On May 2, 2017 Aduro Biotech, Inc. (NASDAQ:ADRO) reported financial results for the first quarter ended March 31, 2017 (Press release, Aduro Biotech, MAY 2, 2017, View Source [SID1234518790]). Net loss for the first quarter of 2017 was $21.8 million, or $0.32 per share, compared to a net loss of $28.8 million, or $0.45 per share for the same period in 2016.

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Cash, cash equivalents and marketable securities totaled $356.0 million at March 31, 2017, compared to $361.9 million at December 31, 2016.

"This will be an important year for Aduro, as we generate data in our ongoing ADU-S100/STING monotherapy trial and our planned Phase 2 trial in mesothelioma, as well as look for data from Janssen’s Phase 1 trials in lung and prostate cancers evaluating LADD therapeutic candidates," said Stephen T. Isaacs, chairman, president and chief executive officer of Aduro. "We also plan to advance our STING program into additional clinical studies in collaboration with Novartis, and the first antibody from our B-select platform, the novel anti-APRIL antibody, is expected to be cleared for clinical testing this year. With ten product candidates in our diversified portfolio and a healthy balance sheet, we are in a strong position to continue to advance our pipeline and build a leading immunotherapy company."

Key Recent Accomplishments

Established a clinical collaboration with Merck to evaluate the combination of Aduro’s LADD agent CRS-207 with Merck’s KEYTRUDA (pembrolizumab) in a Phase 2 study in gastric cancer
Entered into an exclusive license agreement with Stanford University for the use of neoantigen identification technology in therapeutics using modified Listeria for our personalized LADD program, pLADD
Expanded Aduro’s Scientific Advisory Board with leading immunotherapy and oncology experts
Presented at the American Association for Cancer Research (AACR) (Free AACR Whitepaper) Annual Meeting on BION-1301, anti-APRIL antibody, and ADU-S100 STING agonist
Presented at the Keystone Symposia on Cancer Immunology and Immunotherapy Conference on ADU-S100 and pLADD
Anticipated 2017 Milestones

Initiate Phase 2 mesothelioma trial with CRS-207 in combination with anti-PD1 in the first half of 2017 and report early results in the second half of 2017
Initiate Phase 2 gastric trial with CRS-207 in combination with anti-PD1 in the first half of 2017
Initiate Phase 1 pLADD (personalized LADD) trial in advanced gastro-intestinal cancers in the second half of 2017
Janssen expected to initiate Phase 1b/2 trial of ADU-214 in lung cancer and determine next steps for ADU-741 in prostate cancer in the second half of 2017
Report top-line findings from Phase 1 monotherapy trial of ADU-S100 in the second half of 2017
In collaboration with Novartis, initiate Phase 1b trial of ADU-S100 in combination with anti-PD1 in the second half of 2017
File Investigational New Drug Application for BION-1301, anti-APRIL antibody, in the second half of 2017
Initiate Phase 1 multiple myeloma trial with anti-APRIL antibody in the second half of 2017
First Quarter 2017 Financial Results
Revenue for the first quarter of 2017 was $3.8 million, compared to $4.0 million for the same period in 2016. The revenue recognized in both quarters primarily relates to deferred upfront payments under the Novartis collaboration agreement. In addition, revenue in the first quarter of 2016 included reimbursed research services of $0.2 million.

Research and development expenses were $20.6 million for the first quarter of 2017, compared to $20.9 million for the same period in 2016. Research and development expenses incurred in the first quarter of 2016 included GVAX Pancreas manufacturing and pancreatic cancer clinical trial expenses, which did not occur in 2017. The decrease in expenses was partially offset by increased costs to manufacture our B-select antibodies and increased research and development expenses for the STING platform, as well as higher personnel and facility related costs in first quarter of 2017.

General and administrative expenses were $8.3 million for the first quarter of 2017, compared to $9.0 million for the same period in 2016. This decrease was primarily due to lower consulting and professional fees.

