On August 9, 2016 QLT Inc. (NASDAQ:QLTI) (TSX:QLT) ("QLT" or the "Company") reported financial results today for the second quarter ended June 30, 2016 (Press release, QLT, AUG 9, 2016, View Source;p=RssLanding&cat=news&id=2194329 [SID:1234514572]). Unless otherwise specified, all amounts are reported in U.S. dollars and in accordance with U.S. GAAP.

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2016 SECOND QUARTER FINANCIAL RESULTS

Operating Expenses/Income

During the second quarter of 2016, research and development ("R&D") expenditures were $2.9 million compared to $3.4 million for the same period in 2015. The $0.5 million (15%) decrease was primarily due to lower stock based compensation, lower salary and overhead costs related to R&D headcount attrition, the foreign exchange impact of the weak Canadian dollar and downsizing of our lease space. Stock-based compensation expense was significantly lower in the current period relative to the prior period due to the impact of the June 2015 accelerated vesting of all outstanding stock options in connection with the investment in and subsequent distribution of the Aralez Shares (defined below) and execution of the InSite Merger Agreement (defined below). The cost decreases described above were partially offset by an increase in costs related to preparatory activities for our planned Phase III pivotal trial for QLT091001.

During the second quarter of 2016, we incurred $3.2 million of consulting and advisory fees related to our exploration of strategic alternatives and pursuit of the merger transaction with Aegerion Pharmaceuticals, Inc. ("Aegerion") described below. In comparison, we incurred $4.7 million of similar costs in 2015 related to our pursuit of a merger transaction with InSite Vision Incorporated ("InSite") and the Aralez Distribution (defined below). The agreement and plan of merger with InSite (the "InSite Merger Agreement") was terminated by InSite on September 15, 2015.

Excluding the strategic consulting and advisory fees discussed above, during the second quarter of 2016, selling, general and administrative ("SG&A") expenditures were $1.3 million compared to $2.4 million for the same period in 2015. The $1.1 million (46%) decrease was primarily related to lower stock-based compensation expense during the period due to the accelerated vesting described above, lower fees paid for director compensation and lower general operating costs related to the downsizing of our lease space. These costs savings were partially offset by a lower amount of overhead being allocated to R&D expense due to R&D headcount attrition.

Other Expenses/Income

On April 5, 2016, QLT effected a distribution of 4,799,619 common shares (the "Aralez Shares") of Aralez Pharmaceuticals Inc. ("Aralez"), which had a fair value of $19.3 million, and $15.0 million of cash to its shareholders of record as of February 16, 2016 (the "Aralez Distribution").

During the three and six months ended June 30, 2016, QLT recognized a $2.3 million fair value gain and $10.7 million fair value loss, respectively, related to the change in the value of the Aralez Shares held by QLT from the February 5, 2016 acquisition date to the April 5, 2016 distribution date.

Operating Loss and Net Loss per Share

The operating loss for the second quarter of 2016 was $7.4 million, compared to $10.7 million for the same period in 2015. As described above under "Operating Expenses/Income", the net $3.3 million change in our operating loss was primarily due to lower strategic consulting and advisory fees, significantly lower stock-based compensation expense and lower overhead costs.

Net loss per common share was $0.10 in the second quarter of 2016, compared to a net loss per common share of $0.21 for the same quarter in 2015. The change in our loss per common share was primarily due to the same factors described above.

Cash and Cash Equivalents

As at June 30, 2016, the Company’s consolidated cash and cash equivalents were $79.9 million compared to $141.8 million at December 31, 2015. The $61.9 million decrease was primarily due to: (i) the $45.0 million investment in Aralez, which was subsequently distributed to QLT’s shareholders via the Aralez Distribution described above, (ii) $5.4 million of strategic consulting and advisory fees related to the Aralez Distribution, the proposed Merger (as defined below) with Aegerion, and exploration of other strategic alternatives, (iii) $3.0 million advanced to Aegerion pursuant to the terms of the Loan Agreement (defined below) with Aegerion, and (iv) cash used in operating activities during the period.

Passive Foreign Investment Company

The Company believes that it was classified as a Passive Foreign Investment Company ("PFIC") for 2008 through 2015, and that it may be classified as a PFIC in 2016, which could have adverse tax consequences for U.S. shareholders. Please refer to our 2015 Annual Report on Form 10-K (as amended by the Form 10-K/A filed on April 29, 2016) for additional information.

Strategic Transactions

On June 14, 2016, QLT and Aegerion entered into an agreement and plan of merger (the "Merger Agreement") pursuant to which a wholly owned indirect subsidiary of QLT will be merged with and into Aegerion, with Aegerion surviving as a wholly owned indirect subsidiary of QLT (the "Merger"). On the closing of the Merger, each outstanding share of Aegerion common stock will be exchanged for 1.0256 (the "Exchange Ratio") QLT common shares, subject to potential downward adjustment in the event either the DOJ/SEC Investigations (as defined below) or the Class Action Lawsuit (as defined below) are settled for amounts in excess of the Negotiated Thresholds (as defined below) prior to the closing of the Merger. The Merger is currently expected to close before the end of 2016 and is subject to various closing conditions, including receipt of the approvals of the QLT and Aegerion shareholders.

