On May 1, 2018 Ironwood Pharmaceuticals, Inc. (NASDAQ: IRWD), a commercial biotechnology company, reported on its first quarter 2018 results and recent business activities (Press release, Ironwood Pharmaceuticals, MAY 1, 2018, View Source;p=irol-newsArticle&ID=2345875 [SID1234525897]).

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"Ironwood’s first quarter results reflect year-over-year topline growth of 33%, significant commercial and pipeline progress, and continued financial discipline," said Peter Hecht, chief executive officer of Ironwood. "LINZESS continued to demonstrate strong demand, with 15% year-over-year prescription volume growth. We believe we have alignment on Phase III design for IW-3718 following a productive end of Phase II meeting with the FDA and expect to initiate the IW-3718 trials in the third quarter of 2018. In addition, we continue to make good progress advancing our four Phase II trials with praliciguat and olinciguat, our lead clinical sGC stimulators."

First Quarter 2018 and Recent Highlights

Irritable Bowel Syndrome with Constipation (IBS-C) / Chronic Idiopathic Constipation (CIC)

U.S. LINZESS. U.S. net sales, as reported by Ironwood’s U.S. collaboration partner Allergan plc, were $159.3 million in the first quarter of 2018, an 8% increase compared to the first quarter of 2017. Ironwood and Allergan share equally in brand collaboration profits.
LINZESS commercial margin was 63% in the first quarter of 2018 compared to 52% in the first quarter of 2017.
Net profit for the LINZESS U.S. brand collaboration, net of commercial and research and development (R&D) expenses, was $88.8 million in the first quarter of 2018, a 43% increase compared to the first quarter of 2017.
Total LINZESS prescription volume in the first quarter of 2018 included approximately 30 million LINZESS capsules, an 15% increase in capsules compared to the first quarter of 2017, per IQVIA.
More than 764,000 total LINZESS prescriptions were filled in the first quarter of 2018, an approximately 9% increase compared to the first quarter of 2017, per IQVIA.
Since the launch of LINZESS in December 2012, greater than 2 million unique patients have filled approximately 10.6 million prescriptions, per IQVIA.
In January 2018, Ironwood and Allergan reached an agreement with wholly-owned subsidiaries of Sun Pharmaceutical Industries Ltd. (Sun Pharma, including its subsidiaries and/or associated companies), resolving patent litigation brought in response to Sun Pharma’s abbreviated new drug application (ANDA) seeking approval to market a generic version of LINZESS prior to the expiration of the companies’ patents. Pursuant to the terms of the settlement, Ironwood and Allergan will grant the wholly-owned subsidiaries of Sun Pharma a license to market a generic version of LINZESS in the U.S. beginning on February 1, 2031 (subject to U.S. FDA approval), unless certain limited circumstances, customary for settlement agreements of this nature, occur. As a result of the settlement, all Hatch-Waxman litigation between the companies and Sun Pharma regarding LINZESS patents has been dismissed.
Additional Abdominal Symptom Claims. Ironwood and Allergan expect to initiate a single Phase III trial with LINZESS in mid-2018 to evaluate its efficacy for relief of additional abdominal symptoms, including bloating and discomfort, two highly bothersome symptoms associated with IBS-C.
Linaclotide Delayed Release. An estimated 20 to 25 million patients suffer from IBS-mixed and IBS with diarrhea in the U.S. Ironwood and Allergan plan to advance into a Phase IIb clinical trial a linaclotide delayed release formulation as a potential visceral, non-opioid, pain-relieving agent for patients suffering from all subtypes of IBS. The companies are in active discussions with the U.S. FDA about this program.
LINZESS-Japan. Ironwood reported $5.4 million in sales of linaclotide active pharmaceutical ingredient (API) to its Japanese partner, Astellas Pharma Inc. in the first quarter of 2018.
Uncontrolled Gout

DUZALLO (lesinurad and allopurinol) and ZURAMPIC (lesinurad). Ironwood is systematically exploring a more comprehensive marketing mix for its lesinurad franchise, including DUZALLO and ZURAMPIC, in select test markets (with paired controls), while continuing to expand affordable access across the country. The data received from these test markets in 2018 are expected to inform our lesinurad franchise investment decisions. Combined U.S. net sales were $0.6 million in the first quarter of 2018.
Persistent Gastroesophageal Reflux Disease (GERD)

IW-3718. Ironwood is actively working to advance IW-3718, its gastric retentive formulation of a bile acid sequestrant for the potential treatment of persistent GERD, into Phase III trials. There are an estimated 10 million Americans who suffer regularly from symptoms of persistent GERD, such as heartburn and regurgitation, despite receiving treatment with the current standard of care, proton pump inhibitors.
Following a series of productive meetings with the U.S. FDA, Ironwood expects to initiate two randomized, placebo-controlled Phase III trials for IW-3718 in the third quarter of 2018. These trials are expected to evaluate the safety and efficacy of IW-3718 1500mg in patients with persistent GERD. The two trials are expected to enroll less than 800 patients each, with heartburn severity response as the primary endpoint. Further details on study design and endpoints will be provided upon the initiation of the trials.
Diabetic Nephropathy and Heart Failure with Preserved Ejection Fraction (HFpEF)

Praliciguat (IW-1973). Ironwood is enrolling patients in Phase II tirals to evaluate praliciguat, its lead soluble guanylate cyclase (sGC) stimulator, for the potential treatment of serious diseases, including diabetic nephropathy and HFpEF. Both diseases affect millions of patients around the world, including an estimated eight million Americans suffering from diabetic nephropathy and an estimated three million Americans suffering from HFpEF. Diabetic nephropathy is the leading cause of end-stage renal disease. There are few treatment options available to delay the steady decline of renal function leading to dialysis or kidney transplant. HFpEF is a highly symptomatic condition with high rates of morbidity and mortality, with no approved treatments available.
Diabetic nephropathy. Ironwood expects to enroll approximately 150 patients into a randomized, double-blind, placebo-controlled, dose-ranging Phase II trial designed to evaluate the safety and efficacy of praliciguat in patients with diabetic nephropathy.
HFpEF. Ironwood expects to enroll approximately 325 patients into a randomized, double-blind, placebo-controlled, dose-ranging Phase II trial designed to evaluate the safety and efficacy of praliciguat in patients with HFpEF.
Sickle Cell Disease and Achalasia