Income tax benefit was $2.8 million for the first quarter of 2017, compared to a provision for income taxes of $3.2 million for the same period in 2016. The income tax benefit recorded for the first quarter of 2017 was due to the current benefit of federal income taxes paid in 2016.

On May 2, 2017 Spectrum Pharmaceuticals, Inc. (NasdaqGS: SPPI), a biotechnology company with fully integrated commercial and drug development operations with a primary focus in Hematology and Oncology, reported results for the three-month period ended March 31, 2017 (Press release, Spectrum Pharmaceuticals, MAY 2, 2017, View Source [SID1234518788]).

“We remain focused on our advanced stage pipeline and look forward to several important milestones in the near future,” said Rajesh C. Shrotriya, MD, Chairman and Chief Executive Officer of Spectrum Pharmaceuticals. “Based on the preclinical results and clinical data from the first compassionate-use patient, treated at MD Anderson Cancer Center by Dr. John Heymach under a compassionate-use protocol approved by the FDA, enthusiasm is building in the scientific community about the potential of poziotinib in non-small cell lung cancer patients with exon 20 insertion mutations. There is immense need for effective therapies in this disease as the current progression free survival is under 2 months. In addition, I am delighted with the recent pace of enrollment of the ROLONTIS Phase 3 program. Since the beginning of this year, we have enrolled over 135 patients in the pivotal trial. We are looking forward to Phase 3 results and a BLA filing next year. With three advanced stage drugs being studied in multiple tumors, I believe Spectrum is poised for transformational growth.”

Pipeline Update:

ROLONTIS (eflapegrastim), a novel long-acting GCSF: A pivotal Phase 3 study (ADVANCE) was initiated under an SPA from the FDA in 2016 to evaluate ROLONTIS in the management of chemotherapy-induced neutropenia. Based on the amended SPA, the size of the ADVANCE study was reduced to 400 from 580 evaluable patients. The ADVANCE study is now 75% enrolled and the Company expects to complete enrollment in the second half of this year. To strengthen the regulatory package in the U.S. and Europe, the Company has initiated the 218-patient RECOVER study, which is expected to include sites not only from the U.S., but also from Europe, Canada and South Korea. For the RECOVER Study, sites have been initiated and first patient enrollment is imminent. The Company continues to expect to file the BLA next year.
Poziotinib, a potential best-in-class, novel, pan-HER inhibitor: An investigator sponsored trial has been initiated at the University of Texas MD Anderson Cancer Center in non-small cell lung cancer patients with EGFR exon 20 insertion mutations. The study is expected to yield interim results before year end. Spectrum is also conducting a Phase 2 breast cancer study in the U.S., based on promising Phase 1 study efficacy data in breast cancer patients who had failed multiple HER2-directed therapies. Further, multiple Phase 2 studies are being conducted in South Korea by Hanmi Pharmaceuticals and National OncoVenture to study breast, lung, head-and-neck and gastric cancer indications.
QAPZOLA, a potent tumor-activated drug being investigated for low and intermediate risk non-muscle invasive bladder cancer: The Company received a new SPA from the FDA for a new Phase 3 study incorporating learnings from the previous studies, as well as recommendations from the FDA. Compared to the previous program, this new Phase 3 study will include fewer evaluable patients (n=425 versus 1,557 patients), use a higher dosage of QAPZOLA (8 mg versus 4 mg), and will evaluate time-to-recurrence as the primary endpoint. The Phase 3 trial is expected to start enrolling patients in the third quarter.
Three-Month Period Ended March 31, 2017 (All numbers are approximate)

GAAP Results

Total product sales were $25.8 million in the first quarter of 2017. Product sales in the first quarter included: FUSILEV (levoleucovorin) net sales of $2.6 million, FOLOTYN (pralatrexate injection) net sales of $9.3 million, ZEVALIN (ibritumomab tiuxetan) net sales of $2.8 million, MARQIBO (vinCRIStine sulfate LIPOSOME injection) net sales of $2.0 million, BELEODAQ (belinostat) for injection net sales of $2.9 million, and EVOMELA (melphalan) for injection net sales of $6.3 million.