If Aegerion does not settle either its Department of Justice or Securities and Exchange Commission investigations (the "DOJ/SEC Investigations") or its pending shareholder class action lawsuit (the "Class Action Lawsuit") prior to the closing of the Merger, QLT shareholders will receive warrants (the "Warrants"), which will become exercisable to purchase a certain number of QLT common shares for a purchase price of $0.01 in the event that (i) the DOJ/SEC Investigations are resolved for amounts in excess of $40 million, or (ii) the Class Action Lawsuit is settled for an amount that exceeds the amount, if any, available under Aegerion’s insurance coverage (the $40 million in respect of the DOJ/SEC Investigations and the available insurance coverage in respect of the Class Action Lawsuit being the "Negotiated Thresholds").

QLT plans to change its name upon closing of the Merger to Novelion Therapeutics Inc. ("Novelion") and its common shares will continue to trade on the NASDAQ Global Select Market and the Toronto Stock Exchange. Assuming no adjustment to the Exchange Ratio, QLT shareholders, including the Investors in the Private Placement (as defined and described below), are expected to own approximately 67% of the outstanding Novelion common shares following the Merger.

Concurrent with signing the Merger Agreement, QLT and Aegerion entered into a loan and security agreement (the "Loan Agreement") under which QLT has agreed to provide Aegerion with a term loan facility to support working capital needs for an aggregate principal amount not to exceed $15 million, subject to various terms and conditions. As at August 8, 2016, $3.0 million is outstanding under the Loan Agreement.

On June 14, 2016, QLT entered into a unit subscription agreement (the "Unit Subscription Agreement’) with certain investors party thereto (the "Investors") pursuant to which QLT will issue units to such investors for an aggregate subscription price of $21.8 million (the "Private Placement"). Each unit consists of one QLT common share and one Warrant, as described above. The Private Placement, which is contemplated to occur immediately prior to, and is conditional on the closing of, the Merger, is intended to provide QLT with additional capital to support future operations and business development initiatives. The completion of at least $17.5 million of the Private Placement is a condition to the closing of the Merger.

QLT Inc. – Financial Highlights
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(In thousands of U.S. dollars except share and per share information)
Three months ended Six months ended
June 30, June 30,
2016 2015 2016 2015

Expenses
Research and development $ 2,929 $ 3,404 $ 5,919 $ 5,612
Selling, general and administrative 4,451 7,154 10,349 10,773
Depreciation 23 179 61 367
7,403 10,737 16,329 16,752
Operating loss (7,403 ) (10,737 ) (16,329 ) (16,752 )
Other (expense) income
Net foreign exchange (losses) gains (31 ) (60 ) (108 ) 38
Interest income 54 51 129 83
Fair value gain (loss) on investment 2,256 – (10,704 ) –
Other 9 – 9 (2 )
2,288 (9 ) (10,674 ) 119
Loss before income taxes (5,115 ) (10,746 ) (27,003 ) (16,633 )
Provision for income taxes (5 ) (5 ) (11 ) (14 )
Net loss and comprehensive loss $ (5,120 ) $ (10,751 ) $ (27,014 ) $ (16,647 )

Basic and diluted net loss per common share
Net loss per common share $ (0.10 ) $ (0.21 ) $ (0.51 ) $ (0.32 )

Weighted average number of common shares outstanding (thousands)
Basic and diluted 52,829 51,779 52,829 51,508

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands of U.S. dollars) June 30, 2016 December 31, 2015
ASSETS
Current assets
Cash and cash equivalents $ 79,943 $ 141,824
Accounts receivable, net of allowances for doubtful accounts 359 287
Loan receivable 3,011 -
Income taxes receivable 14 14
Prepaid and other assets 668 611
Total current assets 83,995 142,736
Accounts receivable 2,000 2,000
Property, plant and equipment 467 430
Total assets $ 86,462 $ 145,166
LIABILITIES
Current liabilities
Accounts payable $ 5,219 $ 1,656
Accrued liabilities 800 1,827
Total current liabilities 6,019 3,483
Uncertain tax position liabilities 376 342
Total liabilities 6,395 3,825
SHAREHOLDERS’ EQUITY
Share capital
Authorized
500,000,000 common shares without par value
5,000,000 first preference shares without par value, issuable in series
Issued and outstanding common shares $ 475,333 $ 475,333
June 30, 2016 – 52,829,398 shares
December 31, 2015 – 52,829,398 shares
Additional paid-in capital 63,117 97,377
Accumulated deficit (561,352 ) (534,338 )
Accumulated other comprehensive income 102,969 102,969
Total shareholders’ equity 80,067 141,341
Total shareholders’ equity and liabilities $ 86,462 $ 145,166

On August 9, 2016 Omeros Corporation (NASDAQ: OMER), a biopharmaceutical company committed to discovering, developing and commercializing both small-molecule and protein therapeutics for large-market as well as orphan indications targeting inflammation, coagulopathies and disorders of the central nervous system, reported recent highlights and developments as well as financial results for the second quarter of 2016, which include:

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2Q 2016 total and OMIDRIA revenues were $10.0 million. Revenues from OMIDRIA sales rose 220% from the prior year quarter and 38% from 1Q 2016 (Press release, Omeros, AUG 9, 2016, View Source;p=RssLanding&cat=news&id=2194294 [SID:1234514571]).

