AMRI Announces First Quarter 2016 Results

On May 10, 2016 AMRI (NASDAQ: AMRI) reported financial and operating results for the first quarter ended March 31, 2016 and provided an update to its outlook for 2016 (Press release, Albany Molecular Research, MAY 10, 2016, View Source [SID:1234512169]).

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Highlights:

First quarter contract revenue of $102.8 million, up 37% from 2015
First quarter royalties of $2.7 million, down 59% from 2015 due to expiration of Allegra royalties in Q2-2015
First quarter adjusted contract margins 27%
First quarter adjusted diluted EPS of $0.07, reflecting a $0.07 decrease in EPS from royalties in the current quarter
First quarter adjusted EBITDA of $13.1 million
Confirms standalone full year 2016 financial guidance

"Adjusted contract margins", "Adjusted diluted EPS", and "Adjusted EBITDA" are Non-GAAP measurements. See discussion under the heading "Non-GAAP Adjustment Items" in this release.
"Our first quarter results fell short of expectations largely due to timing of API revenue, combined with increased R&D investment and higher SG&A," said William S. Marth, AMRI’s president and chief executive officer. "While our API results were lower than we would have liked, we believe the results are transitory and revenue will build through the year based on contractual obligations we have in hand. Additionally, strong performances in our Drug Product and DDS businesses give us confidence in our outlook for the full year 2016.

We have also continued our investment in generics, with multiple co-development programs underway, as exhibited by the increase in annual R&D investment, in line with our guidance. While we are sharing the costs of some of these development programs now, longer term, we will capture revenue through commercial supply and royalty revenue that is expected to more than offset the investment we are making today."

We are excited about the Euticals acquisition and the benefits of adding such a highly regarded company to our team. As we have said before, our strategy is to build off our existing platforms of API, Discovery/Development and Drug Product by expanding our capabilities, both organically and inorganically in areas with high barriers to entry, creating greater sustainable value. The addition of Euticals fits that strategy well and offers compelling strategic benefits that we believe will generate meaningful value for our customers and shareholders longer term."

First Quarter 2016 Results

Total revenue for the first quarter of 2016 was $105.6 million, an increase of 29%, compared to total revenue of $81.8 million reported in the first quarter of 2015.

Total contract revenue for the first quarter of 2016 was $102.8 million, an increase of 37%, compared to total contract revenue of $75.1 million reported in the first quarter of 2015. Adjusted contract margins were 27% for the first quarter of 2016, compared with 23% for the first quarter of 2015, driven largely by the addition of Gadea Pharmaceuticals. Adjusted contract margins exclude purchase accounting depreciation and amortization, purchase accounting inventory adjustments, and share-based compensation expense that are included under U.S. GAAP. For a reconciliation of U.S. GAAP contract margins as reported to adjusted contract margins for the 2016 and 2015 reporting periods, please see Table 1 at the end of press release.

Royalty revenue in the first quarter of 2016 was $2.7 million, a decrease of 59% from $6.7 million in the first quarter of 2015 due primarily to lower royalties on Allegra (fexofenadine) products which ended in the second quarter 2015, based on the expiration of the underlying patents. Royalty revenue for the first quarter of 2016 includes $2.2 million from the net sales of certain amphetamine salts sold by Actavis and royalties from an API sourced from our business in Spain.

Net loss under U.S. GAAP was $(10.1) million, or $(0.29) per basic and diluted share, in the first quarter of 2016, compared to U.S. GAAP net loss of $(2.2) million, or $(0.07) per basic and diluted share for the first quarter of 2015. Net income on an adjusted non-GAAP basis in the first quarter was $2.4 million or $0.07 per diluted share, compared to adjusted net income of $6.4 million or $0.19 per diluted share for 2015.

Adjusted EBITDA in the first quarter of 2015 was $13.1 million, a decrease of $2.5 million or 16% compared to the first quarter 2015. For a reconciliation of U.S. GAAP net income (loss), EBITDA and earnings (loss) per diluted share to adjusted net income, EBITDA and earnings per diluted share for the 2016 and 2015 reporting periods, please see Tables 2 and 3 at the end of this press release.

