OncoCyte and The Wistar Institute Announce Presentation of Lung Data at CHEST 2016 Annual Meeting

On July 27, 2016 OncoCyte Corporation (NYSE MKT:OCX), a developer of novel, non-invasive blood based tests for the early detection of cancer, and The Wistar Institute, an international biomedical research leader in cancer, immunology and infectious diseases, reported that research results for a lung cancer diagnostic test being developed by The Wistar Institute and OncoCyte under a license from Wistar have been accepted for an Original Investigation Slide Presentation at the prestigious American College of Chest Physician’s CHEST 2016 annual meeting, which will be held in Los Angeles this October (Press release, BioTime, JUL 27, 2016, View Source;p=RssLanding&cat=news&id=2188711 [SID:1234514058]).

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The Presentation "A Blood Based Non-Small Cell Lung Cancer Diagnostic" will be presented by Louise Showe, Ph.D., professor of Molecular and Cellular Oncogenesis Program at The Wistar Institute and lead scientist on the study. Dr. Showe will report on results of a study that was conducted at Wistar and analyzed 610 human blood samples. Preliminary study results were announced in April of this year. The study replicated a previous study that was carried out at Wistar, the results of which were presented by Wistar at the American Thoracic Society conference in May of 2015.

OncoCyte must now independently validate the current results in its own follow-up study. In this study the Company will examine samples that it is collecting and will analyze them using its own laboratory facility and equipment. OncoCyte anticipates the validation study will begin in August 2016 and will be completed during the fourth quarter of 2016.

If the validation study is successful, OncoCyte intends to implement its commercialization plans with respect to the lung cancer diagnostic test, including hiring a dedicated sales force, building out its commercial infrastructure, and moving towards completion of and obtaining CLIA certification for its own diagnostic laboratory. The Company plans to launch its lung cancer diagnostic test in the first half of 2017.

"The acceptance of the data for presentation at CHEST is another step in validating our approach to diagnosing lung cancer and bringing it closer to commercialization by OncoCyte," said Dr. Showe.

"CHEST’s acceptance of this presentation on the effectiveness of our non-invasive diagnostic for the early detection of lung cancer is a significant development for OncoCyte and Wistar," commented William Annett, Chief Executive Officer of OncoCyte. "Each year there are 160,000 deaths related to lung cancer, in part because there is no effective test to reliably diagnose lung cancer at an early enough stage. We believe that OncoCyte’s non-invasive lung cancer diagnostic could represent an important step forward for patients, doctors and payers by improving outcomes and lowering costs. We look forward to continuing the next steps in the product development process and to providing additional updates in the coming months."

Results announcement for the second quarter 2016 and half-yearly financial report for the half-year 2016

On July 27, 2016 GSK reported further progress against strategy with strong Q2 performance (Press release, GlaxoSmithKline, JUL 27, 2016, View Source [SID:1234514071]).

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Summary

For GlaxoSmithKline’s full Q2 results announcement, visit: View Source to view full Q2 results announcement (PDF)

Group sales £6.5 billion, +4% CER, with growth across all three businesses
-Pharmaceuticals £3.9 billion, +2%; Vaccines £960 million, +11%; Consumer Healthcare, £1.7 billion, +7%

New product sales £1.05 billion (Q2 2015, £446 million; Q1 2016, £821 million) driven by HIV (Tivicay,Triumeq), Respiratory (Relvar/Breo, Anoro, Incruse, Nucala) and Meningitis vaccines (Bexsero, Menveo)
-New Pharmaceutical product sales represent 23% of total Pharmaceutical sales (Q2 2015: 11%)

– Sales growth of new respiratory products more than offset decline in sales of Seretide/Advair

New product sales and transaction & restructuring benefits drive improved operating leverage and margin delivery across all three businesses
– Incremental cost savings of £0.3 billion in Q2 2016, with total annual cost savings now at £2.3 billion against end 2017 target of £3 billion
– Q2 core operating margins: Pharmaceuticals 35%, Vaccines 28%, Consumer Healthcare 14%

Q2 core earnings per share 24.5p, +16% CER
Q2 total loss per share reflects impact of significant Sterling currency adjustment to valuations of liabilities associated with Consumer Healthcare and HIV businesses
– Sterling forecasts for sales and cash flows increased for majority-owned Consumer Healthcare and HIV businesses
– Sterling forecasts for liabilities attributable to minority interests therefore also increased, resulting in charges of £1.8 billion in Q2 2016

2016 core EPS percentage growth now expected to be 11-12% CER
– If FX rates held at Q2 period end rates estimated impact of +19% on 2016 Sterling core EPS growth

Q2 Net cash inflow from operations of £1.2 billion (Q2 2015: £0.2 billion)
19p dividend declared for Q2. Continue to expect 80p for FY 2016 and 2017
R&D pipeline development continues in core therapy areas:
– EU approval received for Strimvelis first gene-therapy for ADA-SCID
– Four significant filings expected in H2 2016: Closed Triple for COPD, Shingrix vaccine for shingles; Benlysta subcutaneous for lupus; sirukumab for RA
– Novel anti-IL33R monoclonal antibody for severe asthma licensed from Janssen
– First in class ICOS agonist antibody in Oncology enters clinical development

Amgen Reports Second Quarter 2016 Financial Results

On July 27, 2016 Amgen (NASDAQ:AMGN) reported financial results for the second quarter of 2016 (Press release, Amgen, JUL 27, 2016, View Source [SID:1234514077]).

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Key results include:

Revenues increased 6 percent versus the second quarter of 2015 to $5.7 billion.

Product sales grew 5 percent driven by Enbrel (etanercept), Prolia (denosumab), KYPROLIS (carfilzomib) and XGEVA (denosumab).

GAAP earnings per share (EPS) increased 15 percent to $2.47 driven by higher revenues and higher operating margins.

GAAP operating income increased 15 percent to $2,380 million and GAAP operating margin improved by 3.8 percentage points to 43.5 percent.

