Trulicity.

Gross margin increased 4 percent to $15.567 billion in 2016. Gross margin as a percent of revenue was 73.4 percent, a decrease of 1.4 percentage points compared with 2015. The decline in gross margin percent was primarily due to a lower benefit from foreign exchange rates on international inventories sold.

Total operating expenses increased 3 percent to $11.696 billion in 2016. Research and development expenses increased 9 percent to $5.244 billion, or 24.7 percent of revenue, driven primarily by higher late-stage clinical development costs and, to a lesser extent, higher charges related to development milestones. Marketing, selling and administrative expenses decreased 1 percent to $6.452 billion, as reduced spending on late-life-cycle products was largely offset by expenses related to new products.

In 2016, the company recognized an acquired in-process research and development charge of $30.0 million associated with the agreement with AstraZeneca to co-develop MEDI1814. In 2015, the company recognized acquired in-process research and development charges of $535.0 million resulting from business development activity, primarily a collaboration with Pfizer and the acquisition of worldwide rights to Locemia’s intranasal glucagon.

In 2016, the company recognized asset impairment, restructuring and other special charges of $382.5 million. The charges are primarily associated with integration and severance costs related to the acquisition of Novartis Animal Health, other global severance costs, and asset impairments related to the closure of an animal health manufacturing facility in Ireland. In 2015, the company recognized asset impairment, restructuring, and other special charges of $367.7 million related to severance costs, integration costs for Novartis Animal Health and asset impairments.

Operating income in 2016 increased 29 percent compared with 2015 to $3.459 billion, as higher gross margin and lower acquired in-process research and development charges were partially offset by increased research and development costs.

Other income (expense) was expense of $84.8 million in 2016, compared with income of $100.6 million in 2015. Other expense in 2016 included a $203.9 million charge related to the impact of the Venezuelan financial crisis, including the significant deterioration of the bolívar, partially offset by net gains of $101.6 million on investments. Other income in 2015 included net gains of $236.7 million on investments, partially offset by a net charge of $152.7 million related to the repurchase of $1.65 billion of debt.

The effective tax rate was 18.9 percent in 2016, compared with 13.7 percent in 2015. The higher effective tax rate for 2016 reflects several factors in both years: in 2016, the unfavorable tax effect of the charge related to the impact of the Venezuelan financial crisis and certain asset impairment, restructuring and other special charges; and in 2015, the favorable tax impact of the acquired in-process research and development charges, net charges related to the repurchase of debt and asset impairment, restructuring and other special charges. The higher effective tax rate was partially offset by a net discrete tax benefit.

For the full year 2016, net income and earnings per share increased 14 percent to $2.738 billion, and $2.58, respectively, compared with $2.408 billion, and $2.26, respectively, in 2015. The increases in net income and earnings per share were due to higher operating income, partially offset by lower other income and a higher effective tax rate.

Full-Year Non-GAAP Measures

On a non-GAAP basis for the full year 2016, operating income increased $183.3 million, or 4 percent, to $4.555 billion, as higher gross margin was partially offset by higher operating expenses. The effective tax rate was 20.1 percent in 2016, compared with 20.9 percent in 2015. Net income increased 2 percent and earnings per share increased 3 percent to $3.736 billion, and $3.52, respectively.

For further detail of non-GAAP measures, see the reconciliation below as well as the Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information table later in this press release.

Full Year

2016

2015
% Change
Earnings per share (reported)
$
2.58

$
2.26

14%
Amortization of intangible assets
.44

.39

Asset impairment, restructuring and other special charges
.29

.25

Venezuela charge
.19

—

Acquired in-process research and development
.02

.33

Novartis Animal Health inventory step-up
—

.10

Net charge related to repurchase of debt
—

.09

Earnings per share (non-GAAP)
$
3.52

$
3.43

3%
Numbers may not add due to rounding.