Segment Results

Active Pharmaceutical Ingredients (API)

Three Months Ended

March 31,
(Unaudited; $ in thousands)

2016

2015

API Royalty Revenue

$ 2,741

$ 2,868
API Contract Revenue

54,702

37,848
API Total Revenue

57,443

40,716

Cost of Contract Revenue

40,921

28,583

Contract Gross Profit, excluding royalties

13,781

9,265
Contract Gross Profit, including royalties

16,522

12,133

Contract Gross Margin, excluding royalties

25.2%

24.5%
Contract Gross Margin, including royalties

28.8%

29.8%

Adjusted Contract Gross Profit, excluding royalties (1)

17,244

9,442
Adjusted Contract Gross Margin, excluding royalties (1)

31.5%

24.9%

Adjusted Contract Gross Profit, including royalties (1)

19,985

12,310
Adjusted Contract Gross Margin, including royalties (1)

34.8%

30.2%

(1) Refer to Table 1 included in this release for the reconciliation of U.S. GAAP contract gross profit and contract gross margin to adjusted contract gross profit and adjusted contract gross margin as a percentage of contract revenue.
API contract revenue for the first quarter of 2016 increased 45% compared to the same period of 2015, primarily due to $20 million of incremental revenue from the acquisition of Gadea Pharmaceuticals in July 2015, offset by lower revenue associated with the Holywell, UK site closure. API adjusted contract margin for the first quarter of 2016 increased 7 percentage points from the first quarter of 2015, driven by the margins realized on Gadea’s revenues. API adjusted profit margin including royalties was 35% for the first quarter of 2016, compared to 30% for the same period in 2015.

Drug Discovery Services (DDS)

Three Months Ended

March 31,
(Unaudited; $ in thousands)

2016

2015

DDS Contract Revenue (1)

$ 23,203

$ 17,873
Cost of Contract Revenue (1)

17,170

13,705
Contract Gross Profit

6,033

4,168
Contract Gross Margin

26.0%

23.3%

Adjusted Contract Gross Profit (2)

6,548

4,324
Adjusted Contract Gross Margin (2)

28.2%

24.2%

(1) A portion of the 2015 amounts were reclassified from DDS to DPM to better align business activities within our reporting segments.
(2) Refer to Table 1 included in this release for the reconciliation of U.S. GAAP contract gross profit and contract gross margin to adjusted contract gross profit and adjusted contract gross margin as a percentage of contract revenue.
Discovery and Development Services (DDS) contract revenue for the first quarter of 2016 increased 30% compared to the first quarter of 2015, primarily due to the additions of Whitehouse Laboratories and SSCI, along with organic growth. DDS adjusted gross margins increased to 28% in the first quarter of 2016, from 24% in the first quarter of 2015, driven by margins realized on Whitehouse Labs and SSCI revenue, and higher capacity utilization resulting from previous cost reduction initiatives.

Drug Product Manufacturing (DPM)

Three Months Ended

March 31,
(Unaudited; $ in thousands)

2016

2015

DPM Contract Revenue (1)

$ 24,933

$ 19,410
Cost of Contract Revenue (1)

21,272

15,851
Contract Gross Profit

3,661

3,559
Contract Gross Margin

14.7%

18.3%

Adjusted Contract Gross Profit (2)

3,972

3,730
Adjusted Contract Gross Margin (2)

15.9%

19.2%

(1) A portion of the 2015 amounts were reclassified from DDS to DPM to better align business activities within our reporting segments.
(2) Refer to Table 1 included in this release for the reconciliation of U.S. GAAP contract gross loss and contract gross margin to adjusted contract gross profit and adjusted contract gross margin as a percentage of contract revenue.
Drug Product Manufacturing contract revenue for the first quarter of 2016 increased 28% compared to the first quarter 2015, reflecting higher commercial manufacturing revenue. Drug Product adjusted contract margins for the first quarter of 2016 decreased 3 percentage points, reflecting higher costs associated with commercial launch preparations at our Burlington facility and planned site maintenance activities at our Albuquerque facility.

Liquidity and Capital Resources

At March 31, 2016, AMRI had cash, cash equivalents and restricted cash of $47.2 million, compared to $52.3 million at December 31, 2015. The decrease in cash and cash equivalents for the quarter ended March 31, 2016 was primarily due to the use of $11.6 million in capital expenditures and $5.8 million of debt paydown, offset by cash generated by operating activities of $11.7 million. At March 31, 2016, total common shares outstanding, net of treasury shares, were 35,708,100.

Financial Outlook

AMRI’s guidance takes into account a number of factors, including expected financial results for 2016, anticipated tax rates and shares outstanding. AMRI’s guidance also excludes any potential impact from the acquisition of Prime European Therapeuticals S.p.A., ("Euticals"), which is expected to close in the third quarter 2016.