Net loss in 2Q 2016 was $12.6 million, or $0.32 per share, which included $3.2 million ($0.08 per share) of non-cash expenses. Net loss in the prior year quarter was $16.7 million or $0.44 per share, which included $2.7 million ($0.07 per share) of non-cash expenses.

Completed enrollment in a U.S. Food and Drug Administration (FDA) required post-marketing OMIDRIA pediatric clinical study; the
product is eligible for an additional six months of U.S. marketing exclusivity upon successful completion of the study.

Completed successful meeting with European Medicines Agency (EMA) regarding requirements for OMS721 Phase 3 program for the treatment of atypical hemolytic uremic syndrome (aHUS); the same single-arm Phase 3 clinical trial will support the submission package for marketing approvals in the U.S. and Europe.

Initiated dosing in a Phase 2 clinical trial evaluating OMS721 in patients with complement-related renal disorders.
"OMIDRIA generated solid sales growth in the second quarter," said Gregory A. Demopulos, M.D., chairman and chief executive officer of Omeros. "That growth was broad based; not only did we add a significant number of new accounts, but existing customers continued to increase their level of utilization – it clearly appears that we have turned the corner with respect to the recognition of the clinical benefits of OMIDRIA. The revenues from OMIDRIA are increasingly defraying the costs of our development pipeline, which continues to deliver on that investment. OMS721, our MASP-2 inhibitor program, is in a Phase 3 clinical program in aHUS and in two Phase 2 programs, one for patients with microangiopathies and the other for those with complement-related renal disease. Our PDE10 inhibitor is in a Phase 2 program in Huntington’s disease, we expect OMS405 – our PPAR-gamma agonist program for addiction – to yield additional data this year, our PDE7 inhibitor program for addiction is slated to enter the clinic next year and our MASP-3 and GPCR programs are making good progress. We look forward to building on the commercial and clinical momentum generated in the first half of 2016 and expect to continue that momentum through the remainder of the year."

Second Quarter and Recent Highlights and Developments

Highlights and developments regarding OMIDRIA include:
In June 2016, Omeros announced the completion of enrollment in an FDA required post-marketing OMIDRIA pediatric clinical trial which, if completed in compliance with FDA clinical trial regulations and pre-specified timelines, results in eligibility for an additional six months of marketing exclusivity for OMIDRIA. The trial is being conducted in compliance with FDA regulations and within the specified timelines. OMIDRIA is not yet approved for use in patients less than 18 years of age, and the trial is expected to provide clinical information on the use of OMIDRIA in the pediatric population.
As previously announced, Omeros and ITROM Trading Drug Store (ITROM) entered into an exclusive supply and distribution agreement for the sale of OMIDRIA in the Kingdom of Saudi Arabia, the United Arab Emirates and certain other countries in the Middle East. Under the agreement, ITROM will be responsible for obtaining marketing authorizations for OMIDRIA within the licensed territories in addition to marketing and distributing OMIDRIA supplied by Omeros. Omeros expects ITROM to begin selling OMIDRIA later this year on a limited basis assuming submission of appropriate regulatory applications.
Highlights and developments regarding OMS721, Omeros’ lead human monoclonal antibody in its mannan-binding lectin-associated serine protease-2 (MASP-2) program for the treatment of thrombotic microangiopathies (TMAs), including aHUS and hematopoietic stem cell transplant-related (HSCT) TMAs, and for the treatment of complement-related renal diseases, include:
In the company’s Phase 2 clinical program evaluating OMS721 in patients with complement-related renal disorders, Omeros initiated dosing in a Phase 2 clinical trial that includes patients with IgA nephropathy, membranous nephropathy, C3 glomerulopathy and lupus nephritis.
Omeros received scientific advice from the EMA directed to its OMS721 Phase 3 program for the treatment of aHUS. The advice received is generally consistent with that from the FDA earlier this year and will allow Omeros to submit applications for approval in the U.S. and in the European Union (EU) based on a single data set, which includes the results from one pivotal clinical trial – a single-arm (i.e., no control arm), open-label study in patients with newly diagnosed or ongoing aHUS. Based on this EMA advice, the company plans to run the same, single Phase 3 clinical program to support OMS721 marketing approval applications in both the U.S. and in the EU for the treatment of aHUS.
In August 2016, the company announced results from its OMS906 complement program showing that OMS906 reduced both the incidence and severity of disease in a well-established animal model of arthritis mediated by the alternative pathway of complement (APC). OMS906 is Omeros’ lead antibody targeting mannan-binding lectin-associated serine protease-3 (MASP-3), a protein essential for the activation of the APC. Omeros exclusively controls the use of MASP-3 inhibitors for the treatment of APC-related diseases and disorders. The company is initiating the process of manufacturing scale-up of OMS906 in preparation for clinical trials.
In May 2016, Omeros amended its existing credit facility with Oxford Finance LLC and East West Bank to provide the company with an additional $20 million in unrestricted cash by funding the remaining tranches of the facility. Omeros issued warrants to the lenders, exercisable for seven years for up to 100,602 shares of the company’s common stock at an exercise price per share of $9.94, which was the closing price of the company’s stock on the funding date. The final payment fee rate on the $20 million borrowed increased from 5.25% to 6.25%, reflecting the accelerated draw-down of these additional funds. All loan payments are interest-only until August 1, 2017.
Financial Results