Olinciguat (IW-1701). Ironwood is enrolling patients in Phase II trials to evaluate olinciguat, its second clinical sGC stimulator, for the potential treatment of sickle cell disease and of achalasia. Sickle cell disease is a rare, debilitating genetic disorder that affects approximately 100,000 Americans and causes red blood cells to become sickle-shaped, reducing normal red blood cell number. Achalasia is a rare disease with a prevalence rate of 10/100,000 Americans in which the lower esophagus does not relax normally, causing dysphagia (swallowing problems), regurgitation, and chest pain.
Sickle Cell Disease. Ironwood expects to enroll approximately 80 patients into a multicenter, randomized, double-blind, placebo-controlled, dose-ranging Phase II trial of olinciguat in patients with sickle cell disease. The Phase II trial is designed to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamics of olinciguat in these patients.
Achalasia. Ironwood continues to enroll patients into a randomized, double-blind, placebo-controlled, single-dose Phase IIa study of olinciguat in patients with achalasia. This study is designed to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamics of olinciguat in these patients. Data from this study are expected in 2018.
Corporate and Financials

Total Revenues
Total revenues were $69.2 million in the first quarter of 2018 compared to $52.2 million in the first quarter of 2017. Included in total revenues was $61.2 million associated with Ironwood’s share of the net profits from the sales of LINZESS in the U.S., $5.4 million in sales of linaclotide API to Astellas, $0.6 million in ZURAMPIC and DUZALLO product revenue, and $2.0 million in linaclotide royalties, co-promotion and other revenue.
Operating Expenses
Operating expenses were $105.0 million in the first quarter of 2018, compared to $91.8 million in the first quarter of 2017. Operating expenses in the first quarter of 2018 included $2.6 million in cost of revenues, $36.5 million in R&D expenses, $61.9 million in selling, general and administrative (SG&A) expenses, of which $2.4 million related to Ironwood’s field-based workforce reduction in January 2018, $3.5 million in acquired intangible assets amortization expenses, and a $0.5 million loss on fair value remeasurement of contingent consideration.
Contingent consideration and amortization of acquired intangible assets relate to Ironwood’s license agreement with AstraZeneca for the exclusive U.S. rights to all products containing lesinurad.
Other Expense
Interest Expense. Net interest expense was $8.6 million in the first quarter of 2018, primarily in connection with the $150 million 8.375% Notes funded in January 2017 and the approximately $336 million convertible debt financing funded in June 2015. Interest expense recorded in the first quarter of 2018 includes $5.0 million in cash expense and $4.2 million in non-cash expense.
Gain on Derivatives. Ironwood recorded a gain on derivatives related to the change in fair value of the convertible note hedges and note hedge warrants issued in connection with the convertible debt financing funded in June 2015. A gain on derivatives of $1.3 million was recorded in the first quarter of 2018.
Net Loss
GAAP net loss was $43.1 million, or $0.29 per share, in the first quarter of 2018, compared to a net loss of $52.5 million, or $0.36 per share, in the first quarter of 2017.
Non-GAAP net loss was $40.5 million, or $0.27 per share, in the first quarter of 2018, compared to $48.3 million, or $0.33 per share, in the first quarter of 2017. Non-GAAP net loss excludes the impact of mark-to-market adjustments on the derivatives related to Ironwood’s convertible debt, as well as the amortization of acquired intangible assets and the fair value remeasurement of contingent consideration related to Ironwood’s U.S. lesinurad license. See Non-GAAP Financial Measures below.
Cash Position
Ironwood ended the first quarter of 2018 with approximately $194.4 million of cash, cash equivalents and available-for-sale securities. Ironwood used approximately $30.9 million of cash for operations during the first quarter of 2018.
Non-GAAP Financial Measures
The company presents non-GAAP net loss and non-GAAP net loss per share to exclude the impact of net gains and losses on the derivatives related to our convertible notes that are required to be marked-to-market, as well as the amortization of acquired intangible assets and the fair value remeasurement of contingent consideration associated with Ironwood’s U.S. license agreement with AstraZeneca for the exclusive rights to all products containing lesinurad. The derivative gains and losses may be highly variable, difficult to predict and of a size that could have a substantial impact on the company’s reported results of operations in any given period. The acquired intangible assets are valued as of the date of acquisition and are amortized over their estimated economic useful life, and management believes excluding the amortization of acquired intangible assets provides more consistency with the treatment of internally developed intangible assets for which research and development costs were previously expensed. The contingent consideration balance is remeasured each reporting period, and the resulting change in fair value impacts the company’s reported results of operations. The changes in the fair value remeasurement of contingent consideration do not correlate to the company’s actual cash payment obligations in the relevant period. Management believes this non-GAAP information is useful for investors, taken in conjunction with Ironwood’s GAAP financial statements, because it provides greater transparency and period-over-period comparability with respect to Ironwood’s operating performance. These measures are also used by management to assess the performance of the business. Investors should consider these non-GAAP measures only as a supplement to, not as a substitute for or as superior to, measures of financial performance prepared in accordance with GAAP. In addition, these non-GAAP financial measures are unlikely to be comparable with non-GAAP information provided by other companies. For a reconciliation of these non-GAAP financial measures to the most comparable GAAP measures, please refer to the table at the end of this press release.

Conference Call Information
Ironwood will host a conference call and webcast at 8:30 a.m. Eastern Time on Tuesday, May 1, 2018 to discuss its first quarter 2018 results and recent business activities. Individuals interested in participating in the call should dial (877) 643-7155 (U.S. and Canada) or (914) 495-8552 (international) using conference ID number 9859406. To access the webcast, please visit the Investors section of Ironwood’s website at www.ironwoodpharma.com at least 15 minutes prior to the start of the call to ensure adequate time for any software downloads that may be required. The call will be available for replay via telephone starting at approximately 11:30 a.m. Eastern Time, on May 1, 2018 running through 11:59 p.m. Eastern Time on May 8, 2018. To listen to the replay, dial (855) 859-2056 (U.S. and Canada) or (404) 537-3406 (international) using conference ID number 9859406. The archived webcast will be available on Ironwood’s website for 14 days beginning approximately one hour after the call has completed.

On May 1, 2018 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 it has entered into an agreement with Thermo Fisher Scientific to leverage the Oncomine Dx Target Test as a companion diagnostic for Spectrum’s novel pan-HER inhibitor, poziotinib, which is in development for the treatment of non-small lung cancer (NSCLC) patients with EGFR and HER2 exon 20 insertion mutations (Press release, Spectrum Pharmaceuticals, MAY 1, 2018, View Source [SID1234525894]).

