On February 25, 2016 Emergent BioSolutions Inc. (NYSE:EBS) reported financial results for the quarter and twelve months ended December 31, 2015 (Press release, Emergent BioSolutions, FEB 25, 2016, View Source;p=RssLanding&cat=news&id=2143557 [SID:1234509229]).

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2015 FINANCIAL HIGHLIGHTS

Total revenues: Q4 2015 of $168.1 million, +14% Y/Y; twelve months 2015 of $522.8 million, +16% Y/Y;
GAAP net income: Q4 2015 of $33.3 million, or $0.71 per diluted share, +11% Y/Y; twelve months 2015 of $62.9 million, or $1.41 per diluted share, +71% Y/Y;

Adjusted net income: Q4 2015 of $37.5 million, or $0.78 per diluted share, +8% Y/Y; twelve months 2015 of $75.6 million, or $1.60 per diluted share, +40% Y/Y;

EBITDA: Q4 2015 of $58.5 million, or $1.22 per diluted share, +10% Y/Y; twelve months 2015 of $130.1 million, or $2.75 per diluted share, +41% Y/Y; and

Adjusted EBITDA: Q4 2015 of $61.7 million, or $1.28 per diluted share, +7% Y/Y; twelve months 2015 of $137.4 million, or $2.91 per diluted share, +30% Y/Y.

2016 FORECAST:

Full Year: revenue of $600 to $630 million; GAAP net income of $75 to $85 million, non-GAAP adjusted net income of $90 to $100 million, and EBITDA of $150 to $160 million

1Q 2016: revenue of $105 to $120 million

"Our strong fourth quarter in 2015 continued our history of growth over the last three years both financially and operationally. Since 2012, we nearly doubled our revenues to over $520 million, achieved a net income CAGR of 38% and expanded our portfolio to nine products," said Daniel J. Abdun-Nabi, president and chief executive officer of Emergent BioSolutions. "2016 will bring a renewed focus on addressing public health threats as we spin off Aptevo Therapeutics, our biosciences business, and enter our next phase of growth. We will continue to establish ourselves as a market leader with a global impact and work to achieve our vision of protecting and enhancing 50 million lives by 2025."

2015 BUSINESS ACCOMPLISHMENTS

Announced plan to implement tax-free spin-off of Aptevo Therapeutics (the Company’s Biosciences business) into a separate, publicly traded company, targeted for mid-2016;

Launched a new platform technology, Emergard, the Company’s military-grade auto-injector device for chemical threats being sold in international markets;

Received three approvals from the U.S. Food and Drug Administration (FDA):

Expansion of the BioThrax (Anthrax Vaccine Adsorbed) label to include post-exposure prophylaxis (PEP) against anthrax disease; the first vaccine to be licensed using the FDA Animal Rule,

IXINITY, a recombinant factor IX treatment for Hemophilia B, and

Anthrasil, an immune globulin for the treatment for inhalational anthrax.

Secured over $95 million in new multi-year contract and grant funding, including the following:

$20 million in multiple contracts with BARDA to manufacture Ebola monoclonal antibodies, including the Company’s first awarded task order under the Center for Innovation in Advanced Development and Manufacturing program,

A $44 million CDC contract to further supply the strategic national stockpile with the Company’s Vaccinia Immune Globulin product, and

A $31 million BARDA contract for the advanced development of NuThrax (anthrax vaccine adsorbed with CPG 7909 adjuvant), the Company’s next generation anthrax vaccine candidate.

Initiated a Phase 1 clinical trial for MOR209/ES414, an immunotherapeutic protein built on our ADAPTIR platform technology and targeting prostate cancer, which is being developed in collaboration with MorphoSys AG; and

Continued progress towards achieving licensure of Building 55.

2015 FINANCIAL PERFORMANCE

(I) Quarter Ended December 31, 2015 (unaudited)

Revenues

Product Sales

For Q4 2015, product sales were $132.6 million, an increase of 17% as compared to 2014. The increase primarily reflects increased sales of BioThrax during the quarter.

(in millions) Three Months Ended
December 31,
2015 2014 % Change
Product Sales
BioThrax $ 111.9 $ 87.9 27 %
Other biodefense 12.5 14.5 (13 )%
Total Biodefense $ 124.4 $ 102.3 22 %

Total Biosciences $ 8.2 11.0 (25 )%
Total Product Sales $ 132.6 $ 113.4 17 %

Contract Manufacturing

For Q4 2015, revenue from the Company’s contract manufacturing operations was $10.5 million, an increase of 10% as compared to 2014. The increase was primarily due to the timing of fill/finish services to third parties.

Contracts, Grants and Collaborations
For Q4 2015, contracts, grants and collaborations revenue was $24.9 million, unchanged as compared to 2014.

Operating Expenses

Cost of Product Sales and Contract Manufacturing

For Q4 2015, cost of product sales and contract manufacturing was $39.8 million, an increase of 22% as compared to 2014. The increase was primarily attributable to increased sales of BioThrax to the CDC.

Research and Development

For Q4 2015, gross research and development (R&D) expenses were $32.5 million, a decrease of 17% as compared to 2014. The decrease primarily reflects lower contract service costs associated with product candidates and technology platform development activities associated with the Biosciences division.

For Q4 2015, net R&D expenses were $7.6 million, a decrease of 46% as compared to 2014, reflecting a decrease in unfunded development spending in our Biosciences division, including spending on IXINITY, a product that we launched in Q2 2015. Net R&D expenses, which are more representative of the Company’s actual out-of-pocket investment in product development, are calculated as gross research and development expenses less contracts, grants and collaboration revenues.

(in millions) Three Months Ended
December 31,
2015 2014 % Change
Research and Development Expenses (Gross) $ 32.5 $ 39.0 (17 )%
Adjustments:
Contracts, grants and collaborations revenues 24.9 25.0 N/A
Net Research and Development Expenses $ 7.6 $ 14.0 (46 )%

Selling, General and Administrative

For Q4 2015, selling, general and administrative expenses were $46.0 million, an increase of 44% as compared to 2014. The increase was primarily attributable to a one-time $3.5 million reserve for potential write-off of accounts receivable within the Biosciences segment, a charge to write-off certain obsolete fixed assets, and increased information technology costs associated with the implementation of a new ERP system, as well as costs associated with the spin-off of Aptevo Therapeutics and professional services to support the Company’s strategic growth initiatives.

Net Income

For Q4 2015, GAAP net income was $33.3 million, an increase of 11% as compared to 2014. For Q4 2015 and 2014, GAAP net income per diluted share is computed using the if-converted method. This method requires GAAP net income to be adjusted to reflect the impact of interest expense and amortization of debt issuance cost, both net of tax, associated with the Company’s 2.875% Convertible Senior Notes due 2021. As a result, GAAP net income per diluted share for Q4 2015 is adjusted in the amount of $0.9 million, from $33.3 million to $34.2 million, and diluted shares outstanding were 48.1 million. GAAP net income per diluted share for Q4 2014 is adjusted in the amount of $0.6 million, from $30.1 million to $30.7 million, and diluted shares outstanding were 46.4 million.

(II) Twelve Months Ended December 31, 2015 (unaudited)

Revenues

Product Sales

For the twelve months of 2015, product sales were $356.9 million, an increase of 14% as compared to 2014. The increase primarily reflects increased sales of BioThrax in 2015.

(in millions) Twelve Months Ended
December 31,
2015 2014 % Change
Product Sales
BioThrax $ 293.9 $ 245.9 20 %
Other biodefense 35.0 35.9 (3 )%
Total Biodefense $ 328.9 $ 281.8 17 %

Total Biosciences $ 28.0 $ 30.1 (7 )%
Total Product Sales $ 356.9 $ 311.9 14 %

Contract Manufacturing
For the twelve months of 2015, revenue from the Company’s contract manufacturing operations was $43.0 million, an increase of 39% as compared to 2014. The increase was primarily due to a full year of revenues from the Company’s fill/finish facility in Baltimore, plasma based manufacturing from the Company’s Winnipeg facility and contract manufacturing services related to the production of an MVA Ebola vaccine candidate.