Spectrum recorded net loss of $23.0 million, or $0.29 per basic and diluted share in the three-month period ended March 31, 2017, compared to net loss of $9.3 million, or $0.14 per basic and diluted share in the comparable period in 2016. Total research and development expenses were $14.7 million in the quarter, as compared to $15.5 million in the same period in 2016. Selling, general and administrative expenses were $18.6 million in the quarter, compared to $22.0 million in the same period in 2016.

The Company ended the quarter with Cash and Cash Equivalents of $137 million.

Non-GAAP Results

Spectrum recorded non-GAAP net loss of $11.4 million, or $0.14 per basic and diluted share in the three-month period ended March 31, 2017, compared to non-GAAP net income of $0.3 million, or $0.01 per basic share and less than $0.01 per diluted share in the comparable period in 2016. Non-GAAP research and development expenses were $14.3 million, as compared to $13.0 million in the same period of 2016. Non-GAAP selling, general and administrative expenses were $15.7 million, as compared to $16.7 million in the same period in 2016.

On May 2, 2017 Spectrum Pharmaceuticals, Inc. (NasdaqGS: SPPI), a biotechnology company with fully integrated commercial and drug development operations with a primary focus in Hematology and Oncology, reported results for the three-month period ended March 31, 2017 (Press release, Spectrum Pharmaceuticals, MAY 2, 2017, View Source [SID1234518788]).

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"We remain focused on our advanced stage pipeline and look forward to several important milestones in the near future," said Rajesh C. Shrotriya, MD, Chairman and Chief Executive Officer of Spectrum Pharmaceuticals. "Based on the preclinical results and clinical data from the first compassionate-use patient, treated at MD Anderson Cancer Center by Dr. John Heymach under a compassionate-use protocol approved by the FDA, enthusiasm is building in the scientific community about the potential of poziotinib in non-small cell lung cancer patients with exon 20 insertion mutations. There is immense need for effective therapies in this disease as the current progression free survival is under 2 months. In addition, I am delighted with the recent pace of enrollment of the ROLONTIS Phase 3 program. Since the beginning of this year, we have enrolled over 135 patients in the pivotal trial. We are looking forward to Phase 3 results and a BLA filing next year. With three advanced stage drugs being studied in multiple tumors, I believe Spectrum is poised for transformational growth."

Pipeline Update:

ROLONTIS (eflapegrastim), a novel long-acting GCSF: A pivotal Phase 3 study (ADVANCE) was initiated under an SPA from the FDA in 2016 to evaluate ROLONTIS in the management of chemotherapy-induced neutropenia. Based on the amended SPA, the size of the ADVANCE study was reduced to 400 from 580 evaluable patients. The ADVANCE study is now 75% enrolled and the Company expects to complete enrollment in the second half of this year. To strengthen the regulatory package in the U.S. and Europe, the Company has initiated the 218-patient RECOVER study, which is expected to include sites not only from the U.S., but also from Europe, Canada and South Korea. For the RECOVER Study, sites have been initiated and first patient enrollment is imminent. The Company continues to expect to file the BLA next year.
Poziotinib, a potential best-in-class, novel, pan-HER inhibitor: An investigator sponsored trial has been initiated at the University of Texas MD Anderson Cancer Center in non-small cell lung cancer patients with EGFR exon 20 insertion mutations. The study is expected to yield interim results before year end. Spectrum is also conducting a Phase 2 breast cancer study in the U.S., based on promising Phase 1 study efficacy data in breast cancer patients who had failed multiple HER2-directed therapies. Further, multiple Phase 2 studies are being conducted in South Korea by Hanmi Pharmaceuticals and National OncoVenture to study breast, lung, head-and-neck and gastric cancer indications.
QAPZOLA, a potent tumor-activated drug being investigated for low and intermediate risk non-muscle invasive bladder cancer: The Company received a new SPA from the FDA for a new Phase 3 study incorporating learnings from the previous studies, as well as recommendations from the FDA. Compared to the previous program, this new Phase 3 study will include fewer evaluable patients (n=425 versus 1,557 patients), use a higher dosage of QAPZOLA (8 mg versus 4 mg), and will evaluate time-to-recurrence as the primary endpoint. The Phase 3 trial is expected to start enrolling patients in the third quarter.
Three-Month Period Ended March 31, 2017 (All numbers are approximate)