AMRI’s estimates for full year 2016 are consistent with estimates previously provided on February 17, 2016:

Full Year 2016 revenue of $465 to $490 million, an increase of 19% at the midpoint, including
DDS revenue growth of over 20% to approximately $104 million
API revenue growth of 27% to approximately $260 million
Drug Product revenue growth of 8% to approximately $105 million
Adjusted contract margin of approximately 30%
Adjusted selling, general and administrative expenses of approximately 15% of revenue
R&D of between $9 and $10 million
Adjusted EBITDA between $91 and $97 million, an increase of 25% at the midpoint
Adjusted diluted EPS is expected to be between $1.00 and $1.10, based on an average fully diluted share count of approximately 37 million shares
Effective tax rate of between 29% and 30%
Capital expenditures of approximately $45 million

CGX1321

Curegenix is developing drug candidates targeting a key stem cell pathway in cancer (Company Web Page, Curegenix, MAY 10, 2016, View Source [SID:1234512167]). Our "first-in-class"/"best-in-class" compound CGX1321 for treating gastrointestinal (GI) cancers has completed all IND-enabling studies . We now seek VC investment to advance CGX1321 into clinical development.

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TK-216

Tokalas’ first lead product candidate, TK-216, is a novel, first-in-class ets-family transcription factor inhibitor that targets the EWS-FLI1 fusion protein (Company Web Page, Tokalas, MAY 10, 2016, View Source [SID:1234512166]). Oncogenic fusion proteins involving ets-family gene translocations are known to cause Ewing sarcoma, the company’s first targeted therapy for high unmet need cancers.

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TK-216 is based on technology developed under the direction of Jeffrey Toretsky, M.D. at Georgetown University and licensed to Tokalas through an academic-private development partnership. IND enabling non-clinical studies of TK-216 have been completed, and Tokalas will initiate Phase 1 clinical testing in patients with advanced Ewing sarcoma in early 2016 at MD Anderson, Memorial Sloan Kettering, and UCLA. Tokalas is exploring expedited registration strategies with both US and European regulatory agencies.
Tokalas is also evaluating the unmet medical need in other cancers that sometimes carry overexpressed or translocated ets-family oncogenes, including prostate cancer, AML, and glioblastoma.

Taiho Pharmaceutical Forms Taiho Ventures to Foster Oncology Biotech Start-ups

On May 10, 2016 Taiho Pharmaceutical Co., Ltd. (TPC), a full-fledged oncology pharmaceutical company headquartered in Tokyo, announced on May 10 that it has established Taiho Ventures, LLC, a strategic corporate venture capital arm of TPC, in California, USA (Press release, Taiho, MAY 10, 2016, View Source [SID:1234512290]).

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Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

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Taiho Ventures will be investing globally in the start-up companies that discover and develop innovative therapeutic products and/or drug-enabling platform technologies that demonstrate a clear potential to benefit cancer patients. With the support of Taiho’s established expertise in the field of oncology product discovery and development, Taiho Ventures will provide financial resources and company outreach to build strategic alliances to help translate novel research and high potential drug candidates into cornerstone products. Initially, Taiho Ventures will make investments from the pooled amount of US$ 50million.

In June 2014, TPC committed to invest US$ 30million in Remiges BioPharma Fund and through Remiges’ well-connected US-Japan cross border investment team, Taiho has been tapping into the US/Europe biotech start-up community to catalyze the company’s R&D. Establishing Taiho Ventures demonstrates our continuous commitment to create long-term relationships with external partners globally with the goal to bring novel cancer therapies to patients and redefine the way the world treats cancer.

Taiho Ventures is a wholly owned subsidiary of Taiho Oncology, Inc.

【Taiho Ventures Overview】
Company Name: Taiho Ventures, LLC
President: Sakae Asanuma
Head Office Location: California, US
Established: April 15, 2016
Business: Venture capital
Investment Scale: US$ 50million
Therapeutic Area of Investment:　Oncology
Geographic Area of Investment:　Globally with focus in U.S., Europe and Japan

CTI BioPharma Reports First Quarter 2016 Financial Results

On May 10, 2016 CTI BioPharma Corp. (NASDAQ and MTA:CTIC) reported financial results for the first quarter ended March 31, 2016 (Press release, CTI BioPharma, MAY 10, 2016, View Source [SID:1234512209]).