Select Revenue Highlights

(Dollars in millions)

Fourth Quarter

Full Year

Established
Pharmaceutical
Products
2016

2015

% Change

2016

2015

% Change

Humalog
$
819.8

$
798.7

3%

$
2,768.8

$
2,841.9

(3)%

Cialis
676.3

638.4

6%

2,471.6

2,310.7

7%

Alimta
541.6

627.2

(14)%

2,283.3

2,493.1

(8)%

Forteo
422.5

377.9

12%

1,500.0

1,348.3

11%

Humulin
355.3

358.6

(1)%

1,365.9

1,307.4

4%

Cymbalta
181.8

223.6

(19)%

930.5

1,027.6

(9)%

Strattera
243.2

221.6

10%

854.7

784.0

9%

Zyprexa
153.0

229.1

(33)%

725.3

940.3

(23)%

Erbitux
153.7

176.2

(13)%

687.0

485.0

42%

Effient
140.9

140.3

0%

535.2

523.0

2%

New
Pharmaceutical
Products

Trulicity
337.0

112.5

NM

925.5

248.7

NM

Cyramza
177.1

117.5

51%

614.1

383.8

60%

Jardiance(a)
76.1

14.6

NM

201.9

60.2

NM

Taltz
61.3

—

NM

113.1

—

NM

Basaglar
39.5

7.3

NM

86.1

11.1

NM

Portrazza
3.8

0.6

NM

14.8

0.6

NM

Lartruvo
11.9

—

NM

11.9

—

NM

Subtotal
706.7

252.5

NM

1,967.4

704.4

NM

Animal Health
837.6

811.7

3%

3,158.2

3,181.0

(1)%

Total Revenue
$
5,760.5

$
5,375.6

7%

$
21,222.1

$
19,958.7

6%

(a) Jardiance includes Glyxambi and Synjardy
NM – not meaningful
Numbers may not add due to rounding

Selected Established Pharmaceutical Products

Humalog

For the fourth quarter of 2016, worldwide Humalog revenue increased 3 percent compared with the fourth quarter of 2015 to $819.8 million. Revenue in the U.S. increased 3 percent to $524.8 million, as increased demand was partially offset by lower realized prices. Realized prices in the fourth quarter of both 2015 and 2016 reflect benefits related to estimates for rebates and discounts, with the benefit in 2016 being larger. Revenue outside the U.S. increased 3 percent to $295.0 million, driven by increased volume, partially offset by the unfavorable impact of foreign exchange rates.

For the full year 2016, worldwide Humalog revenue decreased 3 percent to $2.769 billion. U.S. Humalog revenue for 2016 was $1.685 billion, a 5 percent decrease, driven by lower realized prices, partially offset by increased demand. Humalog revenue outside the U.S. was $1.084 billion, a 1 percent increase, driven by increased volume and, to a lesser extent, higher realized prices, partially offset by the unfavorable impact of foreign exchange rates.

Cialis

For the fourth quarter of 2016, worldwide Cialis revenue increased 6 percent to $676.3 million. U.S. revenue of Cialis was $413.8 million in the fourth quarter, a 7 percent increase compared with the fourth quarter of 2015, driven by higher realized prices, partially offset by decreased demand. Revenue of Cialis outside the U.S. increased 4 percent, to $262.5 million, driven by increased volume and higher realized prices, partially offset by the unfavorable impact of foreign exchange rates.

For the full year 2016, worldwide Cialis revenue increased 7 percent to $2.472 billion. U.S. Cialis revenue for 2016 was $1.469 billion, a 17 percent increase, driven by higher realized prices. Cialis revenue outside the U.S. was $1.002 billion, a 5 percent decline, driven by the unfavorable impact of foreign exchange rates and decreased volume, partially offset by higher realized prices.

Alimta

For the fourth quarter of 2016, Alimta generated worldwide revenue of $541.6 million, which decreased 14 percent compared with the fourth quarter of 2015. U.S. revenue of Alimta decreased 5 percent, to $269.8 million, driven by decreased demand due to competitive pressure, partially offset by higher realized prices. Revenue outside the U.S. decreased 21 percent, to $271.7 million, driven primarily by the loss of exclusivity in several countries and to a lesser extent lower realized prices.

For the full year 2016, worldwide Alimta revenue decreased 8 percent to $2.283 billion. U.S. Alimta revenue for 2016 was $1.101 billion, a 5 percent decline, driven by decreased demand due to competitive pressure. Alimta revenue outside the U.S. was $1.182 billion, an 11 percent decline, driven primarily by the loss of exclusivity in several countries.