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"Spectrum is committed to precision medicine for unmet medical needs in oncology," said Tom Riga, Executive Vice President, Chief Operating and Commercial Officer of Spectrum Pharmaceuticals. "Thermo Fisher pioneered next-generation sequencing as the first multi-drug companion diagnostic for patients with non-small cell lung cancer when Oncomine Dx Target Test received premarket approval by the FDA in June 2017. Therefore, we believe Thermo Fisher will be an outstanding partner to help us advance the development of poziotinib. As promising clinical data continue to emerge with poziotinib for the treatment of patients with EGFR and HER2 exon 20 insertion mutations, the expansion of Oncomine Dx Target Test will aid in faster detection and future treatment of patients who are not well-served by currently available therapies."

Oncomine Dx Target Test is FDA approved to simultaneously report 23 genes clinically associated with NSCLC. Of those 23, three contain markers that are approved for use as companion diagnostics, enabling physicians to match patients to three FDA-approved therapies in days instead of weeks. The test uses Thermo Fisher’s proprietary Ion PGM Dx sequencing platform to interrogate patient samples with high reproducibility and rapid turnaround times, even when limited tumor tissue is available.

Under the terms of the collaboration agreement, the goal of the expanded use of the Oncomine Dx Target Test is to identify NSCLC patients with EGFR or HER2 exon 20 insertion mutations who may be candidates for treatment with poziotinib in Spectrum’s global territories.

"We are pleased to partner with Spectrum Pharmaceuticals to help advance its drug development program and expand the clinical utility of Oncomine Dx Target Test," said Joydeep Goswami, president of Clinical Next-Generation Sequencing and Oncology at Thermo Fisher Scientific. "We remain committed to help drive better health outcomes for patients who can benefit from targeted therapies more quickly."

About Poziotinib

Poziotinib is a novel, Epidermal Growth Factor Receptor Tyrosine Kinase Inhibitor (EGFR TKI) that inhibits the tyrosine kinase activity of EGFR as well as HER2 and HER4. Importantly this, in turn, leads to the inhibition of the proliferation of tumor cells that overexpress these receptors. Mutations or overexpression/amplification of EGFR family receptors have been associated with a number of different cancers, including non-small cell lung cancer (NSCLC), breast cancer, and gastric cancer. Spectrum received exclusive license to develop, manufacture, and commercialize worldwide excluding Korea and China from Hanmi Pharmaceuticals. Poziotinib is currently being investigated by Spectrum and Hanmi in several mid-stage trials in multiple solid tumor indications.

On May 1, 2018 Gilead Sciences, Inc. (Nasdaq: GILD) reported its results of operations for the first quarter ended March 31, 2018 (Press release, Gilead Sciences, MAY 1, 2018, View Source [SID1234525893]).

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The financial results that follow represent a year-over-year comparison of the first quarter 2018 to the first quarter 2017. Total revenues were $5.1 billion in 2018 compared to $6.5 billion in 2017. Net income was $1.5 billion or $1.17 per diluted share in 2018 compared to $2.7 billion or $2.05 per diluted share in 2017. Non-GAAP net income, which excludes amounts related to acquisition-related, stock-based compensation and other expenses, and unrealized gains from marketable equity securities, was $2.0 billion or $1.48 per diluted share in 2018 compared to $2.9 billion or $2.23 per diluted share in 2017.

Three Months Ended
March 31,
(In millions, except per share amounts) 2018 2017
Product sales $ 5,001 $ 6,377
Royalty, contract and other revenues 87 128
Total revenues $ 5,088 $ 6,505

Net income attributable to Gilead $ 1,538 $ 2,702
Non-GAAP net income*

$ 1,958 $ 2,949

Diluted earnings per share $ 1.17 $ 2.05
Non-GAAP diluted earnings per share*

$ 1.48 $ 2.23

*

Non-GAAP net income and non-GAAP diluted earnings per share exclude acquisition-related, stock-based compensation and other expenses, and unrealized gains from marketable equity securities. A reconciliation between GAAP and non-GAAP financial information is provided in the tables on pages 7 and 8.

Product Sales

Total product sales for the first quarter of 2018 were $5.0 billion compared to $6.4 billion for the same period in 2017. Product sales for the first quarter of 2018 were $3.5 billion in the United States, $1.0 billion in Europe and $469 million in other locations. Product sales for the first quarter of 2017 were $4.5 billion in the United States, $1.3 billion in Europe and $661 million in other locations.

Antiviral Product Sales

Antiviral product sales, which include sales of HIV, chronic hepatitis B (HBV) and chronic hepatitis C (HCV) products, were $4.4 billion for the first quarter of 2018 compared to $5.8 billion for the same period in 2017.

HIV and HBV product sales were $3,329 million for the first quarter of 2018 compared to $3,265 million for the same period in 2017. The increase was primarily due to the continued uptake of tenofovir alafenamide (TAF)-based products, which include Genvoya (elvitegravir 150 mg/cobicistat 150 mg/emtricitabine 200 mg/tenofovir alafenamide 10 mg), Descovy (emtricitabine 200 mg/tenofovir alafenamide 25 mg) and Odefsey (emtricitabine 200 mg/rilpivirine 25 mg/tenofovir alafenamide 25 mg).
HCV product sales, which consist of Epclusa (sofosbuvir 400 mg/velpatasvir 100 mg), Harvoni (ledipasvir 90 mg/sofosbuvir 400 mg), Vosevi (sofosbuvir 400 mg/velpatasvir 100 mg/voxilaprevir 100 mg) and Sovaldi (sofosbuvir 400 mg), were $1,046 million for the first quarter of 2018 compared to $2,576 million for the same period in 2017. The decline was primarily due to lower sales of Harvoni and Sovaldi across all major markets and lower sales of Epclusa in the United States as a result of increased competition.
Other Product Sales

Other product sales, which include Letairis (ambrisentan), Ranexa (ranolazine), AmBisome (amphotericin B liposome for injection) and Yescarta (axicabtagene ciloleucel), were $626 million for the first quarter of 2018 compared to $536 million for the same period in 2017.

Operating Expenses

Three Months Ended
March 31,
(In millions) 2018 2017
Research and development expenses (R&D) $ 937 $ 931
Non-GAAP R&D expenses* $ 814 $ 889

Selling, general and administrative expenses (SG&A) $ 997 $ 850
Non-GAAP SG&A expenses* $ 884 $ 807

*
Non-GAAP R&D and SG&A expenses exclude acquisition-related, stock-based compensation and other expenses. A reconciliation between GAAP and non-GAAP financial information is provided in the tables on pages 7 and 8.