Contracts, Grants and Collaborations

For the twelve months of 2015, contracts, grants and collaborations revenue was $122.9 million, an increase of 15% as compared to 2014. The increase was primarily due to development funding for Anthrasil and for our CIADM program.

Operating Expenses

Cost of Product Sales and Contract Manufacturing

For the twelve months of 2015, cost of product sales and contract manufacturing was $124.3 million, an increase of 5% as compared 2014. The increase was primarily attributable to the increase in the number of BioThrax doses delivered to the CDC.

Research and Development

For the twelve months of 2015, gross R&D expenses were $154.0 million, an increase of 2% as compared to 2014. The increase was primarily attributable to higher contract service costs for product candidates and manufacturing development in the Biodefense segment.

Net R&D expenses for the twelve months of 2015 were $31.1 million, a decrease of 29% as compared to 2014, reflecting a decrease in unfunded development spending in our Biosciences division, including spending on IXINITY.

(in millions) Twelve Months Ended
December 31,
2015 2014 % Change
Research and Development Expenses (Gross) $ 154.0 $ 150.8 2 %
Adjustments:
Contracts, grants and collaboration revenues 122.9 107.3 15 %
Net Research and Development Expenses $ 31.1 $ 43.5 (29 )%

Selling, General and Administrative

For the twelve months of 2015, selling, general and administrative expenses were $148.5 million, an increase of 21% as compared to 2014. The increase was primarily attributable to additional post-acquisition selling, general and administrative costs largely associated with the operations acquired in Q1 2014, including IXINITY launch costs, as well as costs associated with the spin-off of Aptevo Therapeutics and costs associated with professional services to support the Company’s strategic growth initiatives.

Net Income

For the twelve months of 2015, GAAP net income was $62.9 million, an increase of 71% as compared to 2014. For the twelve months of 2015 and 2014, GAAP net income per diluted share is computed using the if-converted method. This method requires GAAP net income to be adjusted to reflect the impact of interest expense and amortization of debt issuance cost, both net of tax, associated with the Company’s 2.875% Convertible Senior Notes due 2021. As a result, GAAP net income per diluted share for the twelve months of 2015 is adjusted in the amount of $3.9 million, from $62.9 million to $66.8 million, and diluted shares outstanding were 47.3 million. GAAP net income per diluted share for the twelve months of 2014 is adjusted in the amount of $3.6 million, from $36.7 million to $40.3 million, and diluted shares outstanding were 45.8 million.

2016 FINANCIAL OUTLOOK

(I) Full Year 2016

For the full year of 2016, the Company reaffirms its forecast for total revenues of $600 to $630 million, driven by growth in BioThrax sales of $305 to $320 million, continued domestic and international sales of the other Biodefense division products, and continued robust development funding through contracts and grants revenues. The Company also forecasts full year 2016 GAAP net income of $75 to $85 million, non-GAAP adjusted net income of $90 to $100 million, and EBITDA of $150 to $160 million (see "Reconciliation of GAAP Net Income to Adjusted Net Income and EBITDA" for a definition of terms and a reconciliation table). The Company’s outlook for 2016 includes the impact of a successful spin-off of Aptevo Therapeutics in mid-2016 and continuous delivery of BioThrax to the CDC under an anticipated follow-on, multiyear procurement contract, but does not include any estimates for BioThrax deliveries from Building 55, the Company’s large scale BioThrax manufacturing facility, or any estimates for potential new corporate development or other M&A transactions.

(II) Q1 2016

For the first quarter of 2016, the Company reaffirms its forecast for total revenues of $105 to $120 million.

RECONCILIATION OF GAAP NET INCOME TO ADJUSTED NET INCOME, EBITDA AND ADJUSTED EBITDA

This press release contains three financial measures (Adjusted Net Income, EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), and adjusted EBITDA) that are considered "non-GAAP" financial measures under applicable Securities & Exchange Commission rules and regulations. These non-GAAP financial measures should be considered supplemental to and not a substitute for financial information prepared in accordance with generally accepted accounting principles. The Company’s definition of these non-GAAP measures may differ from similarly titled measures used by others. Adjusted Net Income adjusts for specified items that can be highly variable or difficult to predict, or reflect the non-cash impact of charges resulting from purchase accounting. EBITDA reflects net income excluding the impact of depreciation, amortization, interest expense and provision for income taxes. Adjusted EBITDA also excludes specified items that can be highly variable and the non-cash impact of certain purchase accounting adjustments. The Company views these non-GAAP financial measures as a means to facilitate management’s financial and operational decision-making, including evaluation of the Company’s historical operating results and comparison to competitors’ operating results. These non-GAAP financial measures reflect an additional way of viewing aspects of the Company’s operations that, when viewed with GAAP results and the reconciliations to the corresponding GAAP financial measure, may provide a more complete understanding of factors and trends affecting the Company’s business.

The determination of the amounts that are excluded from these non-GAAP financial measures are a matter of management judgment and depend upon, among other factors, the nature of the underlying expense or income amounts. Because non-GAAP financial measures exclude the effect of items that will increase or decrease the Company’s reported results of operations, management strongly encourages investors to review the Company’s consolidated financial statements and publicly filed reports in their entirety.
Reconciliation of GAAP Net Income to Adjusted Net Income

(in millions, except per share value) Three Months Ended
December 31,
2015 2014 Source
GAAP Net Income $ 33.3 $ 30.1 NA
Adjustments:
Spin-off and acquisition-related costs
(transaction & integration) 2.0 0.6 SG&A
Non-cash amortization charges 2.7 2.3 COGS, SG&A,
Other Income
Impact of purchase accounting on inventory step-up – 1.0 COGS
Restructuring activities 1.2 2.6 SG&A
Tax effect (1.8 ) (2.0 ) NA
Total Adjustments 4.2 4.5 NA
Adjusted Net Income
$
37.5
$
34.6
NA
Adjusted Net Income per Diluted Share $ 0.78 $ 0.75

(in millions, except per share value) Twelve Months Ended
December 31,
2015 2014 Source
GAAP Net Income $ 62.9 $ 36.7 NA
Adjustments:
Spin-off and acquisition-related costs
(transaction & integration) 5.5 8.1 SG&A
Non-cash amortization charges 10.8 9.5 COGS, SG&A,
Other Income
Write-off of syndicated loans – 1.8 Other Income
Impact of purchase accounting on inventory step-up 0.6 3.0 COGS
Restructuring activities 1.2 2.6 SG&A
Tax effect (5.4 ) (7.5 ) NA
Total Adjustments 12.7 17.5 NA
Adjusted Net Income
$
75.6
$
54.2
NA
Adjusted Net Income per Diluted Share $ 1.60 $ 1.18

Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA

(in millions, except per share value) Three Months Ended
December 31,
2015 2014
GAAP Net Income $ 33.3 $ 30.1
Adjustments:
+ Depreciation & Amortization 9.1 7.8
+ Provision For Income Taxes 14.5 14.2
+ Total Interest Expense 1.6 1.2
Total Adjustments 25.2 23.2
EBITDA
$
58.5
$
53.3

EBITDA per Diluted Share $ 1.22 $ 1.15
Additional Adjustments:
+ Spin-off and acquisition-related costs
(transaction & integration) 2.0 0.6
+ Impact of purchase accounting on inventory step-up – 1.0
+ Restructuring activities 1.2 2.6
Total Additional Adjustments 3.2 4.2
Adjusted EBITDA
$
61.7
$
57.5

Adjusted EBITDA per Diluted Share $ 1.28 $ 1.24

(in millions, except per share value) Twelve Months Ended
December 31,
2015 2014
GAAP Net Income $ 62.9 $ 36.7
Adjustments:
+ Depreciation & Amortization 33.8 31.0
+ Provision Income Taxes 26.9 16.3
+ Total Interest Expense 6.5 8.2
Total Adjustments 67.2 55.5
EBITDA
$
130.1
$
92.2

EBITDA per Diluted Share $ 2.75 $ 2.01
Additional Adjustments:
+ Spin-off and acquisition-related costs
(transaction & integration) 5.5 8.1
+ Impact of purchase accounting on inventory step-up 0.6 3.0
+ Restructuring activities 1.2 2.6
Total Additional Adjustments 7.3 13.7
Adjusted EBITDA
$
137.4
$
105.9

Adjusted EBITDA per Diluted Share $ 2.91 $ 2.31

On February 25, 2016 Merrimack Pharmaceuticals, Inc. (Nasdaq: MACK) reported its fourth quarter and full year 2015 financial results (Press release, Merrimack, FEB 25, 2016, View Source [SID:1234509224]). Merrimack will host a live conference call and webcast today, Thursday, February 25 at 4:30 p.m., Eastern time, to provide an update on Merrimack’s progress as well as a summary of these results.