GAAP Results

Total product sales were $25.8 million in the first quarter of 2017. Product sales in the first quarter included: FUSILEV (levoleucovorin) net sales of $2.6 million, FOLOTYN (pralatrexate injection) net sales of $9.3 million, ZEVALIN (ibritumomab tiuxetan) net sales of $2.8 million, MARQIBO (vinCRIStine sulfate LIPOSOME injection) net sales of $2.0 million, BELEODAQ (belinostat) for injection net sales of $2.9 million, and EVOMELA (melphalan) for injection net sales of $6.3 million.

Spectrum recorded net loss of $23.0 million, or $0.29 per basic and diluted share in the three-month period ended March 31, 2017, compared to net loss of $9.3 million, or $0.14 per basic and diluted share in the comparable period in 2016. Total research and development expenses were $14.7 million in the quarter, as compared to $15.5 million in the same period in 2016. Selling, general and administrative expenses were $18.6 million in the quarter, compared to $22.0 million in the same period in 2016.

The Company ended the quarter with Cash and Cash Equivalents of $137 million.

Non-GAAP Results

Spectrum recorded non-GAAP net loss of $11.4 million, or $0.14 per basic and diluted share in the three-month period ended March 31, 2017, compared to non-GAAP net income of $0.3 million, or $0.01 per basic share and less than $0.01 per diluted share in the comparable period in 2016. Non-GAAP research and development expenses were $14.3 million, as compared to $13.0 million in the same period of 2016. Non-GAAP selling, general and administrative expenses were $15.7 million, as compared to $16.7 million in the same period in 2016.

On May 2, 2017 Shire plc (Shire) (LSE: SHP, NASDAQ: SHPG) reported unaudited results for the three months ended March 31, 2017 (Press release, Shire, MAY 2, 2017, View Source [SID1234518784]).

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Flemming Ornskov, M.D., M.P.H., Shire Chief Executive Officer, commented:

"In the first quarter we delivered strong top-line growth with quarterly product sales of $3.4 billion. I am especially pleased to see that our sales growth came from across our broad portfolio, with genetic diseases growing 14%, our recently launched XIIDRA product achieving a 22% market share and the Baxalta business growing at 8% on a pro forma basis. We also improved our operational efficiency, and are ahead of plan on integrating Baxalta.

"Our priorities for the rest of 2017 remain unchanged: launching new products while driving commercial excellence, generating operational efficiencies, and advancing our pipeline of novel therapies. Additionally, we continue to prioritize paying down debt, and we are on track to achieve our full-year financial guidance.

"Looking ahead, I see tremendous opportunity for further growth as we continue to build on our position as the global leader in treating patients with rare diseases."

Financial Highlights Q1 2017(1) Growth(1) Non GAAP CER(1)(2)
Product sales $3,412 million +110% +110%
Product sales excluding legacy Baxalta $1,807 million +11% +11%
Total revenues $3,572 million +109% +110%

Operating income from continuing operations $497 million (9%)
Non GAAP operating income(2) $1,454 million +82% +82%

Net income margin(3)(4) 10% (15ppc)
Non GAAP EBITDA margin(2)(4) 44% (5ppc)

Net income $375 million (11%)
Non GAAP net income(2) $1,102 million +74%

Diluted earnings per ADS(5) $1.23 (42%)
Non GAAP diluted earnings per ADS(2)(5) $3.63 +14% +14%

Net cash provided by operating activities $459 million +18%
Non GAAP free cash flow (2) $247 million (27%)
(1) Results include Baxalta Inc. (Baxalta) (acquired on June 3, 2016) and Dyax Corp. (Dyax) (acquired on January 22, 2016), unless otherwise noted. Percentages compare to equivalent 2016 period.
(2) The Non GAAP financial measures included within this release are explained on pages 25 – 26, and are reconciled to the most directly comparable financial measures prepared in accordance with US GAAP on pages 19 – 21.
(3) US GAAP net income as a percentage of total revenues.
(4) Percentage point change (ppc).
(5) Diluted weighted average number of ordinary shares 911.8 million.