Forteo

Fourth-quarter 2016 worldwide revenue for Forteo was $422.5 million, a 12 percent increase compared with the fourth quarter of 2015. U.S. revenue increased 23 percent to $229.3 million, driven by higher realized prices. Revenue outside the U.S. increased 1 percent to $193.1 million, driven by increased volume and the favorable impact of foreign exchange rates, largely offset by lower realized prices.

For the full year 2016, worldwide Forteo revenue increased 11 percent to $1.500 billion. U.S. Forteo revenue for 2016 was $770.5 million, a 26 percent increase driven by higher realized prices. Forteo revenue outside the U.S. was $729.4 million, a 1 percent decline, driven by lower realized prices, largely offset by increased volume and the favorable impact of foreign exchange rates.

Humulin

Worldwide Humulin revenue for the fourth quarter of 2016 decreased 1 percent compared with the fourth quarter of 2015 to $355.3 million. U.S. revenue increased 5 percent to $221.8 million, driven by increased demand, largely offset by lower realized prices. Revenue outside the U.S. decreased 9 percent, to $133.5 million, driven by the unfavorable impact of foreign exchange rates, lower realized prices and decreased volume.

For the full year 2016, worldwide Humulin revenue increased 4 percent to $1.366 billion. U.S. revenue for 2016 was $861.8 million, a 13 percent increase, driven by increased demand and, to a lesser extent, higher realized prices. The increase in realized prices resulted from a change in estimate of a government rebate in the first quarter of 2016. Revenue outside the U.S. was $504.1 million, a 7 percent decline, driven by the unfavorable impact of foreign exchange rates and, to a lesser extent, decreased volume and lower realized prices.

New Pharmaceutical Products

Trulicity

Fourth-quarter 2016 worldwide Trulicity revenue was $337.0 million. U.S. revenue was $268.1 million, driven by growth in the GLP-1 market and increased share of market for Trulicity. Revenue outside the U.S. was $69.0 million.

For the full year 2016, worldwide Trulicity revenue was $925.5 million. U.S. revenue was $737.6 million, driven by growth in the GLP-1 market and increased share of market for Trulicity. Revenue outside the U.S. was $187.9 million.

Cyramza

For the fourth quarter of 2016, worldwide Cyramza revenue was $177.1 million, an increase of 51 percent compared with the fourth quarter of 2015. U.S. revenue was $63.6 million, a decline of 8 percent, due to competitive pressure. Revenue outside the U.S. was $113.5 million, primarily due to strong uptake for the gastric cancer indication in Japan.

For the full year 2016, worldwide Cyramza revenue was $614.1 million, an increase of 60 percent compared with 2015. U.S. revenue was $270.1 million, a decline of 3 percent, due to competitive pressure. Revenue outside the U.S. was $344.0 million, primarily due to strong uptake for the gastric cancer indication in Japan.

Jardiance

The company’s worldwide Jardiance revenue during the fourth quarter of 2016 was $76.1 million. U.S. revenue was $55.8 million, driven by growth in the SGLT2 class and increased share of market for Jardiance. Revenue outside the U.S. was $20.4 million. Jardiance is part of the company’s alliance with Boehringer Ingelheim, and Lilly reports as revenue a portion of Jardiance’s gross margin.

For the full year 2016, worldwide Jardiance revenue was $201.9 million. U.S. revenue was $144.5 million, driven by growth in the SGLT2 class and increased share of market for Jardiance. Revenue outside the U.S. was $57.4 million.

Taltz

For the fourth quarter of 2016, Taltz, a treatment for moderate-to-severe plaque psoriasis, generated worldwide revenue of $61.3 million. U.S. revenue was $59.5 million due to increased share of market for Taltz.

For the full year 2016, Taltz generated worldwide revenue of $113.1 million. U.S. revenue was $110.8 million.