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Investors and the general public are invited to listen to the call by dialing (877) 564-1301 (domestic) or (224) 357-2394 (international) five minutes prior to the start of the call and providing the passcode 43765613. A listen-only webcast of the call can be accessed in the Investors section of Merrimack’s website, investors.merrimack.com, and a replay of the call will be archived there for six weeks following the call.

Key Recent Events

Merrimack’s key recent events include:

Presentation of an updated overall survival analysis of the Phase 3 NAPOLI-1 study of ONIVYDE (irinotecan liposome injection) in combination with fluorouracil (5-FU) and leucovorin that achieved a 63% improvement in 12-month overall survival in patients with post-gemcitabine metastatic pancreatic adenocarcinoma when compared to 5-FU and leucovorin alone at the American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) Gastrointestinal Cancers Symposium in San Francisco;

Publication of the NAPOLI-1 results in The Lancet;

Amendment of the ongoing Phase 2 clinical study of MM-121 (seribantumab) in patients with heregulin-positive non-small cell lung cancer, including a change in the primary endpoint to overall survival to enable a potential registration opportunity for MM-121; and

Closing of a private placement of $175.0 million of senior secured notes, of which $41.2 million was used to repay all amounts outstanding under Merrimack’s private loan agreement.

Commercial Update

Merrimack received approval for ONIVYDE from the U.S. Food and Drug Administration on October 22, 2015 and launched ONIVYDE in the United States on October 26, 2015. Net product revenues from U.S. commercial sales of ONIVYDE for the fourth quarter of 2015 were $4.3 million.

Upcoming Milestones

Merrimack anticipates the following upcoming clinical milestones:

Results in the first half of 2017 from the Phase 2 clinical study of ONIVYDE in previously untreated front-line metastatic pancreatic cancer;

Results in 2017 from HERMIONE, the Phase 2 clinical study of MM-302 in patients with HER2-positive metastatic breast cancer that is designed to support a potential Accelerated Approval application to the FDA;

Results in 2017 from the Phase 2 clinical study of MM-141 in patients with front-line metastatic pancreatic cancer who have high serum levels of free IGF-1; and

Results in 2018 from the Phase 2 clinical study of MM-121 in patients with heregulin-positive, locally advanced or metastatic non-small cell lung cancer.

Fourth Quarter and Full Year 2015 Financial Results

The following summarizes Merrimack’s financial results from the quarter and year ended December 31, 2015:

Received $66.5 million of net milestone payments from collaborations in 2015, consistent with Merrimack’s previous financial guidance;

Cash, cash equivalents and marketable securities as of December 31, 2015 were $185.6 million, compared to $124.0 million as of December 31, 2014. The increase was driven by $168.5 million of net proceeds from the issuance of senior secured notes and $38.6 million of net proceeds from an "at the market offering" program, which were offset by $105.4 million of cash used to fund operating activities and the payoff of $41.2 million of previously-existing debt;

Product revenue from the commercial sale of ONIVYDE, net of discounts, allowances and reserves, was $4.3 million for the fourth quarter of 2015 and the year ended December 31, 2015;

License and collaboration revenue was $17.1 million for the fourth quarter of 2015 and $84.9 million for the year ended December 31, 2015, compared to $33.9 million and $102.8 million, respectively, in the comparable periods in 2014. 2015 license and collaboration revenue is comprised of $64.9 million of revenue under the Baxalta proportional performance model and $20.0 million of substantive milestone revenue under Merrimack’s agreement with Baxalta. 2014 license and collaboration revenue is comprised of $10.5 million of revenue recognized under the Baxalta proportional performance revenue recognition model and $92.3 million of revenue recognized under Merrimack’s now-terminated agreement with Sanofi;

Research and development expenses were $44.7 million in the fourth quarter of 2015 and $161.0 million for the year ended December 31, 2015, compared to $30.7 million and $138.5 million, respectively, in the comparable periods in 2014. The increase in 2015 research and development expenses was driven by increased costs as Merrimack prepared for or initiated Phase 2 studies for four of its most advanced product candidates as well as increased preclinical and general spending as Merrimack advanced and grew its preclinical pipeline;

Selling, general and administrative expenses were $19.3 million in the fourth quarter of 2015 and $57.8 million for the year ended December 31, 2015, compared to $8.3 million and $30.5 million, respectively, in the comparable periods in 2014. The increase in 2015 selling, general and administrative expenses was primarily due to incremental expenses incurred to prepare for and support the launch of ONIVYDE; and

Net loss attributable to Merrimack for the fourth quarter of 2015 was $47.8 million, or $0.41 per share, compared to a net loss attributable to Merrimack of $9.7 million, or $0.09 per share, for the fourth quarter of 2014. For the year ended December 31, 2015, net loss attributable to Merrimack was $148.0 million, or $1.33 per share, compared to a net loss attributable to Merrimack of $83.3 million, or $0.80 per share, for the year ended December 31, 2014.

2016 Financial Outlook

Merrimack anticipates the following for 2016:

Receipt of $46.5 million of net milestone payments related to ONIVYDE. This amount is made up of $36.5 million of net substantive milestones expected to increase net income in 2016 and $10.0 million of net non-substantive milestones expected to increase deferred revenues on Merrimack’s balance sheet, as they are included in the Baxalta proportional performance revenue recognition model; and

Aggregate research and development and selling, general and administrative expenses to be in the range of $225 million to $245 million, not including any one time payments to PharmaEngine.
Merrimack 2016 Analyst Day

Merrimack will host an Analyst Day on May 19, 2016 in New York for analysts and institutional investors. A live webcast of the event will be available in the Investors section of Merrimack’s website, investors.merrimack.com, and a replay of the webcast will be archived there for six weeks.

Upcoming Investor Conferences

Merrimack will attend the following investor conferences this spring:

Credit Suisse 2016 London Healthcare Conference on March 1 in London;

Cowen and Company 36th Annual Health Care Conference on March 9 in Boston;

Barclays Global Healthcare Conference on March 15 in Miami; and

Deutsche Bank Securities 41st Annual Healthcare Conference on May 4-5 in Boston.

Live webcasts of the presentations at the Cowen and Company 36th Annual Health Care Conference, the Barclays Global Healthcare Conference and the Deutsche Bank Securities 41st Annual Healthcare Conference can be accessed by visiting the Investors section of Merrimack’s website at investors.merrimack.com. A replay of the webcasts will be archived there for two weeks following each presentation.

On February 25, 2016 TESARO, Inc. (NASDAQ:TSRO), an oncology-focused biopharmaceutical company, reported operating results for fourth-quarter 2015 and provided an update on the Company’s development programs (Press release, TESARO, FEB 25, 2016, View Source [SID:1234509222]).

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"2016 is poised to be another exciting year for TESARO as we continue to drive awareness of CINV and work to make VARUBI available to all eligible patients," said Lonnie Moulder, CEO of TESARO. "We have implemented a comprehensive, global development program for niraparib in ovarian cancer that spans the treatment and maintenance settings, several patient subgroups and multiple lines of therapy, and we are also exploring combination and monotherapy approaches for additional tumor types. We continue to anticipate that data from our NOVA and QUADRA registration trials of niraparib will become available during the second quarter. Our NOVA study results will be the first data from a prospectively designed, randomized Phase 3 trial for a PARP inhibitor, and the full data from this global trial are intended to support regulatory applications and submissions to payors and pricing authorities as part of our commercialization strategy for the U.S. and European markets. We are enthusiastic about the potential for our pipeline candidates to create significant value for shareholders, particularly by expanding our niraparib development program into additional tumor types and advancing our portfolio of immuno-oncology candidates into the clinic."