Non-GAAP EPS increased 11 percent to $2.84 driven by higher revenues and higher operating margins.

Non-GAAP operating income increased 10 percent to $2,812 million and non-GAAP operating margin improved by 2.6 percentage points to 51.4 percent.

2016 total revenues guidance increased to $22.5-$22.8 billion; EPS guidance increased to $9.55-$9.90 on a GAAP basis and $11.10-$11.40 on a non-GAAP basis.

The Company generated $2.5 billion of free cash flow.

“We delivered another strong quarter and are on track to meet or exceed our long-term objectives,” said Robert A. Bradway, chairman and chief executive officer. “We are in the early stages of a new product launch cycle and have several additional pipeline opportunities rapidly nearing regulatory milestones.”

$Millions, except EPS and percentages

Q2’16

Q2’15

YOY Δ

Total Revenues

$ 5,688

$ 5,370

6%

GAAP Operating Income

$ 2,380

$ 2,076

15%

GAAP Net Income

$ 1,870

$ 1,653

13%

GAAP EPS

$ 2.47

$ 2.15

15%

Non-GAAP Operating Income

$ 2,812

$ 2,551

10%

Non-GAAP Net Income

$ 2,146

$ 1,977

9%

Non-GAAP EPS

$ 2.84

$ 2.57

11%

References in this release to “non-GAAP” measures, measures presented “on a non-GAAP basis” and to “free cash flow” (computed by subtracting capital expenditures from operating cash flow) refer to non-GAAP financial measures. Adjustments to the most directly comparable GAAP financial measures and other items are presented on the attached reconciliations.

Product Sales Performance

Total product sales increased 5 percent for the second quarter of 2016 versus the second quarter of 2015. The increase was driven by ENBREL, Prolia, KYPROLIS and XGEVA.

ENBREL sales increased 10 percent driven by net selling price, offset partially by the impact of competition.

Neulasta (pegfilgrastim) sales decreased 1 percent driven by lower unit demand, offset partially by net selling price in the United States (U.S.).

Aranesp (darbepoetin alfa) sales increased 5 percent. Unit demand grew due to a shift by some U.S. dialysis customers from

EPOGEN (epoetin alfa) to Aranesp. Unit demand growth was offset partially by unfavorable changes in inventory and net selling price.

Prolia sales increased 30 percent driven by higher unit demand.

Sensipar/Mimpara (cinacalcet) sales increased 13 percent driven by net selling price and higher unit demand.

XGEVA sales increased 15 percent driven mainly by higher unit demand and, to a lesser extent, net selling price.

EPOGEN sales decreased 33 percent driven by the impact of competition and, to a lesser extent, a shift by some U.S. dialysis customers to Aranesp.

NEUPOGEN (filgrastim) sales decreased 23 percent driven by the impact of competition in the U.S.

KYPROLIS sales increased 45 percent driven by higher unit demand.

Vectibix (panitumumab) sales were flat.

Nplate (romiplostim) sales increased 14 percent driven by higher unit demand.

BLINCYTO (blinatumomab) sales increased 76 percent driven by higher unit demand.

PRODUCT SALES DETAIL BY PRODUCT AND GEOGRAPHIC REGION

$Millions, except percentages

Q2’16
Q2’15
YOY Δ

US
ROW
TOTAL

TOTAL

TOTAL

Enbrel

$1,423
$61
$1,484

$1,348

10%

Neulasta

962
187
1,149

1,158

(1%)

Aranesp

260
244
504

479

5%

Prolia

286
155
441

340

30%

Sensipar / Mimpara

303
86
389

344

13%

XGEVA

275
106
381

331

15%

EPOGEN

331
0
331

491

(33%)

NEUPOGEN

141
55
196

256

(23%)

KYPROLIS

142
30
172

119

45%

Vectibix

52
108
160

160

0%

Nplate

84
58
142

125

14%

BLINCYTO
21
9
30

17

76%

Repatha
20
7
27

0

*

Other**

17
51
68

57

19%

Total product sales

$4,317
$1,157
$5,474

$5,225

5%

* Not meaningful

** Other includes MN Pharma, Bergamo, IMLYGICand Corlanor

Operating Expense, Operating Margin and Tax Rate Analysis

On a GAAP basis:

Cost of Sales margin improved by 1.6 percentage points driven primarily by manufacturing efficiencies and higher net selling price. Research & Development (R&D) expenses decreased 7 percent driven primarily by transformation and process improvement efforts and lower spending required to support certain later-stage clinical programs. Selling, General & Administrative (SG&A) expenses increased 11 percent driven primarily by investments in new product launches. Total Operating Expenses were flat year-over-year, with all expense categories reflecting savings from our transformation and process improvement efforts.

Operating Margin improved by 3.8 percentage points to 43.5 percent.

Tax Rate decreased by 2.0 percentage points, reflecting discrete benefits associated with tax incentives and the adoption of Accounting Standards Update 2016-09, Improvements to Employee Share-Based Payment Accounting (ASU 2016-09), offset partially by unfavorable changes in the geographic mix of earnings.
On a non-GAAP basis:

Cost of Sales margin improved by 1.6 percentage points driven primarily by manufacturing efficiencies and higher net selling price. R&D expenses decreased 4 percent driven primarily by transformation and process improvement efforts and lower spending required to support certain later-stage clinical programs. SG&A expenses increased 13 percent driven primarily by investments in new product launches. Total Operating Expenses increased 2 percent, with all expense categories reflecting savings from our transformation and process improvement efforts.

Operating Margin improved by 2.6 percentage points to 51.4 percent.

Tax Rate decreased by 1.4 percentage points, reflecting discrete benefits associated with tax incentives and the adoption of ASU 2016-09, offset partially by unfavorable changes in the geographic mix of earnings.