For the quarter ended June 30, 2016, total revenues were $10.0 million, all relating to sales of OMIDRIA. This compares to OMIDRIA revenues of $3.1 million and grant revenue of $62,000 for the same period in 2015. On a sequential quarter basis, OMIDRIA revenue grew $2.8 million or 38% from 1Q to 2Q 2016. The quarter-over-quarter increase in OMIDRIA revenue was due to continued acceptance of and increased demand for OMIDRIA in the ophthalmic surgery community.

Total costs and expenses for the three months ended June 30, 2016 were $20.9 million ($3.2 million of which were non-cash expenses) compared to $19.2 million ($2.7 million of noncash expenses) for the same period in 2015. The increase in the current year quarter was primarily due to increased legal costs associated with the Par lawsuit and increased sales and marketing costs, partially offset by a decrease in research and development costs.

For the three months ended June 30, 2016, Omeros reported a net loss of $12.6 million, or $0.32 per share, which included noncash expenses of $3.2 million ($0.08 per share). This compares to the prior year quarter where Omeros reported a net loss of $16.7 million, or $0.44 per share, which included noncash expenses of $2.7 million ($0.07 per share).

For the six months ended June 30, 2016, total revenues were $17.4 million, consisting of $17.3 million of sales of OMIDRIA and $173,000 of grant revenue. This compares to OMIDRIA revenues of $3.4 million and grant revenue of $212,000 for the same period in 2015. This increase in sales of OMIDRIA is due to the continued acceptance of and increased demand for OMIDRIA in the ophthalmic surgery community.

Total costs and expenses for the six months ended June 30, 2016 were $47.8 million compared to $37.5 million for the same period in 2015. The increase in the current year compared to the prior year was primarily due to increases in OMS721 research and development costs, legal costs associated with the Par lawsuit, sales and marketing costs and stock-based compensation expense.

For the six months ended June 30, 2016, Omeros reported a net loss of $33.2 million, or $0.86 per share, which included noncash expenses of $7.9 million ($0.20 per share). This compares to a net loss of $35.3 million, or $0.95 per share for the six months ended June 30, 2015, which included noncash expenses of $5.5 million ($0.15 per share).

At June 30, 2016, the company had cash, cash equivalents and short-term investments of $21.2 million. In addition, the company had $10.7 million of restricted cash on hand to satisfy covenants under its loan agreement with Oxford Finance and East West Bank and its lease for the Omeros Building.

On August 9, 2016 Mylan N.V. (NASDAQ, TASE: MYL) reported its financial results for the quarter and six months ended June 30, 2016 (Press release, Mylan, AUG 9, 2016, View Source [SID:1234514570]).

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Second Quarter 2016 Financial Highlights
Total revenues of $2.56 billion, up 8% compared to the prior year period

Generics segment third party net sales of $2.14 billion, up 4% compared to the prior year period

Specialty segment third party net sales of $402.5 million, up 33% compared to the prior year period

Current quarter total revenues were not significantly impacted by the effect of foreign currency translation

U.S. GAAP diluted earnings per ordinary share ("EPS") of $0.33, up 3% compared to the prior year period primarily due to higher sales and gross margins, partially offset by increased non-operating expenses driven mainly by certain Meda transaction related acquisition and financing costs

Adjusted diluted earnings per ordinary share ("adjusted EPS") of $1.16, up 28% compared to the prior year period

Six Months Ended June 30, 2016 Financial Highlights
Total revenues of $4.75 billion, up 12% compared to the prior year period

Generics segment third party net sales of $4.07 billion, up 10% compared to the prior year period

Specialty segment third party net sales of $650.4 million, up 27% compared to the prior year period

The unfavorable impact of foreign currency translation on current year total revenues was approximately $33 million, or 1%

U.S. GAAP diluted EPS of $0.36, down 22% compared to the prior year period primarily due to higher operating expenses, driven mainly by certain Meda transaction related acquisition and financing costs

Adjusted EPS of $1.92, up 19% compared to the prior year period

Mylan CEO Heather Bresch commented, "Our strong second quarter results delivered year-over-year total revenue growth of 8% and adjusted EPS growth of 28%. This solid performance, which included continued strength in our generics business and double digit revenue growth in our Specialty business, yet again underscores the strategic value of Mylan’s diversification and scale as well as our differentiation within our industry. Given our performance to date this year and our current trajectory, we are committed to our 2016 adjusted EPS guidance range of $4.85 to $5.15.