Recent Business Highlights

TESARO launched VARUBI (oral rolapitant) in November of 2015, following U.S. Food and Drug Administration (FDA) approval for use in combination with other antiemetic agents in adults, for the prevention of delayed nausea and vomiting associated with initial and repeat courses of emetogenic cancer chemotherapy, including, but not limited to, highly emetogenic chemotherapy.

The intravenous (IV) rolapitant development program is complete, and a New Drug Application (NDA) will be submitted to the FDA in the first quarter of 2016.

Patient treatment continues in the Phase 3 NOVA trial of niraparib in patients with ovarian cancer, and based upon the observed event rate, TESARO continues to expect data in the second quarter of 2016.

Enrollment continues in the QUADRA trial of niraparib for the treatment of patients with ovarian cancer who have received three or more prior lines of chemotherapy, and data from this trial is anticipated to become available in the second quarter.

Antibody drug candidates targeting PD-1, TIM-3, and LAG-3 continue to advance, and the Investigational New Drug (IND) application for TSR-042, our anti-PD-1 antibody candidate, has been cleared by the FDA.

Fourth Quarter 2015 Financial Results

TESARO reported a net loss of $75.8 million, or ($1.89) per share, for the fourth quarter of 2015, compared to a net loss of $47.9 million, or ($1.33) per share, for the fourth quarter of 2014.

Research and development expenses increased to $42.9 million for the fourth quarter of 2015, compared to $29.8 million for the fourth quarter of 2014, driven primarily by higher costs related to the ongoing registration trials of niraparib, development activities related to the rolapitant IV NDA submission, and advancement of our immuno-oncology portfolio, in addition to increased headcount.

Selling, general and administrative expenses increased to $27.9 million for the fourth quarter of 2015, compared to $7.4 million for the fourth quarter of 2014, primarily due to commercial activities in support of the launch of VARUBI, increased commercial headcount, and higher professional service fees.

Acquired in-process research and development expenses totaled $1.0 million for the fourth quarter of 2015 and included a milestone payment related to our immuno-oncology portfolio, compared to $7.0 million for the fourth quarter of 2014, which included development milestones for rolapitant and the immuno-oncology portfolio.

Operating expenses, as described above, include total non-cash, stock-based compensation expense of $8.4 million for the fourth quarter of 2015, compared to $3.1 million for the fourth quarter of 2014.

As of December 31, 2015, TESARO had approximately $230.1 million in cash and cash equivalents and approximately 40.3 million outstanding shares of common stock.

Today TESARO announced a definitive agreement for a private placement that would result in proceeds of $155 million. TESARO expects its cash utilization to be approximately $70 million on average, per quarter, during the first half of 2016.

Full-Year 2015 Financial Results

TESARO reported a net loss of $251.4 million, or ($6.38) per share, for 2015, compared to a net loss of $171.0 million, or ($4.79) per share, for 2014.

Research and development expenses increased to $155.4 million for 2015, compared to $118.4 million for 2014, driven primarily by three ongoing registration trials of niraparib, development activities related to the rolapitant IV NDA submission, and advancement of our immuno-oncology portfolio, in addition to increased headcount.

Acquired in-process research and development expenses totaled $2.0 million for 2015 and included milestone payments related our immuno-oncology portfolio, compared to $24.9 million for 2014, which was primarily due to up-front immuno-oncology license payments.

Selling, general and administrative expenses increased to $78.7 million for 2015, compared to $23.9 million for 2014, primarily due to commercial activities in support of the launch of VARUBI, increased commercial headcount, and higher professional service fees.

Operating expenses, as described above, include total non-cash, stock-based compensation expense of $25.9 million for 2015, compared to $11.7 million for 2014.

2016 Corporate Objectives

TESARO anticipates achieving the following key objectives:

Continue to execute on the VARUBI commercial launch in the United States;

Submit the NDA for IV rolapitant in Q1 2016;

Submit the oral rolapitant Marketing Authorization Application (MAA) to the European Medicines Agency (EMA) in Q2 2016;

Initiate patient enrollment in the Phase 3 clinical trial of niraparib in first-line ovarian cancer (PRIMA) in Q1 2016;

Initiate enrollment in the niraparib/KEYTRUDA (pembrolizumab) combination trial in Q1 2016;

Report data from the Phase 3 NOVA trial and from the QUADRA trial of niraparib in Q2 2016;

Submit the niraparib NDA and MAA in 2H 2016;

Continue to enroll the Phase 3 BRAVO trial of niraparib in breast cancer patients with germline BRCA mutations through 2016;

Initiate a Phase 1 clinical trial of TSR-042 (anti-PD-1 antibody) in Q1 2016;

Submit the IND for TSR-022 (anti-TIM-3 antibody) in Q2 2016;

Select a clinical antibody candidate targeting LAG-3 in 1H 2016;

Identify a dose and schedule for TSR-042 by the end of 2016; and

Select bispecific clinical candidates targeting PD-1/TIM-3 and PD-1/LAG-3 in 2016.

On February 25, 2016 Medivation, Inc. (NASDAQ: MDVN) reported its financial results for the fourth quarter and year ended December 31, 2015 (Press release, Medivation, FEB 25, 2016, View Source [SID:1234509219]).

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"We are delighted with our substantial progress in 2015 on many fronts — marked by strong worldwide net sales of XTANDI (enzalutamide) capsules at the Astellas level, which grew 80 percent over 2014, as well as key developments that enhance the clinical understanding of enzalutamide, expand and diversify our late-stage pipeline, and help secure our plans to continue to meet the needs of underserved patient populations," said David Hung, M.D., founder, President and Chief Executive Officer of Medivation.

Dr. Hung added, "In 2015, several promising developments in the enzalutamide clinical development program, including positive results from two Phase 2 trials comparing enzalutamide to bicalutamide in castration-resistant prostate cancer and a Phase 2 trial in advanced triple-negative breast cancer, combined with the expansion of our clinical pipeline with our acquisition of talazoparib, provide Medivation with a platform from which to build a world-class global oncology franchise. We look forward to multiple milestones throughout 2016 as we report on our continued progress."

Key highlights in recent months:

Acquired worldwide rights to talazoparib (MDV3800), an orally-available poly ADP ribose polymerase (PARP) inhibitor, from BioMarin Pharmaceutical Inc., as announced in October 2015.

Completed collaboration to pursue the translation of a novel gene expression signature algorithm from Medivation into a companion diagnostic assay using NanoString’s nCounter Dx Analysis System, together with Astellas Pharma Inc., as announced in January 2016.

Named Marion McCourt to the role of Chief Operating Officer, whose responsibilities include oversight of several functions including commercial operations, medical affairs, manufacturing, quality and corporate efficiency, effective February 2016.
Results from Phase 2 TERRAIN trial of enzalutamide versus bicalutamide in metastatic castration-resistant prostate cancer published in Lancet Oncology.

Results from Phase 2 STRIVE trial of enzalutamide versus bicalutamide in castration-resistant prostate cancer published in the Journal of Clinical Oncology.

Supplemental New Drug Application for XTANDI in metastatic castration-resistant prostate cancer accepted for review by U.S. Food and Drug Administration (FDA).

Medivation’s non-GAAP collaboration revenue for the fourth quarter of 2015, which excludes collaboration revenue related to upfront and milestone payments, was $202.7 million compared with $133.3 million for the same period in 2014 (+52% vs. prior year) and $695.4 million for the full year 2015 compared with $389.4 million in 2014 (+79% vs. prior year).