Financial Highlights

Delivered product sales growth of 110% with strong legacy Shire sales and the inclusion of legacy Baxalta sales.
Achieved combined pro forma sales growth of 9%; legacy Shire sales growth of 11% and legacy Baxalta pro forma sales growth of 8%.
Generated Non GAAP earnings per ADS of $3.63, reflecting strong business fundamentals and operational discipline.
Ahead of schedule with Baxalta integration and on-track to achieve at least $700 million in synergies by year 3.
Debt pay-down continued during the quarter and we remain on-track to achieve our year end debt target.
Product and Pipeline Highlights

Continued to drive expansion of the U.S. dry eye disease market, with XIIDRA increasing its market share to 22% as of March 2017.
Increased CINRYZE sales by 38% to $226 million, reflecting higher patient demand and improvements in available supply.
Increasing demand for our Immunology products, with pro forma sales growth for immunoglobulin therapies and bio therapeutics of 10% and 19% respectively.
Expect U.S. Food and Drug Administration (FDA) decision for SHP465 in Attention Deficit Hyperactivity Disorder (ADHD) on or before June 20, 2017.
Completed enrollment in SHP643 open-label extension study; topline pivotal study results expected in Q2 2017.
Initiated Phase 3 trials for SHP640 and SHP620 in patients with bacterial and adenoviral conjunctivitis and cytomegalovirus infection, respectively.

On May 2, 2017 6:45 Merck (NYSE:MRK), known as MSD outside the United States and Canada, reported financial results for the first quarter of 2017 (Press release, Merck & Co, MAY 2, 2017, View Source [SID1234518781]).

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"Merck delivered solid performance across our broad range of products that address major disease categories and the needs of global health," said Kenneth C. Frazier, chairman and chief executive officer, Merck. "The continued momentum of KEYTRUDA in oncology, along with the strength of the vaccine and other franchises and animal health, helped to drive revenue growth in the quarter."

Financial Summary


$ in millions, except EPS amounts First Quarter
2017 2016
Sales $9,434 $9,312
GAAP EPS 0.56 0.40
Non-GAAP EPS that excludes certain items1*
0.88 0.89
GAAP net income2
1,551 1,125
Non-GAAP net income that excludes certain items1,2* 2,437 2,492
*Refer to table on page 7.

Worldwide sales were $9.4 billion for the first quarter of 2017, an increase of 1 percent compared with the first quarter of 2016, including a 2 percent negative impact from foreign exchange.

GAAP (generally accepted accounting principles) earnings per share assuming dilution (EPS) were $0.56 for the first quarter of 2017. Non-GAAP EPS of $0.88 for the first quarter of 2017 excludes acquisition- and divestiture-related costs, restructuring costs and certain other items.

Pipeline Highlights

Merck continued to deliver significant progress in the development program for KEYTRUDA (pembrolizumab), an anti-PD-1 therapy, receiving key regulatory approvals or opinions and supplemental Biologics License Application (sBLA) acceptances.