$Millions, except percentages

GAAP

Non-GAAP

Q2’16
Q2’15
YOY Δ

Q2’16
Q2’15
YOY Δ

Cost of Sales
$1,050
$1,089
(4%)

$738
$789
(6%)

% of product sales
19.2%
20.8%
(1.6) pts

13.5%
15.1%
(1.6) pts

Research & Development
$900
$964
(7%)

$878
$918
(4%)

% of product sales
16.4%
18.4%
(2.0) pts

16.0%
17.6%
(1.6) pts

Selling, General & Administrative
$1,292
$1,160
11%

$1,260
$1,112
13%

% of product sales
23.6%
22.2%
1.4 pts

23.0%
21.3%
1.7 pts

Other
$66
$81
(19%)

$0
$0
0%

TOTAL Operating Expenses
$3,308
$3,294
0%

$2,876
$2,819
2%

Operating Margin

operating income as a % of product sales
43.5%
39.7%
3.8 pts

51.4%
48.8%
2.6 pts

Tax Rate
15.2%
17.2%
(2.0) pts

18.6%
20.0%
(1.4) pts

pts: percentage points

Cash Flow and Balance Sheet

The Company generated $2.5 billion of free cash flow in the second quarter of 2016 versus $3.2 billion in the second quarter of 2015. The decrease was driven by the timing of tax payments and the termination of foreign exchange forward contracts in the second quarter of 2015.

The Company’s third quarter 2016 dividend of $1.00 per share declared on July 22, 2016, will be paid on Sept. 8, 2016, to all stockholders of record as of Aug. 17, 2016.
During the second quarter, the Company repurchased 3.9 million shares of common stock at a total cost of $591 million. At the end of the second quarter, the Company had $3.6 billion remaining under its stock repurchase authorization.

$Billions, except shares

Q2’16
Q2’15
YOY Δ

Operating Cash Flow
$2.7
$3.3
($0.6)

Capital Expenditures
0.2
0.1
0.1

Free Cash Flow
2.5
3.2
(0.7)

Dividends Paid
0.8
0.6
0.2

Share Repurchase
0.6
0.5
0.1

Avg. Diluted Shares (millions)
756
768
(12)

Cash and Investments
35.0
30.0
5.0

Debt Outstanding
33.2
32.0
1.2

Stockholders’ Equity
30.1
27.5
2.6

Note: Numbers may not add due to rounding

2016 Guidance

For the full year 2016, the Company now expects:

Total revenues in the range of $22.5 billion to $22.8 billion.
Previously, the Company expected total revenues in the range of $22.2 billion to $22.6 billion.

On a GAAP basis, EPS in the range of $9.55 to $9.90 and a tax rate in the range of 16.5 percent to 17.5 percent.

Previously, the Company expected GAAP EPS in the range of $9.34 to $9.74. Tax rate guidance is unchanged.

On a non-GAAP basis, EPS in the range of $11.10 to $11.40 and a tax rate in the range of 19.0 percent to 20.0 percent.

Previously, the Company expected non-GAAP EPS in the range of $10.85 to $11.20. Tax rate guidance is unchanged.

Capital expenditures to be approximately $700 million.

SECOND QUARTER PRODUCT AND PIPELINE UPDATE
Key development milestones:

Clinical Program
Indication
Milestone

Repatha (evolocumab)
Hyperlipidemia
Phase 3 coronary imaging data expected H2 2016
Phase 3 CV outcomes data expected Q1 2017*

KYPROLIS
Newly diagnosed multiple myeloma
Phase 3 data expected H2 2016*

BLINCYTO
Pediatric Ph- R/R
B-cell precursor ALL
FDA priority review

Parsabiv (etelcalcetide)†
Secondary hyperparathyroidism
Global regulatory reviews

XGEVA
Prevention of SREs in multiple myeloma
Phase 3 data expected H2 2016*

Romosozumab
Postmenopausal osteoporosis
US regulatory review
Global regulatory submissions

Erenumab (AMG 334)
Migraine Prophylaxis
Phase 3 episodic migraine data expected H2 2016
ABP 215

(biosimilar bevacizumab)
Oncology
Global regulatory submissions
ABP 501

(biosimilar adalimumab)
Inflammatory diseases
Global regulatory reviews
ABP 980

(biosimilar trastuzumab)
Breast Cancer
Global regulatory submissions

*Event driven study; †Trade name provisionally approved by FDA; CV = cardiovascular; ALL = acute lymphoblastic leukemia

The Company provided the following updates on selected product and pipeline programs:

Repatha

In July, the U.S. Food and Drug Administration (FDA) approved the Repatha Pushtronex system (on-body infusor with prefilled cartridge) for monthly single-dose administration.

Data from a Phase 3 study evaluating the effects of Repatha on atherosclerotic disease as measured by intravascular ultrasound are expected in H2 2016.

Data from an event driven Phase 3 study evaluating the effects of Repatha on cardiovascular outcomes are expected in Q1 2017.

KYPROLIS

In June, the European Commission approved an expanded indication for KYPROLIS, to be used in combination with dexamethasone alone, for adult patients with multiple myeloma who have received at least one prior therapy, based on the ENDEAVOR data.

Data from the event driven Phase 3 CLARION study of KYPROLIS versus bortezomib in newly diagnosed, transplant ineligible multiple myeloma patients is expected in H2 2016.

BLINCYTO

In May, FDA accepted for priority review the supplemental Biologics License Application for BLINCYTO to include new data supporting the treatment of pediatric and adolescent patients with Philadelphia chromosome‑negative relapsed or refractory B-cell precursor acute lymphoblastic leukemia. The Prescription Drug User Fee Act target action date is Sept. 1, 2016.

Romosozumab

In July, a Biologics License Application for romosozumab for the treatment of osteoporosis in postmenopausal women at increased risk for fracture was submitted to FDA.

Erenumab

In June, a global Phase 2 study evaluating the efficacy and safety of erenumab in chronic migraine prevention met its primary endpoint.

ABP 980

In July, the primary analysis was completed for a Phase 3 study evaluating the efficacy and safety of ABP 980 compared with trastuzumab in patients with human epidermal growth factor receptor 2-positive early breast cancer.