Medivation’s non-GAAP collaboration revenue consists of two components: a) collaboration revenue related to U.S. XTANDI net sales and b) collaboration revenue related to ex-U.S. XTANDI net sales.

a) Medivation’s collaboration revenue related to U.S. net sales of XTANDI for the fourth quarter 2015 was $157.9 million compared with $115.1 million for the same period in 2014 (+37% vs. prior year) and $575.7 million for the full year 2015 compared with $339.9 million for 2014 (+69% vs. prior year).

b) Medivation’s collaboration revenue related to ex-U.S. net sales of XTANDI for the fourth quarter 2015 was $44.8 million compared with $18.2 million for the same period in 2014 (+146% vs. prior year) and $119.8 million for the full year 2015 compared with $49.5 million for 2014 (+142% vs. prior year).

Non-GAAP operating expenses were $127.1 million for the quarter ended December 31, 2015 compared with $109.3 million for the same period in 2014 and $430.0 million for the full year 2015 compared with $334.4 million for 2014.

Non-GAAP research and development (R&D) expenses for the fourth quarter of 2015 were $61.4 million, compared with $44.2 million for the same period in 2014 and $180.6 million for the full year 2015 compared with $134.0 million for 2014. The increase in non-GAAP R&D expenses for the fourth quarter of 2015 relates primarily to an increase in third-party clinical and preclinical development costs due to an increase of activities, which include those related to the acquisition of MDV3800 that was completed during the quarter. The increase in non-GAAP R&D expenses for the full year 2015 also relates primarily to an increase in third-party clinical and preclinical development costs and personnel costs resulting from higher staffing levels and in facilities and information technology costs.

Non-GAAP selling, general and administrative (SG&A) expenses for the fourth quarter of 2015 were $65.7 million, compared with $65.1 million for the same period in 2014 and $249.4 million for the full year 2015 compared with $200.4 million for 2014. The slight increase in non-GAAP SG&A expenses for the fourth quarter of 2015 relates primarily to higher administrative costs and royalties, which are partially offset by a decrease in XTANDI collaboration expenses. The increase in non-GAAP SG&A expenses for the full year 2015 relates primarily to higher collaboration expenses, as well as higher administrative and personnel-related costs, and royalties.

Non-GAAP net income for the fourth quarter of 2015 was $49.5 million, or $0.29 per diluted share, compared with non-GAAP net income of $18.0 million, or $0.11 per diluted share, for the same period in 2014. Medivation reported non-GAAP net income of $170.0 million, or $1.01 per diluted share, for the full year 2015, compared with non-GAAP net income of $34.6 million, or $0.22 per diluted share, in 2014.

On a GAAP basis, Medivation’s collaboration revenue for the fourth quarter of 2015 was $377.7 million compared with $274.7 million for the same period in 2014 (+37% vs. prior year) and $943.3 million for the full year 2015 compared with $710.5 million in 2014 (+33% vs. prior year). Medivation’s GAAP-basis collaboration revenue includes upfront and milestone payments for the fourth quarter of 2015 (not included in non-GAAP collaboration revenue), which totaled $175.0 million compared with $141.4 million for the same period in 2014 (+24% vs. prior year) and $247.8 million for the full year 2015 compared with $321.1 million in 2014 (-23% vs. prior year).

Operating expenses were $156.3 million for the quarter ended December 31, 2015 on a GAAP basis compared with $131.3 million for the same period in 2014 and $528.6 million for the full year 2015 compared with $428.6 million for 2014. Non-cash, stock-based compensation expense included in GAAP-basis operating expenses was $54.9 million in 2015 and $45.1 million in 2014.

R&D expenses for the fourth quarter of 2015 were $94.3 million on a GAAP basis compared with $57.9 million for the same period in 2014 and $232.1 million for the full year 2015 compared with $189.6 million for 2014. R&D expenses for the fourth quarter of 2015 include a $30.0 million non-cash charge related to partial impairment of an intangible in-process R&D asset pidilizumab (MDV9300). In the quarter, the Company determined the MDV9300 antibody does not bind to PD-1 and notified the Food and Drug Administration in January 2016, resulting in a partial clinical hold. In addition, the Company intends to submit an amendment to the Chemistry, Manufacturing and Controls, (CMC) section of its investigational new drug (IND) application for MDV9300 to incorporate certain manufacturing changes. These considerations gave rise to a change in clinical trial timelines and other significant inputs to the IPR&D asset valuation, leading to the partial impairment determination. Nevertheless, the Company believes MDV9300’s profile and clinical activity may differentiate it favorably among immuno-oncology agents. MDV9300 continues to show promise with activity and positive data observed in hematologic indications, including new data published in the fourth quarter in multiple myeloma. The non-cash impairment charge is excluded from non-GAAP results discussed above.

SG&A expenses for the fourth quarter of 2015 were $62.1 million on a GAAP basis compared with $73.4 million for the same period in 2014 and $296.5 million for the full year 2015 compared with $239.1 million for 2014.

Medivation reported GAAP-basis net income of $142.5 million, or $0.85 per diluted share, for the quarter ended December 31, 2015, compared with GAAP net income of $164.2 million, or $0.98 per diluted share, for the same period in 2014. Medivation reported GAAP net income of $244.7 million, or $1.47 per diluted share, for the full year 2015, compared to a GAAP net income of $276.5 million or $1.71 per diluted share in 2014. The comparison is affected, in part, by lower milestone-related revenue in 2015. As of the end of 2015, all development and sales milestones under the Astellas collaboration have now been earned. Worldwide sales eclipsed two milestone levels of $1.2 billion in the third quarter and $1.6 billion in the fourth quarter.

U.S. net sales of XTANDI, as reported by Astellas Pharma Inc, were $315.9 million for the quarter (+37% vs. prior year) and $1.15 billion for the full year 2015 (+69% vs. prior year). Net sales for the quarter ended December 31, 2015 included an unfavorable adjustment of $2.6 million related to changes in Astellas’ estimate of prior period gross-to-net deductions against gross sales and an increase in channel partner inventory of just over one-half week of supply. As seen in previous years, we anticipate U.S. net sales in the first quarter 2016 at the Astellas level may be below the level reported in the fourth quarter 2015, as a result of an expected higher gross-to-net rate (related to Part D coverage gap) and anticipated lower channel partner inventories (estimated at one-half week).

Ex-U.S. net sales of XTANDI, as reported by Astellas, were approximately $231 million for the quarter (approximately +83% vs. prior year) and approximately $757 million for the full year 2015 (nearly doubled vs. prior year). Fluctuating currency exchange rates reduced estimated 2015 ex-U.S. net sales at the Astellas level, as expressed in U.S. dollars, by approximately 10% for the quarter and 14% for the year compared with the comparable 2014 periods.

At December 31, 2015, cash and cash equivalents were $225.9 million, compared with $502.7 million at December 31, 2014. In the second and third quarters of 2015, the Company utilized $259.9 million in cash for the retirement of the convertible notes and, in October, utilized $410.0 million in cash to fund an upfront payment to BioMarin Pharmaceutical Inc., for the acquisition of MDV3800.

The Company has provided full-year 2016 financial guidance, as detailed below.

FULL-YEAR 2016 FINANCIAL GUIDANCE
Year Ending December 31, 2016
U.S. net sales of XTANDI $1.425 to $1.525 billion(1)
Non-GAAP collaboration revenue $900 to $970 million(2)
Non-GAAP operating expenses $555 to $600 million(3)
Non-GAAP R&D expenses $280 to $300 million(4)
Non-GAAP SG&A expenses $275 to $300 million(5)
Non-GAAP tax rate(6) 35.5% – 36%
Non-GAAP diluted earnings per share $1.30 – $1.40

(1) This represents Medivation’s projection of U.S. net sales at the Astellas level.

(2) This measure includes (i) Medivation’s collaboration revenue related to U.S. net sales of XTANDI and (ii) Medivation’s collaboration revenue related to ex-U.S. net sales of XTANDI, in the form of a royalty payment earned from Astellas.

(3) Non-GAAP operating expenses, net of cost-sharing payments to/from Astellas, are expected to range between $555 and $600 million. Non-GAAP operating expenses exclude non-cash, stock-based compensation expense, and any change in fair value of contingent purchase consideration or in-process research and development expenses.