During the first quarter of 2018, compared to the same period in 2017:

R&D expenses increased primarily due to stock-based compensation expenses associated with Gilead’s acquisition of Kite Pharma, Inc. (Kite). The increase was partially offset by lower expenses resulting from Gilead’s purchase of a U.S. Food and Drug Administration (FDA) priority review voucher in the first quarter of 2017.
Non-GAAP R&D expenses* decreased primarily due to the 2017 impact of Gilead’s purchase of an FDA priority review voucher.
SG&A expenses increased primarily due to stock-based compensation expenses associated with Gilead’s acquisition of Kite, higher costs to support Gilead’s product launches including Biktarvy (bictegravir 50 mg/emtricitabine 200 mg/tenofovir alafenamide 25 mg) and Yescarta, geographic expansion and increased expenses to support the growth of Gilead’s business following the acquisition of Kite.
Non-GAAP SG&A expenses* increased primarily due to higher costs to support Gilead’s product launches including Biktarvy and Yescarta, geographic expansion and increased expenses to support the growth of Gilead’s business following the acquisition of Kite.
Cash, Cash Equivalents and Marketable Securities

As of March 31, 2018, Gilead had $32.1 billion of cash, cash equivalents and marketable securities compared to $36.7 billion as of December 31, 2017. During the first quarter of 2018, Gilead generated $2.3 billion in operating cash flow, fully repaid the $4.5 billion term loans borrowed in connection with Gilead’s acquisition of Kite, utilized $1.0 billion on stock repurchases and paid cash dividends of $753 million.

Full Year 2018 Guidance Reiterated

Gilead reiterates its full year 2018 guidance, initially provided on February 6, 2018:

(In millions, except percentages and per share amounts)
Initially Provided
February 6, 2018

Net Product Sales $20,000 – $21,000
Non-GAAP*
Product Gross Margin 85% – 87%
R&D Expenses $3,400 – $3,600
SG&A Expenses $3,400 – $3,600
Effective Tax Rate 21.0% – 23.0%
Diluted EPS Impact of Acquisition-related, Up-front Collaboration, Stock-based Compensation and Other Expenses $1.41 – $1.51
*
Non-GAAP Product Gross Margin, R&D and SG&A expenses and effective tax rate exclude acquisition-related, up-front collaboration, stock-based compensation and other expenses, fair value adjustments of marketable equity securities and potential measurement period adjustments relating to the Tax Cuts and Jobs Act (Tax Reform). A reconciliation between GAAP and non-GAAP full year 2018 guidance is provided in the tables on page 9.

Corporate Highlights

Announced that Norbert Bischofberger, Ph.D., has decided to step down from his role as Executive Vice President, Research and Development and Chief Scientific Officer, effective at the end of April 2018. John McHutchison, M.D., Executive Vice President, Clinical Research, has been appointed Chief Scientific Officer and assumed responsibility for the company’s research and development organization. Also effective in April, Andrew Cheng, M.D., Ph.D., Executive Vice President, Clinical Research & Development Operations, has been appointed Chief Medical Officer.
Announced that James Meyers, Executive Vice President, Commercial Operations, has retired.
Announced that Jacqueline K. Barton, Ph.D., has been appointed to the company’s Board of Directors.
Product and Pipeline Updates announced by Gilead during the First Quarter of 2018 include:

HIV Programs

Presented data at the 2018 Conference on Retroviruses and Opportunistic Infections, which included the announcement of:
Detailed 48-week results from a Phase 3 study evaluating the efficacy and safety of switching from a regimen containing abacavir, dolutegravir and lamivudine (600/50/300 mg) (ABC/DTG/3TC) to Biktarvy, a once-daily single tablet regimen, in virologically suppressed adults with HIV. Through week 48, Biktarvy was found to be statistically non-inferior to ABC/DTG/3TC with a numerically lower incidence of mild or moderate study drug-related adverse events and no treatment-emergent resistance;
48-week results from a Phase 3 study of 470 virologically suppressed adult women with HIV infection, evaluating the efficacy and safety of switching from a boosted protease inhibitor (bPI) or boosted elvitegravir-containing regimen to Biktarvy. In the ongoing study, Biktarvy was found to be statistically non-inferior to regimens containing a bPI or boosted elvitegravir and demonstrated no treatment-emergent resistance at 48 weeks; and
Results from a preclinical study conducted in collaboration with researchers at Beth Israel Deaconess Medical Center evaluating the combination of a proprietary investigational oral toll-like receptor 7 agonist, GS-9620, and a proprietary investigational broadly neutralizing antibody, as part of an HIV eradication strategy.
Announced that FDA has approved Biktarvy for the treatment of HIV-1 infection.
Oncology and Cell Therapy Programs

Announced a worldwide collaboration with Sangamo Therapeutics, Inc. (Sangamo) using Sangamo’s zinc finger nuclease technology platform for the development of next-generation ex vivo cell therapies in oncology.
Announced a clinical trial collaboration with Pfizer, Inc. (Pfizer) to evaluate the safety and efficacy of the investigational combination of Yescarta and Pfizer’s utomilumab, a fully humanized 4-1BB agonist monoclonal antibody, in patients with refractory large B-cell lymphoma.

On May 1, 2018 Pfizer Inc. (NYSE:PFE) reported financial results for first-quarter 2018 and reaffirmed all components of 2018 financial guidance (Press release, Pfizer, MAY 1, 2018, View Source [SID1234525891]).

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Results for the first quarter of 2018 and 2017(3) are summarized below.

OVERALL RESULTS

($ in millions, except per share amounts)

First-Quarter
2018 2017 Change
Revenues $ 12,906 $ 12,779 1%
Reported Net Income(1) 3,561 3,121 14%
Reported Diluted EPS(1) 0.59 0.51 15%
Adjusted Income(2) 4,668 4,192 11%
Adjusted Diluted EPS(2) 0.77 0.69 12%

REVENUES

($ in millions)

First-Quarter

2018

2017

% Change

Total

Oper.

Innovative Health $ 7,829 $ 7,415 6 % 3 %
Essential Health 5,077 5,364 (5 %) (9 %)
Total Company $ 12,906 $ 12,779 1 % (2 %)

On February 3, 2017, Pfizer completed the sale of its global infusion therapy net assets, Hospira Infusion Systems (HIS). Therefore, financial results for the first quarter of 2018 do not reflect any contribution from legacy HIS operations, while the first quarter of 2017 reflects approximately one month of legacy HIS domestic operations and approximately two months of legacy HIS international operations(3).