Erenumab is developed in collaboration with Novartis
Romosozumab is developed in collaboration with UCB globally, as well as Astellas in Japan

Non-GAAP Financial Measures

In this news release, management has presented its operating results for the second quarters of 2016 and 2015 in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and on a non-GAAP basis. In addition, management has presented its full year 2016 EPS and tax rate guidance in accordance with GAAP and on a non-GAAP basis. These non-GAAP financial measures are computed by excluding certain items related to acquisitions, restructuring and certain other items from the related GAAP financial measures. Reconciliations for these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the news release. Management has also presented Free Cash Flow (FCF), which is a non-GAAP financial measure, for the second quarters of 2016 and 2015. FCF is computed by subtracting capital expenditures from operating cash flow, each as determined in accordance with GAAP.

The Company believes that its presentation of non-GAAP financial measures provides useful supplementary information to and facilitates additional analysis by investors. The Company uses certain non-GAAP financial measures to enhance an investor’s overall understanding of the financial performance and prospects for the future of the Company’s ongoing business activities by facilitating comparisons of results of ongoing business operations among current, past and future periods. The Company believes that FCF provides a further measure of the Company’s liquidity.

The Company uses the non-GAAP financial measures set forth in the news release in connection with its own budgeting and financial planning internally to evaluate the performance of the business, including to allocate resources and to evaluate results relative to incentive compensation targets. The non-GAAP financial measures are in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

Amgen Reports Second Quarter 2016 Financial Results

On July 27, 2016 Amgen (NASDAQ:AMGN) reported financial results for the second quarter of 2016 (Press release, Amgen, JUL 27, 2016, View Source [SID:1234514077]).

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Key results include:

Revenues increased 6 percent versus the second quarter of 2015 to $5.7 billion.

Product sales grew 5 percent driven by Enbrel (etanercept), Prolia (denosumab), KYPROLIS (carfilzomib) and XGEVA (denosumab).

GAAP earnings per share (EPS) increased 15 percent to $2.47 driven by higher revenues and higher operating margins.

GAAP operating income increased 15 percent to $2,380 million and GAAP operating margin improved by 3.8 percentage points to 43.5 percent.

Non-GAAP EPS increased 11 percent to $2.84 driven by higher revenues and higher operating margins.

Non-GAAP operating income increased 10 percent to $2,812 million and non-GAAP operating margin improved by 2.6 percentage points to 51.4 percent.

2016 total revenues guidance increased to $22.5-$22.8 billion; EPS guidance increased to $9.55-$9.90 on a GAAP basis and $11.10-$11.40 on a non-GAAP basis.

The Company generated $2.5 billion of free cash flow.

“We delivered another strong quarter and are on track to meet or exceed our long-term objectives,” said Robert A. Bradway, chairman and chief executive officer. “We are in the early stages of a new product launch cycle and have several additional pipeline opportunities rapidly nearing regulatory milestones.”

$Millions, except EPS and percentages

Q2’16

Q2’15

YOY Δ

Total Revenues

$ 5,688

$ 5,370

6%

GAAP Operating Income

$ 2,380

$ 2,076

15%

GAAP Net Income

$ 1,870

$ 1,653

13%

GAAP EPS

$ 2.47

$ 2.15

15%

Non-GAAP Operating Income

$ 2,812

$ 2,551

10%

Non-GAAP Net Income

$ 2,146

$ 1,977

9%

Non-GAAP EPS

$ 2.84

$ 2.57

11%

References in this release to “non-GAAP” measures, measures presented “on a non-GAAP basis” and to “free cash flow” (computed by subtracting capital expenditures from operating cash flow) refer to non-GAAP financial measures. Adjustments to the most directly comparable GAAP financial measures and other items are presented on the attached reconciliations.

Product Sales Performance

Total product sales increased 5 percent for the second quarter of 2016 versus the second quarter of 2015. The increase was driven by ENBREL, Prolia, KYPROLIS and XGEVA.

ENBREL sales increased 10 percent driven by net selling price, offset partially by the impact of competition.

Neulasta (pegfilgrastim) sales decreased 1 percent driven by lower unit demand, offset partially by net selling price in the United States (U.S.).

Aranesp (darbepoetin alfa) sales increased 5 percent. Unit demand grew due to a shift by some U.S. dialysis customers from

EPOGEN (epoetin alfa) to Aranesp. Unit demand growth was offset partially by unfavorable changes in inventory and net selling price.

Prolia sales increased 30 percent driven by higher unit demand.

Sensipar/Mimpara (cinacalcet) sales increased 13 percent driven by net selling price and higher unit demand.

XGEVA sales increased 15 percent driven mainly by higher unit demand and, to a lesser extent, net selling price.

EPOGEN sales decreased 33 percent driven by the impact of competition and, to a lesser extent, a shift by some U.S. dialysis customers to Aranesp.

NEUPOGEN (filgrastim) sales decreased 23 percent driven by the impact of competition in the U.S.

KYPROLIS sales increased 45 percent driven by higher unit demand.

Vectibix (panitumumab) sales were flat.

Nplate (romiplostim) sales increased 14 percent driven by higher unit demand.

BLINCYTO (blinatumomab) sales increased 76 percent driven by higher unit demand.