Basaglar

For the fourth quarter of 2016, Basaglar, a treatment to control high blood sugar in adults and children with type 1 diabetes and adults with type 2 diabetes, generated worldwide revenue of $39.5 million. Basaglar launched in the U.S. in mid-December 2016 and generated revenue of $15.8 million, largely due to initial wholesaler and retailer stocking. Basaglar is part of the company’s alliance with Boehringer Ingelheim.

For the full year 2016, Basaglar generated worldwide revenue of $86.1 million.

Portrazza

For the fourth quarter of 2016, Portrazza, a first-line treatment for metastatic squamous non-small cell lung cancer, generated worldwide revenue of $3.8 million.

For the full year 2016, Portrazza generated worldwide revenue of $14.8 million.

Lartruvo

For the fourth quarter and full year of 2016, Lartruvo, a treatment in combination with doxorubicin for adults with advanced soft tissue sarcoma not amenable to curative treatment with radiotherapy or surgery and who have not been previously treated with doxorubicin, generated worldwide revenue of $11.9 million. Lartruvo was launched in the U.S. and certain European countries in the fourth quarter of 2016.

Animal Health

In the fourth quarter of 2016, worldwide animal health revenue totaled $837.6 million, an increase of 3 percent compared with the fourth quarter of 2015. U.S. animal health revenue increased 2 percent to $389.0 million, due to increased revenue for companion animal products reflecting new launches and expanding relationships with distributors, largely offset by decreased revenue for food animal products due to market access pressures. Animal health revenue outside the U.S. increased 4 percent to $448.6 million, primarily due to increased revenue for food animal products. Excluding the impact of foreign exchange rates, worldwide animal health revenue increased 4 percent.

For the full year 2016, worldwide animal health revenue totaled $3.158 billion, a decline of 1 percent compared with the full year 2015. U.S. animal health revenue increased 1 percent, to $1.564 billion, primarily due to uptake of new companion animal products, partially offset by decreased revenue for food animal products. Animal health revenue outside the U.S. was $1.594 billion, a 3 percent decline driven by the unfavorable impact of foreign exchange rates. Excluding the impact of foreign exchange rates, worldwide animal health revenue increased 1 percent.

2017 Financial Guidance

The company has revised certain elements of its 2017 financial guidance. Earnings per share for 2017 are now expected to be in the range of $2.69 to $2.79 on a reported basis, primarily due to the estimated acquired in-process research and development charge related to the planned acquisition of CoLucid Pharmaceuticals. Earnings per share for 2017 are still expected to be $4.05 to $4.15 on a non-GAAP basis.

2017
Expectations
% Change
Earnings per share (reported)
$2.69 to $2.79
4% to 8%
Acquired in-process research and development charge related to
the planned acquisition of CoLucid Pharmaceuticals (1)
.80

Amortization of intangible assets (1)
.45

Inventory step-up costs associated with the acquisition of
Boehringer Ingelheim Vetmedica’s U.S. feline, canine and
rabies vaccines portfolio (1)(2)
.06

Asset impairment, restructuring and other special charges,
including Novartis Animal Health integration costs
.05

Earnings per share (non-GAAP)
$4.05 to $4.15
15% to 18%
(1) Subject to acquisition accounting adjustments
(2) Subject to final inventory quantities purchased

Numbers may not add due to rounding

The company still anticipates 2017 revenue between $21.8 billion and $22.3 billion. Excluding the impact of foreign exchange rates, the company expects revenue growth from animal health products and a number of established pharmaceutical products including Trajenta, Forteo and Humalog, as well as higher revenue from new products including Trulicity, Taltz, Basaglar, Cyramza, Jardiance and Lartruvo.

Marketing, selling and administrative expenses are still expected to be in the range of $6.4 billion to $6.6 billion. Research and development expenses are still expected to be in the range of $4.9 billion to $5.1 billion.

The 2017 tax rate is now expected to be approximately 24.5 percent on a reported basis, primarily due to the non-deductibility of the estimated acquired in-process research and development charge related to the planned acquisition of CoLucid Pharmaceuticals. The 2017 tax rate on a non-GAAP basis is still expected to be approximately 22.0 percent.