Some amounts in this press release may not add due to rounding. All percentages have been calculated using unrounded amounts. References to operational variances pertain to period-over-period growth rates that exclude the impact of foreign exchange(4).

2018 FINANCIAL GUIDANCE(5)

Pfizer’s reaffirmed 2018 financial guidance is presented below.

Revenues $53.5 to $55.5 billion
Adjusted Cost of Sales(2) as a Percentage of Revenues 20.5% to 21.5%
Adjusted SI&A Expenses(2) $14.0 to $15.0 billion
Adjusted R&D Expenses(2) $7.4 to $7.9 billion
Adjusted Other (Income)/Deductions(2) Approximately $400 million of income
Effective Tax Rate on Adjusted Income(2),(6) Approximately 17.0%
Adjusted Diluted EPS(2) $2.90 to $3.00

Financial guidance for Adjusted diluted EPS(2) now anticipates share repurchases totaling approximately $6.1 billion in 2018, which includes shares repurchased during first-quarter 2018. Dilution related to share-based employee compensation programs is expected to offset by approximately half the reduction in shares associated with these share repurchases.

CAPITAL ALLOCATION

During first-quarter 2018, Pfizer returned $8.1 billion directly to shareholders, through a combination of:

$2.0 billion of dividends, or $0.34 per share of common stock; and
$6.1 billion of share repurchases, composed of $2.1 billion of open-market share repurchases and a $4.0 billion accelerated share repurchase agreement executed in March 2018.
As of May 1, 2018, Pfizer’s remaining share repurchase authorization was $10.3 billion.
EXECUTIVE COMMENTARY

Ian Read, Chairman and Chief Executive Officer, stated, "Our first-quarter 2018 financial results were solid, driven by continued strength from our anchor brands, primarily Ibrance, Eliquis and Xeljanz. The Essential Health business delivered strong growth in emerging markets and biosimilars but was negatively impacted by continued legacy Hospira product supply shortages in the U.S. as well as product losses of exclusivity. We remain focused on executing our commercial strategies, managing expenses, advancing our pipeline and prudently allocating our capital to position Pfizer for sustainable success.

"Our pipeline today, with a range of targeted compounds, biologics and vaccines, is as deep and focused as it has ever been. With several potential near-term opportunities in core therapeutic areas, I believe our pipeline presents an unprecedented opportunity to deliver a life-changing impact on a growing number of patients while creating enhanced value for all of our stakeholders," Mr. Read concluded.

Frank D’Amelio, Executive Vice President, Business Operations and Chief Financial Officer, stated, "First-quarter 2018 results were in-line with our expectations and we remain on track to deliver a solid financial performance in 2018. We reaffirmed all components of our 2018 financial guidance, reflecting our performance to date as well as our confidence in the business going forward. Additionally, in first-quarter 2018, we returned $8.1 billion directly to shareholders through dividends and share repurchases, demonstrating our continued commitment to returning capital to our shareholders."

QUARTERLY FINANCIAL HIGHLIGHTS (First-Quarter 2018 vs. First-Quarter 2017)

First-quarter 2018 revenues totaled $12.9 billion, an increase of $127 million, or 1%, compared to the prior-year quarter, reflecting the favorable impact of foreign exchange of $430 million, or 3%, partially offset by an operational decline of $302 million, or 2%.

Innovative Health Highlights

IH revenues increased 3% operationally in first-quarter 2018, primarily driven by continued growth from key brands including Ibrance, Eliquis and Xeljanz. Global operational revenue growth for Ibrance, Eliquis and Xeljanz was 35%, 30% and 29%, respectively.
First-quarter 2018 IH operational revenue growth was negatively impacted primarily by the loss of exclusivity of Viagra in the U.S. in December 2017 and the resulting shift in the reporting of U.S. and Canada Viagra revenues to the Essential Health business at the beginning of 2018(3). IH operational revenue growth was also negatively impacted by lower revenues for Enbrel in most developed Europe markets due to continued biosimilar competition. In the U.S., revenue for Ibrance, Xeljanz and certain other products was negatively impacted by customer buying patterns.
Global Prevnar 13/Prevenar 13 revenues declined 3% operationally in first-quarter 2018.

Prevenar 13 revenues in international markets increased 16% operationally, primarily due to the favorable impact of the inclusion of Prevenar 13 in additional national immunization programs in certain emerging markets for the adult indication as well as higher volumes for the pediatric indication resulting from the second-quarter 2017 launch of Prevenar 13 in China and increased shipments associated with Gavi, the Vaccine Alliance, partially offset by the overall unfavorable impact of timing associated with government purchases in certain international markets compared with the prior-year quarter.
In the U.S., Prevnar 13 revenues declined 12%, primarily due to lower government purchases in first-quarter 2018 compared to first-quarter 2017 for the pediatric indication due to a change in ordering patterns and, to a lesser extent, the continued decline in revenues for the adult indication due to a smaller remaining "catch up" opportunity compared to the prior-year quarter.
Essential Health Highlights

First-quarter 2018 EH revenues declined 9% operationally, negatively impacted primarily by a 15% operational decline from the Sterile Injectable Pharmaceuticals (SIP) portfolio, primarily due to continued legacy Hospira product shortages in the U.S. EH operational revenue growth was also negatively impacted by a 15% operational decline from the Peri-LOE Products portfolio, primarily due to expected declines in Lyrica in developed Europe and Pristiq in the U.S., partially offset by the addition of Viagra U.S. revenues previously recorded in the IH business. These declines were partially offset primarily by 12% operational growth in emerging markets and 53% operational growth from Biosimilars, primarily from Inflectra in certain channels in the U.S. as well as in developed Europe.
GAAP Reported(1) Income Statement Highlights

SELECTED TOTAL COMPANY REPORTED COSTS AND EXPENSES(1)

($ in millions)

(Favorable)/Unfavorable

First-Quarter

2018

2017

% Change

Total

Oper.

Cost of Sales(1) $ 2,563 $ 2,468 4% (6%)
Percent of Revenues 19.9 % 19.3 % N/A N/A
SI&A Expenses(1) 3,412 3,315 3% —
R&D Expenses(1) 1,743 1,716 2% 1%
Total $ 7,718 $ 7,498 3% (2%)

Other (Income)/Deductions––net(1) ($178
)

$ 60 * *
Effective Tax Rate on Reported Income(1),(6) 13.5 % 20.8 %

* Indicates calculation not meaningful or result is equal to or greater than 100%.