"We also are very excited about the completion of our Meda transaction, as well as the Renaissance topicals transaction that we completed in June, which continue to build on our unique global platform to create even greater scale, breadth, diversity and access across products, geographies and sales channels. These transactions also further strengthen our already very strong cash flows. We see significant opportunities to further differentiate Mylan for our customers, patients and other stakeholders as we bring these assets together."

Total Revenues

View News Release Full Screen

Three Months Ended

Six Months Ended

June 30,

June 30,
(Unaudited; in millions)
2016

2015

Percent
Change

2016

2015

Percent
Change
Total Revenues
$
2,560.7

$
2,371.7

8%

$
4,752.0

$
4,243.4

12%
Generics Third Party Net Sales
2,137.4

2,055.1

4%

4,065.6

3,698.7

10%
North America*
1,010.0

948.5

6%

1,929.7

1,803.5

7%
Europe
604.2

571.0

6%

1,191.9

977.3

22%
Rest of World*
523.2

535.6

(2)%

944.0

917.9

3%
Specialty Third Party Net Sales
402.5

301.9

33%

650.4

512.9

27%
Other Revenues
20.8

14.7

41%

36.0

31.8

13%
*Beginning in the first quarter of 2016, the Company reclassified sales from its Brazilian operation from Rest of World to North America. The amount reclassified for the three and six months ended June 30, 2015 was approximately $11.1 million and $21.3 million, respectively.
Second Quarter 2016 Financial Results
Total Revenue
Generics segment third party net sales were $2.14 billion for the quarter, an increase of 4% when compared to the prior year period. Generics third party net sales were not significantly impacted by the effect of foreign currency translation in the second quarter of 2016.
Third party net sales from North America were $1.01 billion for the quarter, an increase of 6% when compared to the prior year period. This increase was principally due to net sales from significant new products launched since July 1, 2015 ("new products") as a result of leveraging our strong global platform, partially offset by lower pricing and volumes on existing products. The unfavorable impact of foreign currency translation on current period third party net sales was approximately $4.8 million, or 1% within North America.
Third party net sales from Europe were $604.2 million for the quarter, an increase of 6% when compared to the prior year period. This increase was primarily the result of net sales from new products combined with higher volumes on existing products, while pricing was essentially flat in the current period as a result of our diversified product portfolio. The favorable impact of foreign currency translation on current period third party net sales was approximately $5.6 million, or 1% within Europe.
Third party net sales from Rest of World were $523.2 million for the quarter, a decrease of 2% when compared to the prior year period. New product introductions across the region and higher sales in Japan and emerging markets positively impacted sales in the quarter. Lower pricing and sales volumes in the region, including the anti-retroviral ("ARV") franchise, unfavorably impacted third party net sales. However, sales within our ARV franchise progressively improved throughout the quarter as HIV tender volumes increased, resulting in sales growth on a sequential basis of more than 30% compared to the first quarter of 2016. Third party net sales from Rest of World were not significantly impacted by the effect of foreign currency translation during the second quarter of 2016.
Specialty segment third party net sales were $402.5 million for the quarter, an increase of 33% when compared to the prior year period. This increase was primarily the result of higher unit volumes and the realization of the benefits of customer contract negotiations over the last several quarters related to the EpiPen Auto-Injector, and higher sales of the Perforomist Inhalation Solution and ULTIVA.
Total Gross Profit
Gross profit was $1.17 billion and $1.01 billion for the second quarter of 2016 and 2015, respectively. Gross margins were 46% and 43% in the second quarter of 2016 and 2015, respectively. Adjusted gross profit was $1.45 billion and adjusted gross margins were 56% for the quarter compared to adjusted gross profit of $1.28 billion and adjusted gross margins of 54% in the prior year period. Gross margins and adjusted gross margins were both positively impacted primarily by new product introductions and favorable Specialty sales in the second quarter of 2016.
Total Profitability
Earnings from operations were $410.9 million for the quarter, an increase of 49% from the comparable prior year period. This increase was primarily due to higher revenues and higher gross profit.
R&D expense increased from the comparable prior year period due to the continued development of our respiratory, insulin and biologics programs and expenses incurred during the current quarter related to the Company’s collaboration with Momenta Pharmaceuticals, Inc. ("Momenta"). SG&A expense increased from the comparable prior year period as we invested in our continued growth. These increases were partially offset by decreases in consulting and professional services expense and legal expense due to higher acquisition related costs incurred in the prior year period.
U.S. GAAP net earnings attributable to Mylan N.V. ordinary shareholders ("net earnings") increased by $0.6 million to $168.4 million for the quarter ended June 30, 2016, as compared to $167.8 million for the prior year period. Second quarter 2016 net earnings were negatively impacted by increased non-operating expenses including unrealized mark-to-market losses on the Company’s SEK denominated foreign currency contracts and the write off of financing fees related to the termination of the Bridge Credit Agreement originally entered into on February 10, 2016 (the "2016 Bridge Credit Agreement") in connection with Mylan’s public offer to the shareholders of Meda to acquire all of the outstanding shares of Meda (the "Offer"). U.S. GAAP diluted EPS increased from $0.32 to $0.33 as a result of higher earnings from operations and a lower average share count, partially offset by higher non-operating expenses. Adjusted net earnings increased by $118.1 million to $592.4 million compared to $474.3 million for the prior year period. Adjusted EPS increased 28% to $1.16 compared to $0.91 in the prior year period.
EBITDA, which is defined as net earnings (excluding the non-controlling interest and losses from equity method investees) plus income taxes, interest expense, depreciation and amortization, was $621.7 million for the quarter ended June 30, 2016, and $558.3 million for the comparable prior year quarter. After adjusting for certain items as further detailed in the reconciliation below, adjusted EBITDA was $821.4 million for the quarter ended June 30, 2016 and $693.5 million for the comparable prior year quarter.
Six Months Ended June 30, 2016 Financial Results
Total Revenue
Generics segment third party net sales were $4.07 billion for the six months ended June 30, 2016, an increase of 10% when compared to the prior year period. The unfavorable impact of foreign currency translation on Generics third party net sales was approximately $32.7 million, or 1% for the six months ended June 30, 2016.
Third party net sales from North America were $1.93 billion for the six months ended June 30, 2016, an increase of 7% when compared to the prior year period. This increase was principally due to net sales from significant new product introductions as a result of our strong global platform, and to a lesser extent, the two additional months of net sales from our established products ("incremental established products sales") when compared to the six months ended June 30, 2015. This increase was partially offset by lower pricing and volumes on existing products. The unfavorable impact of foreign currency translation on the current period third party net sales was approximately $12.0 million or 1% within North America.
Third party net sales from Europe were $1.19 billion for the six months ended June 30, 2016, an increase of 22% when compared to the prior year period. This increase was primarily the result of the incremental established products sales, and to a lesser extent, net sales from new products. In addition, there were higher volumes on existing products, while pricing was essentially flat in the first half of 2016 as a result of our diversified product portfolio. Third party net sales from Europe were not significantly impacted by the effect of foreign currency translation during the six months ended June 30, 2016.
Third party net sales from Rest of World were $944.0 million for the six months ended June 30, 2016, an increase of 3% when compared to the prior year period. This increase was primarily driven by the incremental established products sales, and to a lesser extent, new product introductions, as well as higher sales in Japan and emerging markets. These increases were partially offset by lower pricing and sales volumes in the region, including the ARV franchise. However, sales within our ARV franchise progressively grew throughout the first half of the year, and on a sequential basis second quarter sales increased over 30% from the first quarter of 2016. The unfavorable impact of foreign currency translation on current year third party net sales was approximately $18.4 million, or 2% within Rest of World.
Specialty segment third party net sales were $650.4 million for the six months ended June 30, 2016, an increase of 27% when compared to the prior year period. This increase was primarily the result of higher unit volumes and the realization of the benefits of customer contract negotiations over the last several quarters related to the EpiPen Auto-Injector, and higher sales of the Perforomist Inhalation Solution and ULTIVA.