PRODUCT SALES DETAIL BY PRODUCT AND GEOGRAPHIC REGION

$Millions, except percentages

Q2’16
Q2’15
YOY Δ

US
ROW
TOTAL

TOTAL

TOTAL

Enbrel

$1,423
$61
$1,484

$1,348

10%

Neulasta

962
187
1,149

1,158

(1%)

Aranesp

260
244
504

479

5%

Prolia

286
155
441

340

30%

Sensipar / Mimpara

303
86
389

344

13%

XGEVA

275
106
381

331

15%

EPOGEN

331
0
331

491

(33%)

NEUPOGEN

141
55
196

256

(23%)

KYPROLIS

142
30
172

119

45%

Vectibix

52
108
160

160

0%

Nplate

84
58
142

125

14%

BLINCYTO
21
9
30

17

76%

Repatha
20
7
27

0

*

Other**

17
51
68

57

19%

Total product sales

$4,317
$1,157
$5,474

$5,225

5%

* Not meaningful

** Other includes MN Pharma, Bergamo, IMLYGICand Corlanor

Operating Expense, Operating Margin and Tax Rate Analysis

On a GAAP basis:

Cost of Sales margin improved by 1.6 percentage points driven primarily by manufacturing efficiencies and higher net selling price. Research & Development (R&D) expenses decreased 7 percent driven primarily by transformation and process improvement efforts and lower spending required to support certain later-stage clinical programs. Selling, General & Administrative (SG&A) expenses increased 11 percent driven primarily by investments in new product launches. Total Operating Expenses were flat year-over-year, with all expense categories reflecting savings from our transformation and process improvement efforts.

Operating Margin improved by 3.8 percentage points to 43.5 percent.

Tax Rate decreased by 2.0 percentage points, reflecting discrete benefits associated with tax incentives and the adoption of Accounting Standards Update 2016-09, Improvements to Employee Share-Based Payment Accounting (ASU 2016-09), offset partially by unfavorable changes in the geographic mix of earnings.
On a non-GAAP basis:

Cost of Sales margin improved by 1.6 percentage points driven primarily by manufacturing efficiencies and higher net selling price. R&D expenses decreased 4 percent driven primarily by transformation and process improvement efforts and lower spending required to support certain later-stage clinical programs. SG&A expenses increased 13 percent driven primarily by investments in new product launches. Total Operating Expenses increased 2 percent, with all expense categories reflecting savings from our transformation and process improvement efforts.

Operating Margin improved by 2.6 percentage points to 51.4 percent.

Tax Rate decreased by 1.4 percentage points, reflecting discrete benefits associated with tax incentives and the adoption of ASU 2016-09, offset partially by unfavorable changes in the geographic mix of earnings.

$Millions, except percentages

GAAP

Non-GAAP

Q2’16
Q2’15
YOY Δ

Q2’16
Q2’15
YOY Δ

Cost of Sales
$1,050
$1,089
(4%)

$738
$789
(6%)

% of product sales
19.2%
20.8%
(1.6) pts

13.5%
15.1%
(1.6) pts

Research & Development
$900
$964
(7%)

$878
$918
(4%)

% of product sales
16.4%
18.4%
(2.0) pts

16.0%
17.6%
(1.6) pts

Selling, General & Administrative
$1,292
$1,160
11%

$1,260
$1,112
13%

% of product sales
23.6%
22.2%
1.4 pts

23.0%
21.3%
1.7 pts

Other
$66
$81
(19%)

$0
$0
0%

TOTAL Operating Expenses
$3,308
$3,294
0%

$2,876
$2,819
2%

Operating Margin

operating income as a % of product sales
43.5%
39.7%
3.8 pts

51.4%
48.8%
2.6 pts

Tax Rate
15.2%
17.2%
(2.0) pts

18.6%
20.0%
(1.4) pts

pts: percentage points

Cash Flow and Balance Sheet

The Company generated $2.5 billion of free cash flow in the second quarter of 2016 versus $3.2 billion in the second quarter of 2015. The decrease was driven by the timing of tax payments and the termination of foreign exchange forward contracts in the second quarter of 2015.

The Company’s third quarter 2016 dividend of $1.00 per share declared on July 22, 2016, will be paid on Sept. 8, 2016, to all stockholders of record as of Aug. 17, 2016.
During the second quarter, the Company repurchased 3.9 million shares of common stock at a total cost of $591 million. At the end of the second quarter, the Company had $3.6 billion remaining under its stock repurchase authorization.

$Billions, except shares

Q2’16
Q2’15
YOY Δ

Operating Cash Flow
$2.7
$3.3
($0.6)

Capital Expenditures
0.2
0.1
0.1

Free Cash Flow
2.5
3.2
(0.7)

Dividends Paid
0.8
0.6
0.2

Share Repurchase
0.6
0.5
0.1

Avg. Diluted Shares (millions)
756
768
(12)

Cash and Investments
35.0
30.0
5.0

Debt Outstanding
33.2
32.0
1.2

Stockholders’ Equity
30.1
27.5
2.6

Note: Numbers may not add due to rounding

2016 Guidance

For the full year 2016, the Company now expects:

Total revenues in the range of $22.5 billion to $22.8 billion.
Previously, the Company expected total revenues in the range of $22.2 billion to $22.6 billion.

On a GAAP basis, EPS in the range of $9.55 to $9.90 and a tax rate in the range of 16.5 percent to 17.5 percent.

Previously, the Company expected GAAP EPS in the range of $9.34 to $9.74. Tax rate guidance is unchanged.

On a non-GAAP basis, EPS in the range of $11.10 to $11.40 and a tax rate in the range of 19.0 percent to 20.0 percent.

Previously, the Company expected non-GAAP EPS in the range of $10.85 to $11.20. Tax rate guidance is unchanged.

Capital expenditures to be approximately $700 million.