The U.S. Food and Drug Administration (FDA) approved under its Accelerated Approval program KEYTRUDA for the treatment of patients with refractory classical Hodgkin lymphoma (cHL) or for patients with cHL who have relapsed after three or more prior lines of therapy.
The European Commission approved KEYTRUDA for the first-line treatment of non-small cell lung cancer (NSCLC) in adults whose tumors have high PD-L1 expression (tumor proportion score of 50 percent or more) with no EGFR or ALK positive tumor mutations.
The Committee for Medicinal Products for Human Use of the European Medicines Agency (EMA) adopted a positive opinion recommending approval of KEYTRUDA for the treatment of adult patients with relapsed or refractory cHL who have failed autologous stem cell transplant and brentuximab vedotin (BV), or who are transplant-ineligible and have failed BV.
The FDA accepted for review under its Accelerated Approval program the sBLA for KEYTRUDA in combination with pemetrexed and carboplatin for the treatment of patients with metastatic or advanced NSCLC regardless of PD-L1 expression. This is the first application for regulatory approval of KEYTRUDA in combination with another treatment. The FDA granted Priority Review with a PDUFA action date of May 10, 2017.
The FDA accepted and granted Priority Review for the sBLA for the treatment of patients with locally advanced or metastatic urothelial cancer, a type of bladder cancer, for first-line use in patients who are ineligible for cisplatin-containing therapy. The application for second-line use was also accepted for Priority Review. The PDUFA action date for both applications is June 14, 2017.
The company recently submitted additional data and analyses to the FDA for the pending sBLA application for the treatment of previously treated patients with advanced microsatellite instability-high cancer. The PDUFA action date for this Priority Review has been extended to June 9, 2017.
The FDA and EMA accepted for review three New Drug Applications (NDAs) in the company’s diabetes franchise for medicines containing ertugliflozin, an investigational SGLT2 inhibitor in development to help improve glycemic control in adults with type 2 diabetes as part of Merck’s collaboration with Pfizer Inc. The PDUFA action date from the FDA is in December 2017 for the three NDAs.

Merck presented phase 3 data across our late-stage pipeline in studies that met their primary endpoints.

At the Conference on Retroviruses and Opportunistic Infections in February, data were presented from the ongoing "DRIVE-FORWARD" phase 3 clinical trial evaluating the safety and efficacy of doravirine (MK-1439), an investigational non-nucleoside reverse transcriptase inhibitor for previously untreated adults with HIV-1 infection. The study met its primary efficacy endpoint, demonstrating the non-inferiority of once-daily doravirine to once-daily ritonavir-boosted darunavir.
Positive results from a study of letermovir, an investigational antiviral medicine for the prevention of cytomegalovirus infection in high-risk bone marrow transplant patients, were presented at the BMT Tandem Meetings in February.
Merck presented data from a trial for V212, an investigational inactivated varicella zoster virus vaccine for the prevention of herpes zoster or HZ, also known as shingles. The data demonstrated a reduction in the incidence of confirmed HZ cases by an estimated 64 percent in immunocompromised patients and also were presented at the BMT Tandem Meetings.
First-Quarter Revenue Performance

The following table reflects sales of the company’s top pharmaceutical products, as well as total sales of Animal Health products.


$ in millions First Quarter
Change
2017 2016 Change Ex-Exchange
Total Sales $9,434 $9,312 1% 3%
Pharmaceutical 8,185 8,104 1% 2%
JANUVIA / JANUMET 1,335 1,412 -5% -5%
KEYTRUDA 584 249 134% 137%
ZETIA / VYTORIN 575 889 -35% -35%
GARDASIL / GARDASIL 9 532 378 41% 41%
ZEPATIER 378 50 * *
PROQUAD, M-M-R II and VARIVAX
355 357 0% 1%
ISENTRESS 305 340 -10% -10%
REMICADE 229 349 -34% -31%
ROTATEQ 224 188 19% 19%
Animal Health 939 829 13% 14%
Other Revenues 310 379 -18% -5%
*Growth comparison not meaningful due to ongoing product launch.
Pharmaceutical Revenue

First-quarter pharmaceutical sales increased 1 percent to $8.2 billion, including a 1 percent negative impact from foreign exchange. The growth was driven by oncology, hepatitis C and vaccines, largely offset by the loss of market exclusivity for several products, as well as lower sales in the diabetes franchise.