Total Gross Profit
Gross profit was $2.08 billion and $1.84 billion for the six months ended June 30, 2016 and 2015, respectively. Gross margins were 44% and 43% for the six months ended June 30, 2016 and 2015, respectively. Gross margins were positively impacted primarily by new product introductions and favorable Specialty sales, partially offset by higher amortization expense due to acquisitions completed in 2015. Adjusted gross profit was $2.63 billion and adjusted gross margins were 55% for the six months ended June 30, 2016 compared to adjusted gross profit of $2.27 billion and adjusted gross margins of 54% in the prior year period. Adjusted gross margins were positively impacted primarily by new product introductions and favorable Specialty sales in the first half of 2016.

Total Profitability
Earnings from operations were $516.5 million for the six months ended June 30, 2016, an increase of 18% from the comparable prior year period. This increase was primarily due to higher revenue, including third party net sales growth of 10% and 27% in the Generics and Specialty segments from the comparable prior year period, respectively, and higher gross profit.

R&D expense for the six months ended June 30, 2016 increased from the comparable prior year period due to an upfront payment to Momenta for $45.0 million and additional expenses incurred in the current period related to the Company’s collaboration agreement. In addition, R&D expense increased due to the two additional months of expense related to our established products in the current year and our continued investment in the development of our respiratory, insulin and biologics programs. SG&A expense increased from the comparable prior year period principally due to the two additional months of expense related to our established products in the current year. These increases were partially offset by decreases in consulting and professional services expense and legal expense due to higher acquisition related costs incurred in the prior year period.