(4) Non-GAAP R&D expenses excludes approximately $30 – $35 million of stock-based compensation expense and any change in acquisition related fair value re-measurements such as contingent consideration or in-process research and development expenses

(5) Non-GAAP SG&A expenses excludes approximately $38 – $42 million of stock-based compensation expense, and any change in fair value of contingent purchase consideration.

(6) The 2016 non-GAAP tax rate is expected to range between 35.5% – 36%.

MEDIVATION, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited)
December 31, 2015 December 31, 2014
ASSETS
Current assets:
Cash and cash equivalents $ 225,853 $ 502,677
Receivable from collaboration partner 391,558 184,737
Deferred income tax assets - 21,987
Prepaid expenses and other current assets 15,877 12,264
Restricted cash 930 203
Total current assets 634,218 721,868
Property and equipment, net 58,142 41,161
Intangible assets 644,299 101,000
Deferred income tax assets, non-current 57,011 15,176
Restricted cash, net of current 12,206 11,562
Goodwill 18,643 10,000
Other non-current assets 7,072 10,852
Total assets $ 1,431,591 $ 911,619
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable, accrued expenses and other current liabilities $ 186,203 $ 106,128
Borrowings under Revolving Credit Facility 75,000 -
Contingent consideration 4,900 10,000
Deferred revenue - 2,822
Current portion of build-to-suit lease obligation - 698
Current portion of Convertible Notes, net of unamortized discount of $- and $1 at December 31, 2015 and 2014, respectively - 4
Total current liabilities 266,103 119,652
Convertible Notes, net of unamortized discount of $- and $36,598 at December 31, 2015 and 2014, respectively - 222,140
Contingent consideration 262,368 96,000
Build-to-suit lease obligation, excluding current portion 17,406 18,711
Other non-current liabilities 13,035 5,817
Total liabilities 558,912 462,320
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value per share; 1,000,000 shares authorized; no shares issued and outstanding - -
Common stock, $0.01 par value per share; 340,000,000 shares authorized; 163,905,342 and 156,234,454 shares issued and outstanding at December 31, 2015 and 2014, respectively 1,639 1,562
Additional paid-in capital 684,841 505,446
Retained earnings (accumulated deficit) 186,199 (57,709 )
Total stockholders’ equity 872,679 449,299
Total liabilities and stockholders’ equity $ 1,431,591 $ 911,619
MEDIVATION, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended
December 31, Years Ended
December 31,
2015 2014 2015 2014
Collaboration revenue $ 377,748 $ 274,730 $ 943,258 $ 710,487
Operating expenses:
Research and development expenses 94,259 57,877 232,100 189,570
Selling, general and administrative expenses 62,089 73,376 296,545 239,071
Total operating expenses 156,348 131,253 528,645 428,641
Income from operations 221,400 143,477 414,613 281,846
Other income (expense), net:
Loss on extinguishment of Convertible Notes - - (21,087 ) -
Interest expense (488 ) (5,589 ) (12,483 ) (21,690 )
Other, net 28 88 275 38
Total other income (expense), net (460 ) (5,501 ) (33,295 ) (21,652 )
Income before income tax (expense) benefit 220,940 137,976 381,318 260,194
Income tax (expense) benefit (78,433 ) 26,229 (136,593 ) 16,258
Net income $ 142,507 $ 164,205 $ 244,725 $ 276,452
Basic net income per common share $ 0.87 $ 1.06 $ 1.53 $ 1.80
Diluted net income per common share $ 0.85 $ 0.98 $ 1.47 $ 1.71
Weighted average common shares used in the calculation of basic net income per common share 163,746 155,644 160,345 153,859
Weighted average common shares used in the calculation of diluted net income per common share 168,368 171,513 169,324 170,001
MEDIVATION, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(in thousands, except per share amounts)
(unaudited)
Three Months Ended Year Ended
December 31,
2015 December 31,
2014 December 31,
2015 December 31,
2014
Collaboration revenue reconciliation:
GAAP collaboration revenue $ 377,748 $ 274,730 $ 943,258 $ 710,487
Milestone-related payments from Astellas (a) (175,000 ) (141,411 ) (247,822 ) (321,109 )
Non-GAAP collaboration revenue $ 202,748 $ 133,319 $ 695,436 $ 389,378
Research and development expenses reconciliation:
GAAP research and development expenses $ 94,259 $ 57,877 $ 232,100 $ 189,570
Stock-based compensation expense (b) (6,775 ) (4,677 ) (24,368 ) (17,913 )
Contingent consideration (c) 3,949 - 2,833 -
Impairment of intangible asset (d) (30,000 ) - (30,000 ) -
Milestone-related payments to third party (e) - (9,000 ) - (25,700 )
License payments to third party (e) - - - (12,000 )
Non-GAAP research and development expenses $ 61,433 $ 44,200 $ 180,565 $ 133,957
Selling, general, and administrative expenses reconciliation:
GAAP selling, general, and administrative expenses $ 62,089 $ 73,376 $ 296,545 $ 239,071
Stock-based compensation expense (b) (7,245 ) (7,658 ) (30,494 ) (27,221 )
Contingent consideration (c) 13,524 - 7,841 -
Milestone-related payments to third party (e) (2,714 ) (638 ) (24,500 ) (5,000 )
U.S. Branded Prescription Drug Fee adjustment (e) - - - (6,441 )
Non-GAAP selling, general, and administrative expenses $ 65,654 $ 65,080 $ 249,392 $ 200,409
Other expense (income), net reconciliation:
GAAP other expense (income), net $ 460 $ 5,501 $ 33,295 $ 21,652
Non-cash interest expense (f) (65 ) (3,891 ) (10,299 ) (14,898 )
Loss on extinguishment of convertible notes (g) - - (21,087 ) -
Non-GAAP other expense (income), net $ 395 $ 1,610 $ 1,909 $ 6,754
Income tax expense reconciliation:
GAAP income tax expense (benefit) $ 78,433 $ (26,229 ) $ 136,593 $ (16,258 )
Income tax effect on non-GAAP adjustments (h) (52,655 ) (40,483 ) (43,023 ) (74,966 )
Change in valuation allowance (h) - 71,130 - 104,861
Non-GAAP income tax expense $ 25,778 $ 4,418 $ 93,570 $ 13,637
Net income reconciliation:
GAAP net income $ 142,507 $ 164,205 $ 244,725 $ 276,452
Milestone-related payments from Astellas (a) (175,000 ) (141,411 ) (247,822 ) (321,109 )
Stock-based compensation expense (b) 14,020 12,335 54,862 45,134
Contingent consideration (c) (17,473 ) - (10,674 ) -
Impairment of intangible asset (d) 30,000 - 30,000 -
Milestone-related payments to third party (e) 2,714 9,638 24,500 30,700
License payments to third party (e) - - - 12,000
U.S. Branded Prescription Drug Fee adjustment (e) - - - 6,441
Non-cash interest expense (f) 65 3,891 10,299 14,898
Loss on extinguishment of Convertible Notes (g) - - 21,087 -
Income tax adjustments (h) 52,655 (30,647 ) 43,023 (29,895 )
Non-GAAP net income $ 49,488 $ 18,011 $ 170,000 $ 34,621
Diluted net income per share reconciliation:
GAAP net income $ 142,507 $ 164,205 $ 244,725 $ 276,452
Interest expense related to convertible notes, net of taxes (i) - 3,616 3,629 14,030
GAAP diluted net income 142,507 167,821 248,354 290,482
Non-GAAP adjustments after-tax (93,019 ) (146,194 ) (74,725 ) (241,831 )
Interest expense related to Convertible Notes, net of taxes (i) - (3,616 ) (2,531 ) (14,030 )
Non-GAAP diluted net income $ 49,488 $ 18,011 $ 171,098 $ 34,621
Non-GAAP diluted net income per share $ 0.29 $ 0.11 $ 1.01 $ 0.22
Shares used in per share calculation (diluted):
GAAP shares used in per share calculation (diluted) (j) 168,368 171,513 169,324 170,001
Anti-dilutive effect of potential common shares for convertible notes - (10,100 ) - (10,100 )
Non-GAAP shares used in per share calculation (diluted) (j) 168,368 161,413 169,324 159,901
Non-GAAP adjustment summary:
Collaboration revenue $ (175,000 ) $ (141,411 ) $ (247,822 ) $ (321,109 )
Research and development expenses 32,826 13,677 51,535 55,613
Selling, general and administrative expenses (3,565 ) 8,296 47,153 38,662
Other expense (income), net 65 3,891 31,386 14,898
Total non-GAAP adjustments before tax (145,674 ) (115,547 ) (117,748 ) (211,936 )
Income tax effect 52,655 (30,647 ) 43,023 (29,895 )
Total non-GAAP adjustments after tax $ (93,019 ) $ (146,194 ) $ (74,725 ) $ (241,831 )
(a) Upfront and milestone payments from Astellas: Upfront and milestone payments are excluded from non-GAAP financial measures because they occur at irregular intervals and are not related to Medivation’s long term core business going forward; such exclusion allows for better representation of the ongoing economics of the business, facilitates period over period comparison and is reflective of how Medivation manages its business.