SECOND QUARTER PRODUCT AND PIPELINE UPDATE
Key development milestones:

Clinical Program
Indication
Milestone

Repatha (evolocumab)
Hyperlipidemia
Phase 3 coronary imaging data expected H2 2016
Phase 3 CV outcomes data expected Q1 2017*

KYPROLIS
Newly diagnosed multiple myeloma
Phase 3 data expected H2 2016*

BLINCYTO
Pediatric Ph- R/R
B-cell precursor ALL
FDA priority review

Parsabiv (etelcalcetide)†
Secondary hyperparathyroidism
Global regulatory reviews

XGEVA
Prevention of SREs in multiple myeloma
Phase 3 data expected H2 2016*

Romosozumab
Postmenopausal osteoporosis
US regulatory review
Global regulatory submissions

Erenumab (AMG 334)
Migraine Prophylaxis
Phase 3 episodic migraine data expected H2 2016
ABP 215

(biosimilar bevacizumab)
Oncology
Global regulatory submissions
ABP 501

(biosimilar adalimumab)
Inflammatory diseases
Global regulatory reviews
ABP 980

(biosimilar trastuzumab)
Breast Cancer
Global regulatory submissions

*Event driven study; †Trade name provisionally approved by FDA; CV = cardiovascular; ALL = acute lymphoblastic leukemia

The Company provided the following updates on selected product and pipeline programs:

Repatha

In July, the U.S. Food and Drug Administration (FDA) approved the Repatha Pushtronex system (on-body infusor with prefilled cartridge) for monthly single-dose administration.

Data from a Phase 3 study evaluating the effects of Repatha on atherosclerotic disease as measured by intravascular ultrasound are expected in H2 2016.

Data from an event driven Phase 3 study evaluating the effects of Repatha on cardiovascular outcomes are expected in Q1 2017.

KYPROLIS

In June, the European Commission approved an expanded indication for KYPROLIS, to be used in combination with dexamethasone alone, for adult patients with multiple myeloma who have received at least one prior therapy, based on the ENDEAVOR data.

Data from the event driven Phase 3 CLARION study of KYPROLIS versus bortezomib in newly diagnosed, transplant ineligible multiple myeloma patients is expected in H2 2016.

BLINCYTO

In May, FDA accepted for priority review the supplemental Biologics License Application for BLINCYTO to include new data supporting the treatment of pediatric and adolescent patients with Philadelphia chromosome‑negative relapsed or refractory B-cell precursor acute lymphoblastic leukemia. The Prescription Drug User Fee Act target action date is Sept. 1, 2016.

Romosozumab

In July, a Biologics License Application for romosozumab for the treatment of osteoporosis in postmenopausal women at increased risk for fracture was submitted to FDA.

Erenumab

In June, a global Phase 2 study evaluating the efficacy and safety of erenumab in chronic migraine prevention met its primary endpoint.

ABP 980

In July, the primary analysis was completed for a Phase 3 study evaluating the efficacy and safety of ABP 980 compared with trastuzumab in patients with human epidermal growth factor receptor 2-positive early breast cancer.

Erenumab is developed in collaboration with Novartis
Romosozumab is developed in collaboration with UCB globally, as well as Astellas in Japan

Non-GAAP Financial Measures

In this news release, management has presented its operating results for the second quarters of 2016 and 2015 in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and on a non-GAAP basis. In addition, management has presented its full year 2016 EPS and tax rate guidance in accordance with GAAP and on a non-GAAP basis. These non-GAAP financial measures are computed by excluding certain items related to acquisitions, restructuring and certain other items from the related GAAP financial measures. Reconciliations for these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the news release. Management has also presented Free Cash Flow (FCF), which is a non-GAAP financial measure, for the second quarters of 2016 and 2015. FCF is computed by subtracting capital expenditures from operating cash flow, each as determined in accordance with GAAP.

The Company believes that its presentation of non-GAAP financial measures provides useful supplementary information to and facilitates additional analysis by investors. The Company uses certain non-GAAP financial measures to enhance an investor’s overall understanding of the financial performance and prospects for the future of the Company’s ongoing business activities by facilitating comparisons of results of ongoing business operations among current, past and future periods. The Company believes that FCF provides a further measure of the Company’s liquidity.

The Company uses the non-GAAP financial measures set forth in the news release in connection with its own budgeting and financial planning internally to evaluate the performance of the business, including to allocate resources and to evaluate results relative to incentive compensation targets. The non-GAAP financial measures are in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

Amgen Reports Second Quarter 2016 Financial Results

On July 27, 2016 Amgen (NASDAQ:AMGN) reported financial results for the second quarter of 2016 (Press release, Amgen, JUL 27, 2016, View Source [SID:1234514077]).

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Key results include:

Revenues increased 6 percent versus the second quarter of 2015 to $5.7 billion.

Product sales grew 5 percent driven by Enbrel (etanercept), Prolia (denosumab), KYPROLIS (carfilzomib) and XGEVA (denosumab).

GAAP earnings per share (EPS) increased 15 percent to $2.47 driven by higher revenues and higher operating margins.

GAAP operating income increased 15 percent to $2,380 million and GAAP operating margin improved by 3.8 percentage points to 43.5 percent.

Non-GAAP EPS increased 11 percent to $2.84 driven by higher revenues and higher operating margins.

Non-GAAP operating income increased 10 percent to $2,812 million and non-GAAP operating margin improved by 2.6 percentage points to 51.4 percent.

2016 total revenues guidance increased to $22.5-$22.8 billion; EPS guidance increased to $9.55-$9.90 on a GAAP basis and $11.10-$11.40 on a non-GAAP basis.

The Company generated $2.5 billion of free cash flow.

“We delivered another strong quarter and are on track to meet or exceed our long-term objectives,” said Robert A. Bradway, chairman and chief executive officer. “We are in the early stages of a new product launch cycle and have several additional pipeline opportunities rapidly nearing regulatory milestones.”

$Millions, except EPS and percentages

Q2’16

Q2’15

YOY Δ

Total Revenues

$ 5,688

$ 5,370

6%

GAAP Operating Income

$ 2,380

$ 2,076

15%

GAAP Net Income

$ 1,870

$ 1,653

13%

GAAP EPS

$ 2.47

$ 2.15

15%

Non-GAAP Operating Income

$ 2,812

$ 2,551

10%

Non-GAAP Net Income

$ 2,146

$ 1,977

9%

Non-GAAP EPS

$ 2.84

$ 2.57

11%

References in this release to “non-GAAP” measures, measures presented “on a non-GAAP basis” and to “free cash flow” (computed by subtracting capital expenditures from operating cash flow) refer to non-GAAP financial measures. Adjustments to the most directly comparable GAAP financial measures and other items are presented on the attached reconciliations.