Pfizer recorded other income––net(1) in first-quarter 2018 compared with other deductions––net(1) in first-quarter 2017 primarily due to:

higher income from collaborations, out-licensing arrangements and sale of compound/product rights; and
unrealized net gains on equity securities, reflecting the adoption of a new accounting standard in first-quarter 2018. Prior to the adoption of the new standard, net unrealized gains and losses on virtually all readily tradeable equity securities were reported in Accumulated other comprehensive income.
Pfizer’s effective tax rate on Reported income(1) for first-quarter 2018 was favorably impacted by the December 2017 enactment of the Tax Cuts and Jobs Act (TCJA)(6).

Adjusted(2) Income Statement Highlights

SELECTED TOTAL COMPANY ADJUSTED COSTS AND EXPENSES(2)

($ in millions)

(Favorable)/Unfavorable

First-Quarter

2018

2017

% Change

Total

Oper.

Adjusted Cost of Sales(2) $ 2,536 $ 2,432 4% (6%)
Percent of Revenues 19.7 % 19.0 % N/A N/A
Adjusted SI&A Expenses(2) 3,286 3,295 — (3%)
Adjusted R&D Expenses(2) 1,739 1,713 1% 1%
Total $ 7,561 $ 7,440 2% (3%)

Adjusted Other (Income)/Deductions––net(2) ($322 ) ($100 ) * *
Effective Tax Rate on Adjusted Income(2),(6) 16.4 % 22.3 %

* Indicates calculation not meaningful or result is equal to or greater than 100%.

Pfizer’s effective tax rate on Adjusted income(2) for first-quarter 2018 was favorably impacted by the aforementioned December 2017 enactment of the TCJA(6).

First-quarter 2018 diluted weighted-average shares outstanding used to calculate Reported(1) and Adjusted(2) diluted EPS declined by 35 million shares compared to the prior-year quarter due to Pfizer’s ongoing share repurchase program, reflecting the impact of the $5 billion accelerated share repurchase agreement executed in February 2017 and completed in May 2017 and, to a lesser extent, share repurchases during first-quarter 2018, partially offset by dilution related to share-based employee compensation programs.

A full reconciliation of Reported(1) to Adjusted(2) financial measures and associated footnotes can be found starting on page 18 of the press release located at the hyperlink below.

RECENT NOTABLE DEVELOPMENTS (Since January 30, 2018)

Product Developments

Bavencio (avelumab) — In February 2018, Merck KGaA, Darmstadt, Germany, which operates its biopharmaceutical business as EMD Serono in the U.S. and Canada (Merck KGaA), and Pfizer announced results from the Phase 3 JAVELIN Lung 200 trial comparing avelumab to docetaxel in patients with unresectable, recurrent or metastatic non-small cell lung cancer (NSCLC) whose disease progressed after treatment with a platinum-containing doublet therapy. While the trial did not meet its pre-specified endpoint of improving overall survival (OS) in patients with programmed death ligand-1-positive (PD-L1+) (1% or higher) tumors, the proportion of patients in the chemotherapy arm crossing over to immune checkpoint inhibitors outside the study was higher than previously reported in post-platinum immunotherapy clinical trials, which may have confounded this trial outcome (percentage of patients receiving subsequent checkpoint inhibitor therapy: docetaxel arm 26.4%; avelumab arm 5.7%). Improvements in OS versus the control arm were observed in the moderate-to-high PD-L1+ expression (50% or greater, which represented approximately 40% of the study population) and high PD-L1+ expression (PD-L1+ expression 80% or greater, which represented approximately 30% of the study population) population subsets. The safety profile for avelumab in this trial was consistent with that observed in the overall JAVELIN clinical development program; no new safety signals were identified.
Bosulif (bosutinib)(7) — In April 2018, Pfizer announced that the European Commission (EC) approved an indication extension for Bosulif for the treatment of adults with newly diagnosed chronic phase Philadelphia chromosome-positive chronic myelogenous leukemia (Ph+ CML). Bosulif previously received conditional marketing authorization from the EC in March 2013 for the treatment of adult patients with chronic phase, accelerated phase and blast phase Ph+ CML previously treated with one or more tyrosine kinase inhibitors (TKIs) and for whom imatinib, nilotinib and dasatinib are not considered appropriate treatment options.
Chantix/Champix (varenicline) — In March 2018, Pfizer announced results from a Phase 4 study evaluating the efficacy and safety of Chantix/Champix for smoking cessation in nicotine dependent adolescents 12-19 years of age. The study did not meet its primary endpoint of the four-week continuous abstinence rate at weeks 9 through 12 for Chantix/Champix compared to placebo. The study is a regulatory post-marketing commitment for Chantix/Champix in the U.S. and the European Union (EU) for adolescents 12-16 years and 12-17 years of age, respectively. As part of planned regulatory interactions in the U.S. and EU, these data will be submitted to the U.S. Food and Drug Administration (FDA) for pediatric exclusivity determination.
Inlyta (axitinib) — In April 2018, Pfizer announced that the independent Data Monitoring Committee for the Phase 3 ATLAS trial evaluating Inlyta as adjuvant therapy for patients at high risk of recurrent renal cell carcinoma (RCC) after nephrectomy recommended stopping the trial at a planned interim analysis due to futility. The recommendation was based on the study failing to demonstrate a clear improvement in the primary endpoint of extending disease-free survival for patients treated with Inlyta compared with patients treated with placebo. No new safety signals were observed, and the safety profile was consistent with the known profile of Inlyta in advanced RCC.
Mylotarg (gemtuzumab ozogamicin) — In April 2018, Pfizer announced that the EC approved Mylotarg in combination with daunorubicin and cytarabine for the treatment of patients age 15 years and above with previously untreated, de novo, CD33-positive acute myeloid leukemia, except acute promyelocytic leukemia.
Steglatro (ertugliflozin), Steglujan (ertugliflozin and sitagliptin) and Segluromet (ertugliflozin and metformin hydrochloride) — In March 2018, the EC approved the oral sodium-glucose cotransporter 2 (SGLT2) inhibitor Steglatro (ertugliflozin) and the two fixed-dose combinations Steglujan (ertugliflozin and sitagliptin) and Segluromet (ertugliflozin and metformin hydrochloride) for use in adults aged 18 years and older with type 2 diabetes mellitus as an adjunct to diet and exercise to improve glycemic control. These products will be exclusively promoted by Merck, known as MSD outside the U.S. and Canada, in the EU.
Sutent (sunitinib malate) — In February 2018, Pfizer announced that the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) has recommended against expanding use of Sutent to include the adjuvant treatment of adult patients at a high risk of recurrent RCC following nephrectomy. The CHMP’s recommendation is not binding but will now be taken into consideration by the EC. There is currently no approved adjuvant treatment option available for patients with non-metastatic RCC at high risk for recurrence in the EU.
Trumenba (Meningococcal Serogroup B Bivalent Recombinant Lipoprotein vaccine) — In April 2018, Pfizer announced that Trumenba received Breakthrough Therapy designation from the FDA for active immunization to prevent invasive disease caused by Neisseria meningitidis group B (MenB) in children ages 1 through 9 years. This is the first Breakthrough Therapy designation for a MenB vaccine to help protect children as young as 1 year of age. Trumenba previously received Breakthrough Therapy designation in 2014 for the prevention of MenB in adolescents and young adults ages 10 through 25 years, and later the same year received FDA approval as the first MenB vaccine approved in the U.S.
Vyndaqel (tafamidis) — In March 2018, Pfizer announced that the Tafamidis Phase 3 Transthyretin Cardiomyopathy (ATTR-ACT) study evaluating tafamidis for the treatment of transthyretin cardiomyopathy (TTR-CM) met its primary endpoint, demonstrating a statistically significant reduction in the combination of all-cause mortality and frequency of cardiovascular-related hospitalizations compared to placebo at 30 months. The preliminary safety data showed that tafamidis was generally well tolerated in this population and no new safety signals were identified. Vyndaqel is approved in 40 countries for the treatment of transthyretin amyloid polyneuropathy (TTR-FAP) in adult patients with early-stage symptomatic polyneuropathy to delay peripheral neurologic impairment. Tafamidis is an investigational treatment for TTR-CM and is not approved for this indication.
Xeljanz (tofacitinib)