(b) Stock-based compensation expense: Stock-based compensation expense is excluded from non-GAAP financial measures because of the nature of this charge, varying available valuation methodologies, subjective assumptions and the variety of award types; such exclusion facilitates comparison of Medivation’s operating results to peer companies.

(c) Contingent consideration: The effects of contingent consideration valuation are excluded from non-GAAP financial measures because of the nature of this item, which is related to the change in fair value of the liability for contingent consideration related to Medivation’s License Agreement with CureTech, Inc. for MDV9300 and the acquisition of worldwide rights to MDV3800 from BioMarin; such exclusion facilitates comparisons of Medivation’s operating results to peer companies.

(d) Impairment of intangible asset: The effects of impairment of intangible asset are excluded from non-GAAP financial measures because of the nature of this item, which is related to impairment of our IPR&D asset related to MDV9300; such exclusion facilitates comparisons of Medivation’s operating results to peer companies.

(e) Milestone-related payments to third party and other adjustments: These payments and adjustments are excluded from non-GAAP financial measures because they occur at irregular intervals and are not related to Medivation’s long term core business going forward; such exclusion allows for better representation of the ongoing economics of the business, facilitates period over period comparison and is reflective of how Medivation manages its business.

(f) Non-cash interest expense related to the Convertible Notes and Revolving Credit Facility: The effects of non-cash interest expense related to the Convertible Notes and the Revolving Credit Facility are excluded from non-GAAP financial measures because these expenses are non-cash expenses; such exclusion facilitates comparison of Medivation’s cash operating results to peer companies and is reflective of how Medivation manages its business.

(g) Loss on extinguishment of Convertible Notes: The effects of loss on extinguishment of Convertible Notes are excluded from non-GAAP financial measures because this expense is a non-cash charge; such exclusion facilitates comparison of Medivation’s cash operating results to peer companies and is reflective of how Medivation manages its business.

(h) Income tax adjustments: Adjustments to income tax expense for non-GAAP financial measures consist of the income tax effect of the non-GAAP adjustments and changes in valuation allowance.

(i) Interest expense related to Convertible Notes: For the three and twelve months ended December 31, 2014 and the twelve months ended December 31, 2015, interest expense related to the Convertible Notes was included in the computation of diluted net income per share for GAAP purposes because the effect was dilutive. However, it was excluded from the computation of diluted net income per share for non-GAAP purposes because the effect was anti-dilutive. For the twelve months ended December 31, 2015, cash interest expense, net of tax, of $1.1 million is added back to non-GAAP net income for purposes of the non-GAAP diluted net income per share calculation.

(j) Shares used in per share calculation (diluted): In periods in which Medivation reports a GAAP or non-GAAP net loss, all common stock equivalents are deemed anti-dilutive and basic and diluted shares are equal. In periods in which Medivation reports a GAAP or non-GAAP net income, the dilutive effect of common stock equivalents related to common stock issuable under Medivation’s equity incentive plan is included in the GAAP and non-GAAP net income per share calculation for that period.

In periods in which Medivation reports GAAP or non-GAAP net income, the effect of contingently issuable shares is considered in the calculation of diluted net income per share. The Convertible Notes had no effect on the diluted net income per share calculation for the three months ended December 31, 2015 for both GAAP and non-GAAP purposes because Medivation completed the settlement of all of its Convertible Notes during the third quarter of 2015. For the twelve months ended December 31, 2015, Medivation included the effect of approximately 3.9 million contingently issuable shares related to the Convertible Notes in the diluted net income per share calculation for both GAAP and non-GAAP purposes. For the three and twelve months ended December 31, 2014, Medivation included the effect of approximately 10.1 million contingently issuable shares related to the Convertible Notes in the diluted net income per share calculation for GAAP purposes. The effect of the Convertible Notes is excluded from the diluted net income per share calculation for non-GAAP purposes for the three and twelve months ended December 31, 2014 because their effect is anti-dilutive.

Non-GAAP Financial Measures
To supplement Medivation’s financial results presented on a U.S. generally accepted accounting principles, or GAAP, basis, Medivation uses certain non-GAAP financial measures as shown in the tables above. Medivation believes that these non-GAAP financial measures are helpful in understanding Medivation’s past financial performance and potential future financial results. These non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable U.S. GAAP financial measures, and they should be read in conjunction with Medivation’s consolidated financial statements prepared in accordance with U.S. GAAP. Medivation’s management uses these non-GAAP financial measures for planning, budgeting, forecasting and performance measurement, to assess historical operating performance and make financial and operational business decisions, and also to provide forecasts and financial guidance to investors on this basis. In addition, Medivation believes that the presentation of these non-GAAP financial measures is useful to investors because it enhances the ability of investors to compare Medivation’s financial results period over period and allows for greater transparency with respect to key financial metrics Medivation uses in making operating decisions, and also because Medivation’s investors and analysts regularly use them to model or track Medivation’s financial performance. Medivation believes that the non-GAAP financial measures provide investors with a meaningful understanding of its historical and potential future financial results because they exclude certain non-cash charges such as stock-based compensation which is substantially dependent on changes in the market price of Medivation’s common stock and the timing of equity awards, impairment charges, contingent purchase consideration, revenues and expenses that occur at irregular intervals, such as milestone payments earned from collaboration partners and related payments to licensors of technology, and non-cash interest expense, and losses related to Convertible Notes. Investors should note that these non-GAAP financial measures are not prepared under any comprehensive set of accounting rules or principles and do not reflect all of the amounts associated with Medivation’s results of operations as determined in accordance with U.S. GAAP. Investors should also note that these non-GAAP financial measures have no standardized meaning prescribed by U.S. GAAP and, therefore, have limits in their usefulness to investors. In addition, from time-to-time in the future there may be other items that Medivation may exclude for the purposes of its non-GAAP financial measures; likewise, Medivation may in the future cease to exclude items that Medivation has historically excluded for the purpose of Medivation’s non-GAAP financial measures. Medivation’s non-GAAP financial measures may not be comparable with non-GAAP financial measures provided by other companies.

On February 25, 2016 Clovis Oncology, Inc. (NASDAQ:CLVS) reported financial results for its quarter and year ended December 31, 2015, and provided an update on the Company’s clinical development programs and regulatory outlook for 2016 (Press release, Clovis Oncology, FEB 25, 2016, View Source;p=RssLanding&cat=news&id=2143489 [SID:1234509215]).

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"2016 has the potential to be a very transformational year for Clovis," said Patrick J. Mahaffy, President and CEO of Clovis Oncology. "We are preparing for the rociletinib ODAC panel in April ahead of our June 28, 2016 PDUFA date, as well as the planned NDA submission of rucaparib during the second quarter. Our U.S. commercial and medical affairs organizations are in place as we work toward the potential launch of two oncology drugs in the U.S. within the next twelve months."