Product Sales Performance

Total product sales increased 5 percent for the second quarter of 2016 versus the second quarter of 2015. The increase was driven by ENBREL, Prolia, KYPROLIS and XGEVA.

ENBREL sales increased 10 percent driven by net selling price, offset partially by the impact of competition.

Neulasta (pegfilgrastim) sales decreased 1 percent driven by lower unit demand, offset partially by net selling price in the United States (U.S.).

Aranesp (darbepoetin alfa) sales increased 5 percent. Unit demand grew due to a shift by some U.S. dialysis customers from

EPOGEN (epoetin alfa) to Aranesp. Unit demand growth was offset partially by unfavorable changes in inventory and net selling price.

Prolia sales increased 30 percent driven by higher unit demand.

Sensipar/Mimpara (cinacalcet) sales increased 13 percent driven by net selling price and higher unit demand.

XGEVA sales increased 15 percent driven mainly by higher unit demand and, to a lesser extent, net selling price.

EPOGEN sales decreased 33 percent driven by the impact of competition and, to a lesser extent, a shift by some U.S. dialysis customers to Aranesp.

NEUPOGEN (filgrastim) sales decreased 23 percent driven by the impact of competition in the U.S.

KYPROLIS sales increased 45 percent driven by higher unit demand.

Vectibix (panitumumab) sales were flat.

Nplate (romiplostim) sales increased 14 percent driven by higher unit demand.

BLINCYTO (blinatumomab) sales increased 76 percent driven by higher unit demand.

PRODUCT SALES DETAIL BY PRODUCT AND GEOGRAPHIC REGION

$Millions, except percentages

Q2’16
Q2’15
YOY Δ

US
ROW
TOTAL

TOTAL

TOTAL

Enbrel

$1,423
$61
$1,484

$1,348

10%

Neulasta

962
187
1,149

1,158

(1%)

Aranesp

260
244
504

479

5%

Prolia

286
155
441

340

30%

Sensipar / Mimpara

303
86
389

344

13%

XGEVA

275
106
381

331

15%

EPOGEN

331
0
331

491

(33%)

NEUPOGEN

141
55
196

256

(23%)

KYPROLIS

142
30
172

119

45%

Vectibix

52
108
160

160

0%

Nplate

84
58
142

125

14%

BLINCYTO
21
9
30

17

76%

Repatha
20
7
27

0

*

Other**

17
51
68

57

19%

Total product sales

$4,317
$1,157
$5,474

$5,225

5%

* Not meaningful

** Other includes MN Pharma, Bergamo, IMLYGICand Corlanor

Operating Expense, Operating Margin and Tax Rate Analysis

On a GAAP basis:

Cost of Sales margin improved by 1.6 percentage points driven primarily by manufacturing efficiencies and higher net selling price. Research & Development (R&D) expenses decreased 7 percent driven primarily by transformation and process improvement efforts and lower spending required to support certain later-stage clinical programs. Selling, General & Administrative (SG&A) expenses increased 11 percent driven primarily by investments in new product launches. Total Operating Expenses were flat year-over-year, with all expense categories reflecting savings from our transformation and process improvement efforts.

Operating Margin improved by 3.8 percentage points to 43.5 percent.

Tax Rate decreased by 2.0 percentage points, reflecting discrete benefits associated with tax incentives and the adoption of Accounting Standards Update 2016-09, Improvements to Employee Share-Based Payment Accounting (ASU 2016-09), offset partially by unfavorable changes in the geographic mix of earnings.
On a non-GAAP basis:

Cost of Sales margin improved by 1.6 percentage points driven primarily by manufacturing efficiencies and higher net selling price. R&D expenses decreased 4 percent driven primarily by transformation and process improvement efforts and lower spending required to support certain later-stage clinical programs. SG&A expenses increased 13 percent driven primarily by investments in new product launches. Total Operating Expenses increased 2 percent, with all expense categories reflecting savings from our transformation and process improvement efforts.

Operating Margin improved by 2.6 percentage points to 51.4 percent.

Tax Rate decreased by 1.4 percentage points, reflecting discrete benefits associated with tax incentives and the adoption of ASU 2016-09, offset partially by unfavorable changes in the geographic mix of earnings.

$Millions, except percentages

GAAP

Non-GAAP

Q2’16
Q2’15
YOY Δ

Q2’16
Q2’15
YOY Δ

Cost of Sales
$1,050
$1,089
(4%)

$738
$789
(6%)

% of product sales
19.2%
20.8%
(1.6) pts

13.5%
15.1%
(1.6) pts

Research & Development
$900
$964
(7%)

$878
$918
(4%)

% of product sales
16.4%
18.4%
(2.0) pts

16.0%
17.6%
(1.6) pts

Selling, General & Administrative
$1,292
$1,160
11%

$1,260
$1,112
13%

% of product sales
23.6%
22.2%
1.4 pts

23.0%
21.3%
1.7 pts

Other
$66
$81
(19%)

$0
$0
0%

TOTAL Operating Expenses
$3,308
$3,294
0%

$2,876
$2,819
2%

Operating Margin

operating income as a % of product sales
43.5%
39.7%
3.8 pts

51.4%
48.8%
2.6 pts

Tax Rate
15.2%
17.2%
(2.0) pts

18.6%
20.0%
(1.4) pts

pts: percentage points

Cash Flow and Balance Sheet

The Company generated $2.5 billion of free cash flow in the second quarter of 2016 versus $3.2 billion in the second quarter of 2015. The decrease was driven by the timing of tax payments and the termination of foreign exchange forward contracts in the second quarter of 2015.

The Company’s third quarter 2016 dividend of $1.00 per share declared on July 22, 2016, will be paid on Sept. 8, 2016, to all stockholders of record as of Aug. 17, 2016.
During the second quarter, the Company repurchased 3.9 million shares of common stock at a total cost of $591 million. At the end of the second quarter, the Company had $3.6 billion remaining under its stock repurchase authorization.