Growth in oncology was due to higher sales of KEYTRUDA as the company continues to launch the product with new indications globally.

Growth in hepatitis C was driven by ZEPATIER (elbasvir and grazoprevir), a medicine for the treatment of chronic hepatitis C virus genotypes 1 or 4 infection, due to ongoing launches globally. Sales in the United States also reflect an approximately $40 million favorable adjustment to rebate accruals due to mix of business.

Growth in vaccines was primarily driven by higher sales of GARDASIL [Human Papillomavirus Quadrivalent (Types 6, 11, 16 and 18) Vaccine, Recombinant] and GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant), vaccines to prevent certain cancers and other diseases caused by HPV, in the United States reflecting the timing of public sector purchases, underlying demand and increased price, as well as higher sales of PNEUMOVAX 23 (pneumococcal vaccine polyvalent) largely driven by demand in the United States. Growth in vaccines also reflects incremental sales of approximately $65 million, of which approximately $50 million relates to GARDASIL and GARDASIL 9, due to Merck now recording vaccine sales in the 19 European countries previously part of the Sanofi Pasteur MSD vaccines joint venture, which was terminated on Dec. 31, 2016.

Pharmaceutical sales reflect a decrease in the diabetes franchise of JANUVIA (sitagliptin) and JANUMET (sitagliptin and metformin HCl), medicines that help lower blood sugar in adults with type 2 diabetes, primarily due to the timing of customer purchases in the United States as anticipated for the quarter.

Sales growth also was offset by the loss of U.S. market exclusivity in 2016 for ZETIA (ezetimibe), a medicine for lowering LDL cholesterol; CUBICIN (daptomycin for injection), an I.V. antibiotic; and NASONEX (mometasone furoate monohydrate), an inhaled nasal corticosteroid for the treatment of nasal allergy symptoms; as well as by the ongoing impact of biosimilar competition in the company’s marketing territories in Europe for REMICADE (infliximab), a treatment for inflammatory diseases. In the aggregate, sales of these products declined $686 million during the first quarter of 2017 compared to the first quarter of 2016.

Animal Health Revenue

Animal Health sales totaled $939 million for the first quarter of 2017, an increase of 13 percent compared with the first quarter of 2016, including a 1 percent negative impact from foreign exchange. Growth was primarily due to sales increases in companion animal products, driven by the BRAVECTO (fluralaner) line of products that kill fleas and ticks in dogs and cats for up to 12 weeks, as well as in ruminants, poultry and swine products. In March, Animal Health completed the acquisition of Vallée S.A., a leading privately held producer of animal health products in Brazil.

First-Quarter Expense, EPS and Related Information

The table below presents selected expense information.


$ in millions
Acquisition- and
Divestiture- Restructuring Certain Other
First-Quarter 2017 GAAP
Related Costs 3
Costs Items
Non-GAAP 1
Materials and production $3,015 $855 $63 $– $2,097
Marketing and administrative 2,411 20 1 – 2,390
Research and development 1,796 11 – – 1,785
Restructuring costs 151 – 151 – –
Other (income) expense, net 58 (3) – (9) 70

First-Quarter 2016
Materials and production $3,572 $1,386 $47 $– $2,139
Marketing and administrative 2,318 2 3 – 2,313
Research and development 1,659 35 55 – 1,569
Restructuring costs 91 – 91 – –
Other (income) expense, net 48 – – – 48
GAAP Expense, EPS and Related Information

On a GAAP basis, the gross margin was 68.0 percent for the first quarter of 2017 compared to 61.6 percent for the first quarter of 2016. The increase in gross margin for the first quarter of 2017 was primarily driven by a lower net impact from acquisition- and divestiture-related costs and restructuring costs which reduced gross margin by 9.8 percentage points in the first quarter of 2017 as compared with 15.4 percentage points in the first quarter of 2016. The increase in gross margin also reflects the favorable effects of foreign exchange and lower inventory write-offs.