U.S. GAAP net earnings decreased by $42.1 million to $182.3 million for the six months ended June 30, 2016, compared to $224.4 million for the prior year period. U.S. GAAP diluted EPS decreased from $0.46 to $0.36 as a result of higher operating expenses, including higher amortization expense related to acquisitions completed during 2015, unrealized mark-to-market losses related to the Company’s SEK denominated foreign currency contracts, the write off of financing fees related to the termination of the 2016 Bridge Credit Agreement and a higher average share count due to the impact of ordinary shares issued in the prior year in the transaction in which Mylan N.V. acquired Mylan Inc. and Abbott Laboratories’ non-U.S. developed markets specialty and branded generics business (the "EPD Transaction"). Adjusted net earnings increased by $195.3 million to $978.7 million for the six months ended June 30, 2016 compared to $783.4 million for the prior year period. Adjusted EPS increased 19% to $1.92 for the six months ended June 30, 2016 compared to $1.62 in the prior year period.

EBITDA was $1.04 billion for the six months ended June 30, 2016, and $898.8 million for the comparable prior year period. After adjusting for certain items as further detailed in the reconciliation below, adjusted EBITDA was $1.41 billion for the six months ended June 30, 2016 and $1.20 billion for the comparable prior year period.

Cash Flow
Net cash provided by operating activities was $497.1 million for the six months ended June 30, 2016 compared to $381.7 million for the prior year period. The increase in net cash provided by operating activities was primarily the result of higher earnings from operations. Capital expenditures were approximately $121 million for the six months ended June 30, 2016 compared to approximately $122 million for the comparable prior year period. Adjusted cash provided by operating activities was $686.5 million for the six months ended June 30, 2016 compared to $489.9 million for the prior year period. Adjusted free cash flow, defined as adjusted cash provided by operating activities less capital expenditures, was $565.5 million for the six months ended June 30, 2016, compared to $367.9 million in the prior year period.

On August 9, 2016 Lipocine Inc. (NASDAQ: LPCN), a specialty pharmaceutical company, reported financial and operational results for the quarter ended June 30, 2016 (Filing, Q2, Lipocine, 2016, AUG 9, 2016, View Source [SID:1234514569]).

Quarterly and Recent Highlights

· Received a Complete Response Letter ("CRL") from the United States Food and Drug Administration ("FDA") regarding its New Drug Application ("NDA") for LPCN 1021, an oral testosterone product candidate for testosterone replacement therapy ("TRT") in adult males for conditions associated with a deficiency or absence of endogenous testosterone, also known as hypogonadism. The next step will be to request a meeting with the FDA to understand more fully the issues raised in the CRL and to agree on a path forward to achieve approval of LPCN 1021.

· Added to the Russell 3000 and Russell Global Indexes.

· Presented clinical data for LPCN 1021 at the 2016 American Urological Association Annual Meeting.

"Our focus remains on evaluating the content of the CRL, including the FDA recommended actions, to bring our NDA for LPCN 1021 into a position for approval. We remain committed to bringing LPCN 1021 to patients who will benefit from its intended use," said Dr. Mahesh Patel, Chairman, President and CEO of Lipocine. "In addition, we continue to advance the progress our other pipeline products, LPCN 1107 and LPCN 1111, with updates expected in the coming months."

Second Quarter 2016 Financial Results

Lipocine reported a net loss of $5.8 million, or $0.32 per diluted share, for the second quarter of 2016, compared with a net loss of $4.2 million, or $0.26 per diluted share, for the second quarter of 2015.

For the second quarter of 2016, research and development expenses were $2.6 million, compared with $3.2 million for the second quarter of 2015. The decrease was primarily due to decreased contract research organization and consultant costs, partially offset by increased pre-commercialization manufacturing expenses related to LPCN 1021.

For the second quarter of 2016, general and administrative expenses were $3.2 million, compared with $1.1 million for the second quarter of 2015. The increase was primarily due to increased costs related to business development, market research and pre-commercialization activities related to LPCN 1021 as well as increased personnel costs.

As of June 30, 2016, Lipocine had cash, cash equivalents and marketable investment securities of $32.9 million, compared with cash and cash equivalents of $44.8 million as of December 31, 2015.

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On August 9, 2016 Galectin Therapeutics Inc. (NASDAQ: GALT), the leading developer of therapeutics that target galectin proteins to treat fibrosis and cancer, reported financial results for the three and six months ended June 30, 2016 (Filing, Q2, Galectin Therapeutics, 2016, AUG 9, 2016, View Source [SID:1234514567]). These results are included in the Company’s Form 10-Q, which has been filed with the U.S. Securities and Exchange Commission and is available at www.sec.gov.
Summary of Key Development Programs, Updates and Anticipated Milestones

• Completed recruitment in a Phase 2 clinical trial with GR-MD-02 in patients with non-alcoholic steatohepatitis (NASH) with cirrhosis (stage 4) (the NASH-CX trial), wherein patient recruitment was completed slightly ahead of our original expectations

• Completed enrollment in Phase 2 clinical trial with GR-MD-02 in patients with non-alcoholic steatohepatitis (NASH) with advanced fibrosis (stage 3) (the NASH-FX trial)

• Positive preclinical results were presented at the American Thoracic Society (ATS) 2016 International Conference in which GR-MD-02 had shown a positive effect on vascular remodeling in an animal model of pulmonary arterial hypertension (PAH)