The following table summarizes the company’s 2017 financial guidance:

2017 Guidance

Prior

Revised
Revenue
$21.8 to $22.3 billion

Unchanged

Gross Margin % of Revenue (reported)
Approx. 73.5%

Unchanged
Gross Margin % of Revenue (non-GAAP)
Approx. 77.0%

Unchanged

Marketing, Selling & Administrative
$6.4 to $6.6 billion

Unchanged

Research & Development
$4.9 to $5.1 billion

Unchanged

Other Income/(Expense)
$0 to $100 million

Unchanged

Tax Rate (reported)
Approx. 20.0%

Approx. 24.5%
Tax Rate (non-GAAP)
Approx. 22.0%

Unchanged

Earnings per Share (reported)
$3.51 to $3.61

$2.69 to $2.79
Earnings per Share (non-GAAP)
$4.05 to $4.15

Unchanged

Capital Expenditures
Approx. $1.2 billion

Unchanged

Non-GAAP adjustments are consistent with the earnings per share table above.

ZIOPHARM Utilizing Non-Viral Sleeping Beauty Platform to Rapidly Produce CAR-Expressing T cells Advancing “Point-of-Care” Approach

On January 31, 2017 ZIOPHARM Oncology, Inc. (Nasdaq:ZIOP), a biopharmaceutical company focused on new immunotherapies, reported improved production times utilizing its non-viral platform to engineer chimeric antigen receptor (CAR)-modified T cells in an ongoing Phase 1 study of second-generation Sleeping Beauty CD19-specific CAR+ T cells (Press release, Ziopharm, JAN 31, 2017, View Source [SID1234517599]). Plans to progress the Company’s point-of-care (POC) approach with administration of CAR-T cell therapy in less than 2 days are also underway helping expand access to innovative T-cell therapies.

"Through the application of Intrexon’s industrial engineering components and principles, we have enhanced our non-viral approach to T-cell therapies. Shortening the manufacturing process and avoiding the complexity of viral-based approaches with Sleeping Beauty represents a significant advance which dramatically reduces barriers to broadening delivery of CAR-expressing T cells to a wide range of institutions and importantly cancer patients in need," said Laurence Cooper, M.D., Ph.D., Chief Executive Officer of ZIOPHARM.

In contrast to the multi-step methods to produce virus-modified CAR- and TCR-expressing T cells, the non-viral Sleeping Beauty system offers the ability to rapidly generate genetically modified products through a simplified process. The improvements include avoiding activation and propagation of T cells as well as reduced time in culture.

In the clinical setting, data published in the Journal of Clinical Investigation in August 2016 from two Phase 1 trials, infusing first-generation Sleeping Beauty CD19-specific CAR T cells produced in 4 weeks, demonstrated positive long-term survival data for patients with acute lymphoblastic leukemia (ALL) and non-Hodgkin lymphoma (NHL). In the ongoing Phase 1 study utilizing second-generation Sleeping Beauty CD19-specific CAR+ T cells for lymphoid malignancies, compressed production times with younger T cells are being deployed:

A patient with multiple-relapsed B-cell ALL received Sleeping Beauty-modified CD19-specific CAR+ T cells with the manufacturing time reduced to 3 weeks and achieved a complete remission with normalization of PET/CT tumor imaging.
A patient with triple-hit NHL treated in January 2017 was the first to receive Sleeping Beauty-modified CD19-specific CAR+ T cells with the manufacturing time reduced to 2 weeks.
In the pre-clinical setting, the time to administration of third generation Sleeping Beauty CAR+ T cells co-expressing a membrane-bound version of IL-15 (mbIL15) has been reduced to less than two days. This shortened process delivers genetically modified T cells with superior proliferative potential. Data presented at the 58th American Society of Hematology (ASH) (Free ASH Whitepaper) Annual Meeting in December 2016, supported by an earlier publication in the Proceedings of the National Academy of Sciences, revealed promising results:

Third generation Sleeping Beauty CAR+ T cells demonstrated that a single low-dose of T cells co-expressing a CD19-specific CAR and mbIL15 resulted in sustained in vivo persistence that produced potent anti-tumor effects and superior leukemia-free survival.
These clinical and pre-clinical data support the Company’s POC plans to rapidly infuse Sleeping Beauty CAR+ T cells in a Phase I trial to be launched later this year. With the intent to administer clinical-grade Sleeping Beauty CAR+ T cells in less than 48 hours, this non-viral CAR-T approach has the potential to outpace viral-based methods.