$Billions, except shares

Q2’16
Q2’15
YOY Δ

Operating Cash Flow
$2.7
$3.3
($0.6)

Capital Expenditures
0.2
0.1
0.1

Free Cash Flow
2.5
3.2
(0.7)

Dividends Paid
0.8
0.6
0.2

Share Repurchase
0.6
0.5
0.1

Avg. Diluted Shares (millions)
756
768
(12)

Cash and Investments
35.0
30.0
5.0

Debt Outstanding
33.2
32.0
1.2

Stockholders’ Equity
30.1
27.5
2.6

Note: Numbers may not add due to rounding

2016 Guidance

For the full year 2016, the Company now expects:

Total revenues in the range of $22.5 billion to $22.8 billion.
Previously, the Company expected total revenues in the range of $22.2 billion to $22.6 billion.

On a GAAP basis, EPS in the range of $9.55 to $9.90 and a tax rate in the range of 16.5 percent to 17.5 percent.

Previously, the Company expected GAAP EPS in the range of $9.34 to $9.74. Tax rate guidance is unchanged.

On a non-GAAP basis, EPS in the range of $11.10 to $11.40 and a tax rate in the range of 19.0 percent to 20.0 percent.

Previously, the Company expected non-GAAP EPS in the range of $10.85 to $11.20. Tax rate guidance is unchanged.

Capital expenditures to be approximately $700 million.

SECOND QUARTER PRODUCT AND PIPELINE UPDATE
Key development milestones:

Clinical Program
Indication
Milestone

Repatha (evolocumab)
Hyperlipidemia
Phase 3 coronary imaging data expected H2 2016
Phase 3 CV outcomes data expected Q1 2017*

KYPROLIS
Newly diagnosed multiple myeloma
Phase 3 data expected H2 2016*

BLINCYTO
Pediatric Ph- R/R
B-cell precursor ALL
FDA priority review

Parsabiv (etelcalcetide)†
Secondary hyperparathyroidism
Global regulatory reviews

XGEVA
Prevention of SREs in multiple myeloma
Phase 3 data expected H2 2016*

Romosozumab
Postmenopausal osteoporosis
US regulatory review
Global regulatory submissions

Erenumab (AMG 334)
Migraine Prophylaxis
Phase 3 episodic migraine data expected H2 2016
ABP 215

(biosimilar bevacizumab)
Oncology
Global regulatory submissions
ABP 501

(biosimilar adalimumab)
Inflammatory diseases
Global regulatory reviews
ABP 980

(biosimilar trastuzumab)
Breast Cancer
Global regulatory submissions

*Event driven study; †Trade name provisionally approved by FDA; CV = cardiovascular; ALL = acute lymphoblastic leukemia

The Company provided the following updates on selected product and pipeline programs:

Repatha

In July, the U.S. Food and Drug Administration (FDA) approved the Repatha Pushtronex system (on-body infusor with prefilled cartridge) for monthly single-dose administration.

Data from a Phase 3 study evaluating the effects of Repatha on atherosclerotic disease as measured by intravascular ultrasound are expected in H2 2016.

Data from an event driven Phase 3 study evaluating the effects of Repatha on cardiovascular outcomes are expected in Q1 2017.

KYPROLIS

In June, the European Commission approved an expanded indication for KYPROLIS, to be used in combination with dexamethasone alone, for adult patients with multiple myeloma who have received at least one prior therapy, based on the ENDEAVOR data.

Data from the event driven Phase 3 CLARION study of KYPROLIS versus bortezomib in newly diagnosed, transplant ineligible multiple myeloma patients is expected in H2 2016.

BLINCYTO

In May, FDA accepted for priority review the supplemental Biologics License Application for BLINCYTO to include new data supporting the treatment of pediatric and adolescent patients with Philadelphia chromosome‑negative relapsed or refractory B-cell precursor acute lymphoblastic leukemia. The Prescription Drug User Fee Act target action date is Sept. 1, 2016.

Romosozumab

In July, a Biologics License Application for romosozumab for the treatment of osteoporosis in postmenopausal women at increased risk for fracture was submitted to FDA.

Erenumab

In June, a global Phase 2 study evaluating the efficacy and safety of erenumab in chronic migraine prevention met its primary endpoint.

ABP 980

In July, the primary analysis was completed for a Phase 3 study evaluating the efficacy and safety of ABP 980 compared with trastuzumab in patients with human epidermal growth factor receptor 2-positive early breast cancer.

Erenumab is developed in collaboration with Novartis
Romosozumab is developed in collaboration with UCB globally, as well as Astellas in Japan

Non-GAAP Financial Measures

In this news release, management has presented its operating results for the second quarters of 2016 and 2015 in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and on a non-GAAP basis. In addition, management has presented its full year 2016 EPS and tax rate guidance in accordance with GAAP and on a non-GAAP basis. These non-GAAP financial measures are computed by excluding certain items related to acquisitions, restructuring and certain other items from the related GAAP financial measures. Reconciliations for these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the news release. Management has also presented Free Cash Flow (FCF), which is a non-GAAP financial measure, for the second quarters of 2016 and 2015. FCF is computed by subtracting capital expenditures from operating cash flow, each as determined in accordance with GAAP.

The Company believes that its presentation of non-GAAP financial measures provides useful supplementary information to and facilitates additional analysis by investors. The Company uses certain non-GAAP financial measures to enhance an investor’s overall understanding of the financial performance and prospects for the future of the Company’s ongoing business activities by facilitating comparisons of results of ongoing business operations among current, past and future periods. The Company believes that FCF provides a further measure of the Company’s liquidity.

The Company uses the non-GAAP financial measures set forth in the news release in connection with its own budgeting and financial planning internally to evaluate the performance of the business, including to allocate resources and to evaluate results relative to incentive compensation targets. The non-GAAP financial measures are in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.