• Presented interim results from an exploratory, open-label, Phase 2a clinical trial with GR-MD-02 in patients with moderate-to-severe plaque psoriasis in which patients showed significant improvement in their plaque psoriasis

Management Commentary
"We are very pleased with the significant progress achieved this quarter completing enrollment in two important clinical trials, gaining further global protection of our intellectual property, and presenting further evidence of the positive effects of GR-MD-02 in new and exciting applications," said Peter G. Traber, M.D., president, chief executive officer and chief medical officer of Galectin Therapeutics. "Most immediately, with enrollment in our NASH-FX trial in NASH patients with advanced fibrosis (stage 3) having been completed on schedule in May, we are on pace to report top-line data assessing the efficacy of GR-MD-02 by the end of September. And, with recruitment also completed for our Phase 2 NASH-CX trial, we will be able to assess the efficacy of GR-MD-02 in up to 156 patients with non-alcoholic steatohepatitis (NASH) with cirrhosis. Patient recruitment for this trial was completed slightly ahead of our original expectations and we anticipate to report top line results in December 2017, as previously planned."
With its NASH trials investigating liver applications, Galectin is also exploring other applications of its lead compound. This quarter, the Company received encouraging results on two early stage studies. In an early stage investigation of applicability to vascular remodeling in pulmonary arterial hypertension (PAH), investigators from the Vascular Biology Center and the Department of Pharmacology and Toxicology at Augusta University presented data at the American Thoracic Society (ATS) 2016 International Conference, in which GR-MD-02 had shown a positive effect in an animal model of PAH. David Fulton, Ph.D., director of the Vascular Biology Center at Augusta University, noted that the alterations in cardiopulmonary function and vascular proliferation, as well as in fibrosis were significantly attenuated by in vivo treatment with specific gal-3 inhibitors, with our lead compound obviously being a gal-3 inhibitor.
Separately, interim results from an exploratory, open-label, Phase 2a clinical trial with GR-MD-02 in patients with moderate-to-severe plaque psoriasis, in which four patients who received 12 weeks of therapy had significant improvement in their plaque psoriasis, led to the extension of the treatment duration to 24 weeks. These interim results demonstrate a potentially important clinical effect of GR-MD-02 in clearing moderate-to-severe plaque psoriasis.

In the quarter, the Company also received Notice of Allowance from the Australian Government Patent Office for patent application for "Composition of Novel Carbohydrate Drug for Treatment of Human Diseases" that, from the date they are issued and through 2032, will extend coverage of GR-MD-02 to Australia to treat patients at risk of non-alcoholic steatohepatitis (NASH), fibrosis, inflammatory and autoimmune disorders in which galectins are at least in part involved. The allowance of these claims further strengthens the protection of the intellectual property behind GR-MD-02. This is but one of more than 50 patent applications the Company has pending in 10 foreign countries, all of which are viewed as significant markets for the active pharmaceutical ingredient (API) or the manufacture of the API. When issued, this patent will augment Galectin’s current intellectual property portfolio for treatment of liver fibrosis, kidney fibrosis, lung fibrosis or heart fibrosis.
The investigator-sponsored trials utilizing GR-MD-02 in combination with checkpoint inhibitors being conducted by Galectin’s partners at the Providence Portland Cancer Center, who are also funding the studies, continue to advance. The study of GR-MD-02 in combination with Yervoy and Keytruda in two separate Phase 1b trials in patients with metastatic melanoma is expected to yield data from the Yervoy combination trial by the end of the year."
Galectin Therapeutics is exhibiting a steady pattern of progress throughout and across the organization not only with its primary investigations, but in new and evolving applications as well. As such, its addressable market increases from the still very large $35 billion, understood to be available just from the treatment of NASH, to an even larger sum when considering psoriasis, PAH and potentially other maladies. Each of these efforts is based on a very systematic approach to advancing development whereby Galectin is moving methodically along the development path while simultaneously branching out into adjacent and complementary markets whenever the science warrants a new investigation. Allied with very strong medical professionals who are conducting these trials and investigations, Galectin’s management team is doing everything within its power to optimize the value of the organization, its intellectual property, and the other assets at its disposal.
Financial Results
For the three months ended June 30, 2016, the Company reported a net loss applicable to common stockholders of $5.8 million, or $0.20 per share, compared with a net loss applicable to common stockholders of $4.9 million, or $0.21 per share, for the three months ended June 30, 2015. The increase is largely due to higher research and development expenses primarily related to the Phase 2 clinical program in NASH.

Research and development expense for the three months ended June 30, 2016 was $4.2 million, compared with $2.6 million for the three months ended June 30, 2015. The increase primarily relates to costs for the Phase 2 clinical trials begun in 2015, partially offset by lower preclinical costs.
General and administrative expense for quarter was $1.3 million, compared with $2.1 million for the prior year, with the decrease being to severance and non-cash stock compensation and lower legal and accounting fees.
As of June 30, 2016, the Company had $18.0 million of non-restricted cash and cash equivalents. The Company believes it has sufficient cash to fund currently planned operations and research and development activities through June 30, 2017.

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