"Together with ZIOPHARM, we are realizing the promise of engineered T cells and are excited to advance the POC approach. Our ability to generate T cells that co-express immunoreceptors and cytokines such as membrane-bound IL-15 through non-viral gene transfer, plus integration of our RheoSwitch Therapeutic System enabling conditional control of these and other essential components, represents what we believe will be the best-in-class platform in CAR-T and TCR-based cellular therapy," stated Geno Germano, President of Intrexon Corporation (NYSE:XON).plete remission with normalization of PET/CT tumor imaging.
A patient with triple-hit NHL treated in January 2017 was the first to receive Sleeping Beauty-modified CD19-specific CAR+ T cells with the manufacturing time reduced to 2 weeks.
In the pre-clinical setting, the time to administration of third generation Sleeping Beauty CAR+ T cells co-expressing a membrane-bound version of IL-15 (mbIL15) has been reduced to less than two days. This shortened process delivers genetically modified T cells with superior proliferative potential. Data presented at the 58th American Society of Hematology (ASH) (Free ASH Whitepaper) Annual Meeting in December 2016, supported by an earlier publication in the Proceedings of the National Academy of Sciences, revealed promising results:

Incyte and Calithera Biosciences Announce Global Collaboration to Develop and Commercialize CB-1158, a First-in-class, Small Molecule Arginase Inhibitor

On January 30, 2019 Incyte Corporation (NASDAQ:INCY) and Calithera Biosciences, Inc. (NASDAQ:CALA) reported the companies have entered into a global collaboration and license agreement for the research, development and commercialization of Calithera’s first-in-class, small molecule arginase inhibitor CB-1158 in hematology and oncology (Press release, Calithera Biosciences, JAN 30, 2017, View Source [SID1234535251]). CB-1158 is currently being studied in a monotherapy dose escalation trial and additional studies are expected to evaluate CB-1158 in combination with immuno-oncology agents, including anti-PD-1 therapy.

"Arginase-expressing tumor-infiltrating myeloid cells have been shown to play an important role in orchestrating the immune suppressive microenvironment in cancer; but, to date, therapeutic targeting of the arginase enzyme has remained elusive," said Reid Huber, Ph.D., Incyte’s Chief Scientific Officer. "The addition of this first-in-class, small molecule arginase inhibitor, CB-1158, to our portfolio expands our innovative immuno-oncology pipeline and allows us to continue to advance our mission of discovering and developing immune-active combination therapies to treat patients with cancer."

"In this strategic partnership with Incyte, CB-1158 is expected to be evaluated in multiple trials of novel therapeutic combinations, accelerating its development across hematological and oncology indications," said Susan Molineaux, Ph.D., Calithera’s Chief Executive Officer. Terms of the Collaboration Under the terms of the collaboration and license agreement, Calithera will receive an up-front payment of $45 million from Incyte.

In addition, Incyte will make an equity investment in Calithera of $8 million through the purchase of shares at a price of $4.65 per share. Incyte will receive worldwide rights to develop and commercialize CB-1158 in hematology and oncology and Calithera will retain certain rights to research, develop and commercialize certain other arginase inhibitors in certain orphan indications.

Incyte and Calithera will jointly conduct and co-fund development of CB-1158, with Incyte leading global development activities. Incyte will fund 70 percent of global development and Calithera will be responsible for the remaining 30 percent. In the event of regulatory approvals and commercialization of CB-1158, Incyte and Calithera will share in any future U.S. profits and losses (receiving 60 percent and 40 percent, respectively) and Calithera will be eligible to receive over $430 million in potential development, regulatory and commercialization milestones from Incyte. Per the terms of the agreement, Calithera will have the right to co-detail CB-1158 in the U.S. and also be eligible to receive from Incyte tiered royalties based on future ex-U.S. sales, with rates ranging from low-to-mid double-digits.