Marketing and administrative expenses were $2.4 billion in the first quarter of 2017, a 4 percent increase compared to the first quarter of 2016. The increase primarily reflects higher health care reform fee expenses, administrative costs, and promotion and direct selling expenses.

Research and development (R&D) expenses were $1.8 billion in the first quarter of 2017, an 8 percent increase compared to the first quarter of 2016. The increase reflects higher clinical development spending, partially offset by lower restructuring costs.

GAAP EPS was $0.56 for the first quarter of 2017 compared with $0.40 for the first quarter of 2016.

Non-GAAP Expense, EPS and Related Information

The non-GAAP gross margin was 77.8 percent for the first quarter of 2017 compared to 77.0 percent for the first quarter of 2016. The increase in non-GAAP gross margin was largely driven by the favorable effects of foreign exchange and lower inventory write-offs.

Non-GAAP marketing and administrative expenses were $2.4 billion in the first quarter of 2017, an increase of 3 percent compared to the first quarter of 2016. The increase was driven primarily by higher health care reform fee expenses, administrative costs, and promotion and direct selling expenses.

Non-GAAP R&D expenses were $1.8 billion in the first quarter of 2017, a 14 percent increase compared to the first quarter of 2016. The increase primarily reflects higher clinical development spending.

Non-GAAP EPS was $0.88 for the first quarter of 2017 compared with $0.89 for the first quarter of 2016.

A reconciliation of GAAP to non-GAAP net income and EPS is provided in the table that follows.


$ in millions, except EPS amounts First Quarter
2017 2016
EPS
GAAP EPS $0.56 $0.40
Difference4
0.32 0.49
Non-GAAP EPS that excludes items listed below1 $0.88 $0.89

Net Income
GAAP net income2 $1,551 $1,125
Difference 886 1,367
Non-GAAP net income that excludes items listed below1,2 $2,437 $2,492

Decrease (Increase) in Net Income Due to Excluded Items:
Acquisition- and divestiture-related costs3 $883 $1,423
Restructuring costs 215 196
Other (9) –
Net decrease (increase) in income before taxes 1,089 1,619
Estimated income tax (benefit) expense (203) (252)
Decrease (increase) in net income $886 $1,367

Financial Outlook

Merck has narrowed and raised its full-year 2017 GAAP EPS range to be between $2.51 and $2.63. Merck has narrowed and raised its full-year 2017 non-GAAP EPS range to be between $3.76 and $3.88, including an approximately 1.5 percent negative impact from foreign exchange at mid-April 2017 exchange rates. The non-GAAP range excludes acquisition- and divestiture-related costs, costs related to restructuring programs and certain other items.

Merck has narrowed and raised its full-year 2017 revenue range to be between $39.1 billion and $40.3 billion, including an approximately 1.5 percent negative impact from foreign exchange at mid-April 2017 exchange rates.

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


GAAP Non-GAAP 1

Revenue $39.1 to $40.3 billion $39.1 to $40.3 billion**
Operating expenses Lower than 2016 Higher than 2016 by a low-single digit rate
Effective tax rate 22.0% to 23.0% 21.0% to 22.0%
EPS $2.51 to $2.63 $3.76 to $3.88
**The company does not have any non-GAAP adjustments to revenue.

A reconciliation of anticipated 2017 GAAP EPS to non-GAAP EPS and the items excluded from non-GAAP EPS are provided in the table below.


$ in millions, except EPS amounts

Full-Year 2017

GAAP EPS $2.51 to $2.63
Difference4 1.25
Non-GAAP EPS that excludes items listed below1 $3.76 to $3.88

Acquisition- and divestiture-related costs $3,600
Restructuring costs 600
Net decrease (increase) in income before taxes 4,200
Estimated income tax (benefit) expense (750)
Decrease (increase) in net income $3,450

The expected full-year 2017 GAAP effective tax rate of 22.0 to 23.0 percent reflects an unfavorable impact of approximately 1 percentage point from the above items.

Total Employees

As of March 31, 2017, Merck had approximately 69,000 employees worldwide.