In April 2018, the CHMP of the EMA adopted a positive opinion recommending a change to the terms of the marketing authorization for Xeljanz to include Xeljanz in combination with methotrexate for the treatment of active psoriatic arthritis in adult patients who have had an inadequate response or who have been intolerant to a prior disease-modifying antirheumatic drug therapy. The CHMP’s opinion will now be reviewed by the EC, which has the authority to approve medicines for the EU.
In March 2018, Pfizer announced a positive outcome from an FDA Gastrointestinal Drugs Advisory Committee (GIDAC) meeting. The GIDAC met to discuss Pfizer’s supplemental New Drug Application (sNDA) for Xeljanz, which is currently under review by the FDA, for the treatment of adult patients with moderately to severely active ulcerative colitis (UC). The role of the GIDAC is to provide recommendations to the FDA; however, the recommendations are not binding. The FDA’s decision on whether or not to approve Xeljanz for UC is expected by the Prescription Drug User Fee Act (PDUFA) date in June 2018.
Xtandi (enzalutamide)

In March 2018, Pfizer and Astellas Pharma Inc. (Astellas) announced that a sNDA for Xtandi was accepted for filing and granted Priority Review designation by the FDA. If approved, the sNDA would expand the indication of Xtandi to include men with non-metastatic (M0) Castration-Resistant Prostate Cancer (CRPC), based on data from the Phase 3 PROSPER trial. Xtandi is currently indicated for the treatment of patients with metastatic CRPC. The PDUFA goal date assigned by the FDA is in July 2018. In addition, the EMA validated the Type II Variation for Xtandi seeking to expand the current indication to the same patient population.
In February 2018, Pfizer and Astellas announced results from the Phase 3 PROSPER trial in patients with M0 CRPC. The results show that the use of Xtandi plus androgen deprivation therapy (ADT) significantly reduced the risk of developing metastases or death by 71% compared to ADT alone. The median for the primary endpoint, metastasis-free survival, was 36.6 months for men who received Xtandi compared to 14.7 months with ADT alone. Full results were presented at the 2018 Genitourinary Cancers Symposium in San Francisco.
Pipeline Developments

A comprehensive update of Pfizer’s development pipeline was published today and is now available at www.pfizer.com/science/drug-product-pipeline. It includes an overview of Pfizer’s research and a list of compounds in development with targeted indication and phase of development, as well as mechanism of action for some candidates in Phase 1 and all candidates from Phase 2 through registration.

Dacomitinib (PF-00299804) — In April 2018, Pfizer announced that the FDA accepted and granted Priority Review for the company’s New Drug Application (NDA) for dacomitinib, a pan-human epidermal growth factor receptor (EGFR) TKI, for the first-line treatment of patients with locally advanced or metastatic NSCLC with EGFR-activating mutations. The PDUFA goal date assigned by the FDA is in September 2018. The EMA has also accepted the Marketing Authorization Application for dacomitinib for the same indication.
Lorlatinib (PF-06463922) — In February 2018, Pfizer announced that the FDA accepted and granted Priority Review for the company’s NDA for lorlatinib, an investigational, anaplastic lymphoma kinase (ALK) TKI for the treatment of patients with ALK-positive metastatic NSCLC, in patients previously treated with one or more ALK TKIs. The PDUFA goal date assigned by the FDA is in August 2018. The EMA and the Japan Pharmaceutical and Medical Devices Agency have also accepted marketing applications for the use of lorlatinib.
PF-04965842 — In February 2018, Pfizer announced that its once-daily oral Janus kinase 1 (JAK1) inhibitor PF-04965842 received Breakthrough Therapy designation from the FDA for the treatment of patients with moderate-to-severe atopic dermatitis (AD). The Phase 3 program for PF-04965842 initiated in December 2017 and is the first trial in the JAK1 Atopic Dermatitis Efficacy and Safety (JADE) global development program.
PF-05280014 (proposed biosimilar trastuzumab) — In April 2018, Pfizer announced that it received a Complete Response Letter (CRL) from the FDA in response to the Biologics License Application for the company’s proposed trastuzumab biosimilar. In the CRL, the FDA highlighted the need for additional technical information. The additional requested information does not relate to safety or clinical data submitted in the application. Pfizer is working closely with the FDA to address the contents of the letter and remains committed to bringing this important medicine to patients in the U.S.
PF-06939926 — In April 2018, Pfizer announced that a Phase 1b clinical trial for its mini-dystrophin gene therapy candidate, PF-06939926, in boys with Duchenne muscular dystrophy (DMD) was initiated. The first boy received an infusion of the mini-dystrophin gene on March 22nd, administered under the supervision of principal investigator, Edward Smith, MD, Associate Professor of Pediatrics and Neurology at Duke University Medical Center. Screening and enrollment of patients is expected to continue at up to four clinical research sites in the U.S. Early data from this trial are expected in the first half of 2019, once the first patient has been evaluated for one full year post-treatment. The multi-center, open-label, non-randomized, ascending dose study of a single intravenous infusion of PF-06939926 will enroll approximately 12 ambulatory boys aged 5 to 12 years with DMD. In addition to evaluating safety and tolerability, the study will evaluate measurements of dystrophin expression and distribution, as well as assessments of muscle strength, quality and function. As part of the screening process, potential candidates for treatment will be tested to confirm a negative result for antibodies against the adeno-associated virus serotype 9 (AAV9) capsid and for a T-cell (immune) response to dystrophin.
Corporate Developments