The agreement also provides that Calithera may choose to opt out of its co-funding obligations. In this scenario, Calithera would no longer be eligible to receive future U.S. profits and losses but would be eligible to receive up to $750 million in potential development, regulatory and commercialization milestones from Incyte and, if the product is approved and commercialized, also be eligible to receive reimbursement based on previous development expenditures incurred by Calithera and tiered royalty payments on future global sales of CB-1158, with rates ranging from low-to-mid double-digits. The transaction is expected to close in the first quarter of 2017, subject to customary closing conditions.

Conference Call and Webcast Information

Calithera will host a conference call today to discuss this collaboration at 8:30 a.m. ET, 5:30 a.m. PT. Participants may access the call by dialing (855)783-2599 (domestic) or (631)485-4877 (international) and referencing conference ID 58716954. The conference call will also be available by webcast in the Investor Relations page of Calithera’s website, www.calithera.com. The archived webcast will remain available for replay for 30 days.

About Arginase

Arginase is an enzyme produced by immunosuppressive myeloid cells, including myeloid-derived suppressor cells (MDSCs) and neutrophils, which prevents T-cell and natural killer (NK) cell activation in tumors. Arginase exerts its immunosuppressive effect by depleting the amino acid arginine in the tumor microenvironment which subsequently prevents activation and proliferation of the immune system’s cytotoxic T-cells and NK-cells. Inhibition of arginase activity reverses this immunosuppressive block and restores T-cell function. In preclinical models, arginase inhibition has been shown to enhance anti-tumor immunity and inhibit tumor growth.

Incyte and Calithera Biosciences Announce Global Collaboration to Develop and Commercialize CB-1158, a First-in-class, Small Molecule Arginase Inhibitor

On January 30, 2017 Incyte Corporation (NASDAQ:INCY) and Calithera Biosciences, Inc. (NASDAQ:CALA) report that the companies have entered into a global collaboration and license agreement for the research, development and commercialization of Calithera’s first-in-class, small molecule arginase inhibitor CB-1158 in hematology and oncology (Press release, Incyte, JAN 30, 2017, View Source;p=irol-newsArticle&ID=2240498 [SID1234517849]). CB-1158 is currently being studied in a monotherapy dose escalation trial and additional studies are expected to evaluate CB-1158 in combination with immuno-oncology agents, including anti-PD-1 therapy.

Terms of the Collaboration
Under the terms of the collaboration and license agreement, Calithera will receive an up-front payment of $45 million from Incyte. In addition, Incyte will make an equity investment in Calithera of $8 million through the purchase of shares at a price of $4.65 per share.

Incyte will receive worldwide rights to develop and commercialize CB-1158 in hematology and oncology and Calithera will retain certain rights to research, develop and commercialize certain other arginase inhibitors in certain orphan indications.

The transaction is expected to close in the first quarter of 2017, subject to customary closing conditions.

Astellas Reports the First Nine Months Financial Results of FY2016

On January 31, 2017 Astellas Pharma Inc. (TSE: 4503, President and CEO: Yoshihiko Hatanaka, "Astellas") reported financial results for three quarters of fiscal year 2016 ending March 31, 2017 ("FY2016") (Press release, Astellas, JAN 30, 2017, View Source [SID1234517620]).

"We achieved many milestones including the acquisition of Ganymed Pharmaceuticals, a Germany-based pharma company, last December. The acquisition of Ganymed will enable Astellas to further expand its oncology pipeline with a late stage antibody program for the treatment of gastroesophageal cancer," said Yoshihiko Hatanaka, President and CEO, Astellas. "We remain committed to creating innovative medical solutions and delivering value for stakeholders including patients, as we reinforce our strategic plan through maximizing the product value, creating innovation and pursuing operational excellence."

Consolidated Financial Results (April 1, 2016 – December 31, 2016) (core basis) (Millions of yen) First nine months of FY2015 First nine months of FY2016 Change (%) Sales 1,065,666 1,005,587 -60,079 (-5.6%) Core operating profit 233,863 241,837 +7,974 (+3.4%) Core profit for the period 169,379 177,189 +7,810 (+4.6%) Basic core earnings per share (yen) 78.16 83.62 +5.46 (+7.0%)

Revenue Highlights for First Nine Months

Sales in the first nine months of FY2016 decreased by 5.6% compared to those in the corresponding period of the previous fiscal year ("year-on-year") and resulted in 1,005.6 billion yen. Sales decreased due to the impact of foreign exchange as well as the impact of the NHI drug price revision in Japan enforced in April 2016. On a constant currency basis, however, sales increased by approximately 3% year-on-year.