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"We continue to believe in the potential of pacritnib to help patients in need and are working to address the clinical hold on the pacritinib program," said James A. Bianco, M.D., President and Chief Executive Officer of CTI BioPharma. "While we work with the FDA to seek to address their recommendations for getting pacritinib off hold, we have made progress in our efforts to support patients who were deriving benefit from pacritinib at the time of the clinical hold by providing pacritinib under a single patient IND program and, separately, to individual patients for "compassionate use" under the FDA’s emergency Expanded Access program. We are pleased that certain investigator-sponsored trials can resume as the agency has removed the clinical hold at their sites."

"We are also preparing for the release of top-line results from the PERSIST-2 Phase 3 clinical trial, which we expect to report in the third quarter of 2016," added Dr. Bianco.

First Quarter and Recent Events

In the first quarter, patient enrollment was completed in the PERSIST-2 Phase 3 clinical trial of pacritinib for the treatment of patients with intermediate and high-risk myelofibrosis. PERSIST-2 is evaluating pacritinib for patients with myelofibrosis whose platelet counts are less than or equal to 100,000 per microliter (≤100,000/μL). In February, the U.S. Food and Drug Administration (FDA) placed a full clinical hold on pacritinib clinical studies, and as such, all patients participating in the PERSIST-2 clinical trial discontinued pacritinib treatment. Although not all patients enrolled were able to reach the primary endpoint evaluation at 24 weeks from randomization prior to the full clinical hold on pacritinib, approximately two thirds of the enrolled patients reached or exceeded the 24-week endpoint evaluation. The Company believes there is sufficient power to reach statistical significance of the primary objectives. Top-line results from the PERSIST-2 Phase 3 trial of pacritinib are expected in the third quarter of 2016.
In March 2016, the FDA expressed interest in allowing patients who were receiving benefit from pacritinib treatment at the time the clinical hold was imposed to submit requests to the FDA to resume pacritinib treatment under a Single Patient IND (SPI) program on a case-by-case basis. The Company has been working with investigators in submitting SPI requests to the FDA. Separately, the FDA has informed clinical investigators that emergency requests may be submitted to the FDA for individual patient Expanded Access to pacritinib. Expanded Access, sometimes called "compassionate use," is the use outside of a clinical trial of an investigational medical product. The Company recently learned that the FDA has released the clinical hold on certain investigator-sponsored trials that were evaluating pacritinib.
In April 2016, researchers presented findings from an investigator-sponsored preclinical study indicating that pacritinib, an inhibitor of JAK2, FLT3, IRAK1 and CSF1R may potentially be effective in reducing survival of myelofibrosis and acute myeloid leukemia (AML) repopulating cells. Further, this study also demonstrated that the combination of pacritinib at low nanomolar concentrations with dasatinib may eliminate self-renewing leukemia stem cells in blast crisis of chronic myeloid leukemia (CML) with minimal toxicity toward normal progenitors. These and other findings were presented at the American Association of Cancer Research (AACR) (Free AACR Whitepaper) Annual Meeting.
First Quarter Financial Results

Total revenues for the first quarter ended March 31, 2016, were $36.5 million compared to $2.7 million for the same period in 2015. The increase in total revenue for the first quarter of 2016 is primarily due to recognition of $32 million in milestone payments related to pacritinib. The Company had previously received a cash advance for these milestone payments in the second quarter of 2015 that was accounted for as long-term debt until the achievement of the associated milestones in the first quarter of 2016. Additionally, net product revenues of PIXUVRI for the first quarter ended March 31, 2016 increased to $1.2 million compared to $0.8 million for the same period in 2015.

GAAP operating income for the first quarter ended March 31, 2016, was $4.1 million compared to GAAP operating loss of $27.5 million for the same period in 2015. Non-GAAP operating income, which excludes non-cash share-based compensation expense, for the first quarter ended March 31, 2016, was $8.0 million compared to the non-GAAP operating loss of $23.1 million for the same period in 2015. The Company’s operating income for the first quarter ended March 31, 2016, as compared an operating loss for the same period in 2015, is primarily due to recognition of $32 million in milestone payments related to pacritinib as mentioned above. Non-cash share-based compensation expense for the first quarter ended March 31, 2016, was $3.8 million compared to $4.3 million for the same period in 2015. For information on CTI BioPharma’s use of this non-GAAP measure and a reconciliation of such measure to GAAP operating loss, see the section below entitled "Non-GAAP Financial Measures."

Net income for the first quarter of 2016 was $3.3 million, or $0.01 per share, compared to a net loss of $28.6 million, or ($0.16) per share, for the same period in 2015.

As of March 31, 2016, cash and cash equivalents totaled $104.6 million, compared to $128.2 million as of December 31, 2015.