2015 Financial Results

Clovis had $528.6 million in cash, cash equivalents and available-for-sale securities as of December 31, 2015. Cash used in operating activities was $75.7 million for the fourth quarter of 2015, and $253.1 million for the year ending December 31, 2015, inclusive of $12.0 million in rociletinib milestone payments made in the third quarter of 2015.

Clovis reported a net loss for the fourth quarter of 2015 of $119.5 million ($3.12) per share, and $352.9 million ($9.79) per share for the year ended December 31, 2015. Importantly, the net loss for the fourth quarter and full year 2015 includes a $89.6 million non-cash charge ($61.0 million net of the related income tax benefit) for the impairment of the intangible asset relating to the lucitanib product rights recorded in 2013 in connection with the Company’s acquisition of Ethical Oncology Science S.p.A. (EOS) and a $26.9 million non-cash expense credit for the reduction in the fair value of the contingent purchase considerations liability, also related to the EOS acquisition. The adjusted net loss excluding these items was $85.4 million ($2.23 per share) in the fourth quarter of 2015 and $318.8 million ($8.85 per share) for the year ended December 31, 2015. The net loss for the fourth quarter of 2014 was $54.9 million ($1.62 per share) and $160.0 million ($4.72 per share) for the year ended December 31, 2014.

Research and development expenses totaled $76.0 million for the fourth quarter of 2015 and $269.3 million for the full year 2015, compared to $50.1 million for the fourth quarter and $137.7 million for the full year 2014. The increase in expenses for both periods is due to the significantly expanded clinical development activities for rociletinib and rucaparib, increased commercial product planning costs associated with the potential approval and launch of rociletinib, and increased personnel-related expenses associated with the hiring of additional staff to support the Company’s expanded activities, including the hiring of the U.S. commercial and medical affairs organizations.

General and administrative expenses totaled $8.2 million for the fourth quarter of 2015 and $30.5 million for the full year 2015, compared to $5.6 million for the fourth quarter and $21.5 million for the full year 2014. The increase year over year is primarily due to personnel costs for employees engaged in general and administrative activities, increased facility costs and higher professional service fees.

As noted above, in the fourth quarter of 2015 Clovis recorded a non-cash impairment charge of $89.6 million to reflect a reduction in the estimated fair value of the intangible asset related to lucitanib. This reduction in fair value was the result of our and our development partner’s decision to terminate the development of lucitanib for lung cancer, as well as updates to the probability-weighted discounted cash flow assumptions for the breast cancer indication.

In connection with its acquisition of EOS, Clovis is obligated to pay additional consideration to the former EOS shareholders if certain future regulatory and sales milestones for lucitanib are achieved. The estimated fair value of these contingent payments is recorded as a liability on the Company’s balance sheet. During the fourth quarter of 2015, Clovis recorded a $26.9 million reduction in the fair value of the contingent consideration liability due to a change in the estimated probability-weighted future milestone payments. This reduction is included as a non-cash credit to operating expenses in Clovis’ 2015 results of operations.

There was no acquired in-process research and development expense for the fourth quarter of 2015, and $12.0 million for the full year 2015, with none reported in the fourth quarter of 2014 and $8.8 million for the full year 2014. During the third quarter of 2015, the Company made milestone payments totaling $12.0 million upon the acceptance of the NDA and MAA submissions for rociletinib by the U.S. FDA and European Medicines Agency, respectively. In the first quarter of 2014, the Company recorded milestone revenue of $13.6 million received pursuant to our collaboration and license agreement for lucitanib and also recognized charges for acquired in-process research and development expense totaling $8.4 million associated with milestone payments incurred for rociletinib and lucitanib.

Operating expenses for the fourth quarter of 2015 and year ended December 31, 2015 include share-based compensation expense totaling $10.9 million and $40.4 million, respectively.

2016 Key Milestones and Objectives

Highlights of planned or completed objectives for each product follow:

Rociletinib

Rociletinib is an investigational therapy for the treatment of patients with mutant epidermal growth factor receptor (EGFR) non-small cell lung cancer (NSCLC) who have been previously treated with an EGFR-targeted therapy and have the EGFR T790M mutation. The U.S. Food and Drug Administration (FDA) has accepted Clovis’ New Drug Application (NDA) for rociletinib and has granted it priority review status with a Prescription Drug User Fee Act (PDUFA) action date of June 28, 2016. In addition, the European Medicines Agency (EMA) has accepted the Marketing Authorization Application (MAA) for rociletinib. Both reviews are ongoing.

The Company is preparing for its scheduled Oncologic Drugs Advisory Committee (ODAC) panel discussion regarding the rociletinib NDA on April 12, 2016.

During the first quarter the Company initiated a Phase 1b/2 trial of rociletinib in combination with investigational cancer immunotherapy atezolizumab (MPDL3280A; anti-PD-L1 antibody). The Clovis-sponsored study is designed to assess the safety and activity of the combination in patients with activating EGFR mutation-positive (EGFRm) advanced or metastatic NSCLC.

Rucaparib

During the second quarter of 2016, Clovis intends to complete its rolling NDA submission to the FDA for rucaparib as treatment for advanced ovarian cancer patients with a tumor BRCA mutation (germline and somatic mutations), including platinum-sensitive, -resistant and -refractory patients. In addition, the Company intends to submit an MAA for rucaparib for a comparable ovarian treatment indication by the end of 2016. Enrollment in the ARIEL3 pivotal maintenance study is expected to complete in the next few months, with data expected to be available approximately 12 months later. Pending positive data, supplemental NDAs for maintenance indications in tumor BRCA mutant patients and BRCA-like patients with advanced ovarian cancer are expected to follow.

During the second half of 2016, the Company intends to initiate a study of rucaparib in metastatic castrate-resistant BRCA mutant (inclusive of germline and somatic) prostate cancer patients. In addition, the Company expects to initiate the ARIEL4 confirmatory study in advanced ovarian cancer, including both tumor BRCA mutant and, potentially, BRCA-like patients.

Lucitanib

A Phase 2 program is ongoing to explore lucitanib in patients with treatment-refractory breast cancer. In parallel with Clovis’ sponsored study, a Servier-sponsored Phase 2 study of lucitanib in patients with advanced breast cancer is underway to identify the population of patients most likely to benefit from lucitanib therapy.

About Rociletinib

Rociletinib is an oral, potent, mutant-selective inhibitor of epidermal growth factor receptor (EGFR) under investigation for the treatment of EGFR-mutated non-small cell lung cancer (NSCLC). Rociletinib targets the activating mutations of EGFR (L858R and Del19), while also inhibiting the dominant acquired resistance mutation, T790M. The T790M mutation develops in approximately 60 percent of patients treated with first- and second-generation EGFR inhibitors. Rociletinib was granted Breakthrough Therapy designation by the U.S. FDA in May 2014. Clovis holds worldwide rights for rociletinib.

About Rucaparib

Rucaparib is an oral, potent small molecule inhibitor of PARP1 and PARP2 being developed for the treatment of ovarian cancer, specifically in patients with tumors with BRCA mutations and other DNA repair deficiencies beyond BRCA, including those with high genomic loss of heterozygosity (LOH) commonly referred to as "BRCA-like." Clovis is also exploring rucaparib in other solid tumor types with significant BRCA and BRCA-like populations, including prostate, breast and gastroesophageal cancers. Rucaparib was granted Breakthrough Therapy designation by the U.S. FDA in April 2015. Clovis holds worldwide rights for rucaparib.

About Lucitanib

Lucitanib is an oral, potent inhibitor of the tyrosine kinase activity of vascular endothelial growth factor receptors 1 through 3 (VEGFR1-3), platelet-derived growth factor receptors alpha and beta (PDGFRα-β) and fibroblast growth factor receptors 1 through 3 (FGFR1-3). Clovis, which holds exclusive U.S. and Japanese rights, is collaborating with its development partner Les Laboratoires Servier (Servier) on the global clinical development of lucitanib outside of China, initially targeting advanced breast cancer.