In terms of global products, sales of XTANDI grew while sales of overall OAB treatments Vesicare (solifenacin succinate) and Betanis / Myrbetriq / BETMIGA decreased due to the impact of foreign exchange. Prograf (tacrolimus) sales also decreased. < Sales by Region1 >

Sales in Japan decreased by 4.2% year-on-year to 380.1 billion yen. Sales in the Japanese market decreased by 7.2% year-on-year to 358.2 billion yen mainly due to the impact of the NHI drug price revision. There was growth in sales of products including overall OAB treatments (Vesicare and Betanis ), Celecox (celecoxib), Symbicort (budesonide and formoterol fumarate dihydrate) and Suglat (ipragliflozin). Sales of XTANDI decreased due to the impact of the NHI drug price revision. Sales of vaccines declined due to the continued impact of shipping restraints by the manufacturer in FY2015 (shipments of some of the products have 1 Based on location of sellers 3 already recommenced). Revenues were impacted by the decline in sales of products including Lipitor (atorvastatin calcium) and Gaster (famotidine) mainly due to the impact of generics.

Sales in the Americas decreased by 11.6% year-on-year to 308.1 billion yen; however sales on a U.S. dollar basis increased by 0.8% year-on-year to 2,889 million USD. The increase in sales of CRESEMBA (isavuconazonium sulfate) contributed to the sales growth. Sales of products including XTANDI , overall OAB treatments (VESIcare and Myrbetriq ) and Lexiscan (regadenoson) decreased due to the impact of foreign exchange, while the sales of each product on a US dollar basis increased. Sales of Prograf decreased.

EMEA2 saw a 0.6% increase in sales year-on-year to 252.9 billion yen, with growth from XTANDI . Sales on a euro basis increased by 14.6% year-on-year to 2,143 million euros. Sales of overall OAB treatments (Vesicare and BETMIGA ) and Prograf declined due to the impact of foreign exchange.

In Asia and Oceania, sales decreased by 6.3% year-on-year to 64.5 billion yen, while the sales on a constant currency exchange rate basis increased by 9.5%. XTANDI and overall OAB treatments (Vesicare and BETMIGA ) contributed to the revenue growth. Sales of Prograf and Harnal (tamsulosin hydrochloride) declined mainly due to the foreign exchange impact. Other Financial Highlights Based on the transfer of the global dermatology business in April 2016, the sales and expenses of the transferred products were not included in the first nine months of FY2016; however the consideration for the business transfer was recognized as revenue over certain periods. As a result, there were certain positive impacts on sales and profit for the first nine months of FY2016. Latest Strategic Highlights Astellas continues to create sustainable growth over the mid-to long-term through the pursuit of three main strategies – "Maximizing the Product Value," " Creating Innovation" and "Pursuing Operational Excellence." The company achieved multiple 2 EMEA: Europe, the Middle East and Africa 4 accomplishments during the third quarter of FY2016 (October 1, 2016 – December 31, 2016) including the most recent highlights outlined below. Maximizing the Product Value

Continued to maximize the growth of the oncology franchise centered on XTANDI and the OAB franchise comprised of Vesicare and Betanis / Myrbetriq / BETMIGA with new launches across various countries and growth in sales Creating Innovation

Advanced multiple strategic collaborations including: – Completion of acquisition of Ganymed Pharmaceuticals Pursuing Operational Excellence Optimal allocation of resources: – Transfer of commercial rights for Qutenza (capsaicin 8% patch) to Grünenthal in Europe, Middle East and Africa

Continually enhance organization structure: – Outsourcing of facility and equipment management support in Japan, and dissolution of Astellas Business Service Company Limited NOTE: For further information on the results, please refer to the reference documents: Financial Results, Supplementary Documents, Overview of R&D Pipeline and Presentation Material for Information Meeting available on the Astellas website.