In April 2018, Pfizer and Allogene Therapeutics, Inc. (Allogene) announced that the two companies entered into an asset contribution agreement for Pfizer’s portfolio of assets related to allogeneic chimeric antigen receptor T cell (CAR T) therapy, an investigational immune cell therapy approach to treating cancer. Allogene is co-founded and led by former executives of Kite Pharma. Pfizer views this agreement as an attractive opportunity to support the continued development of allogeneic CAR T therapy in a highly focused and skilled manner. Pfizer will continue to participate financially in the development of the CAR T portfolio through a 25% ownership stake in Allogene. Separately, Pfizer maintains its approximate 8% ownership stake in Cellectis through an equity agreement entered into in 2014 by which Pfizer obtained exclusive rights to pursue the development and commercialization of certain Cellectis CAR T therapies. These CAR T therapy development programs obtained from Cellectis comprise the assets contributed to Allogene.
On March 12, 2018, Pfizer entered into an accelerated share repurchase agreement with Citibank N.A. (Citibank) to repurchase $4.0 billion of Pfizer’s common stock. Pursuant to the terms of the agreement, on March 14, 2018, Pfizer paid $4.0 billion to Citibank and received an initial delivery of approximately 87 million shares of Pfizer common stock from Citibank. At settlement of the agreement, which is expected to occur during or prior to the third quarter of 2018, Citibank may be required to deliver additional shares of common stock to Pfizer, or, under certain circumstances, Pfizer may be required to deliver shares of its common stock or may elect to make a cash payment to Citibank, with the number of shares to be delivered or the amount of such payment based on the volume-weighted average price of Pfizer’s common stock during the term of the transaction.

On May 1, 2018 Merck (NYSE: MRK), known as MSD outside the United States and Canada, reported financial results for the first quarter of 2018 (Press release, Merck & Co, MAY 1, 2018, View Source [SID1234525890]).

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"Merck had a strong start to the year driven by KEYTRUDA, GARDASIL, BRIDION and Animal Health," said Kenneth C. Frazier, Merck Chairman and CEO. "This provides good momentum as we continue to execute on our pillars of growth and look to deliver innovative medicines and vaccines that address unmet needs for patients around the world."

Financial Summary

First Quarter
$ in millions, except EPS amounts 2018 2017
Sales $ 10,037 $ 9,434
GAAP net income1

736 1,551
Non-GAAP net income that excludes items listed below1,2 2,844 2,437
GAAP EPS 0.27 0.56
Non-GAAP EPS that excludes items listed below2

1.05 0.88
Worldwide sales were $10.0 billion for the first quarter of 2018, an increase of 6 percent compared with the first quarter of 2017, including a 3 percent positive impact from foreign exchange.

GAAP (generally accepted accounting principles) earnings per share assuming dilution (EPS) were $0.27 for the first quarter of 2018, which reflects a $1.4 billion aggregate charge related to the formation of a collaboration with Eisai Co., Ltd. (Eisai). Non-GAAP EPS of $1.05 for the first quarter of 2018 excludes acquisition- and divestiture-related costs, restructuring costs, the charge related to the Eisai collaboration referenced above and certain other items.

Oncology Pipeline Highlights

Merck expanded its focus in oncology by further advancing the development program for KEYTRUDA (pembrolizumab), the company’s anti-PD-1 therapy, and Lynparza (olaparib), a PARP inhibitor being co-developed and co-commercialized with AstraZeneca. The company recently presented pivotal Phase 3 data for KEYTRUDA at the American Association for Cancer Research (AACR) (Free AACR Whitepaper) Annual Meeting. Additionally, Merck and Eisai entered into a strategic collaboration for the worldwide co-development and co-commercialization of Lenvima (lenvatinib mesylate), an orally available tyrosine kinase inhibitor discovered by Eisai. Eisai and Merck will develop and commercialize Lenvima jointly, both as a monotherapy and in combination with KEYTRUDA.

Merck announced results from KEYNOTE-189, a Phase 3 trial evaluating KEYTRUDA in combination with pemetrexed and cisplatin or carboplatin for the first-line treatment of metastatic nonsquamous non-small cell lung cancer (NSCLC). Findings showed that the combination significantly improved overall survival (OS), reducing the risk of death by half compared with chemotherapy alone. In pre-specified exploratory analyses, an OS benefit was observed regardless of PD-L1 expression in the three PD-L1 categories that were evaluated. These results were presented in a plenary session at the AACR (Free AACR Whitepaper) Annual Meeting with simultaneous publication in The New England Journal of Medicine (NEJM).
Based on the KEYNOTE-189 data, the U.S. Food and Drug Administration (FDA) granted Priority Review for the supplemental Biologics License Application (sBLA) for KEYTRUDA in combination with pemetrexed and platinum chemotherapy for the first-line treatment of patients with metastatic nonsquamous NSCLC with a PDUFA date of Sept. 23, 2018. Additionally, Merck announced that following validation by the European Medicines Agency (EMA), the centralized review process has begun for the company’s Type II Variation, which seeks approval for KEYTRUDA in combination with pemetrexed and platinum cisplatin or carboplatin for the first-line treatment of patients with metastatic nonsquamous NSCLC. The application was accepted for review based on OS and progression-free survival (PFS) data from the Phase 3 KEYNOTE-189 trial.
Merck announced the Phase 3 KEYNOTE-042 trial evaluating KEYTRUDA as monotherapy for the first-line treatment of locally advanced or metastatic NSCLC, including nonsquamous or squamous histologies, met its primary endpoint of OS. An interim analysis conducted by the independent Data Monitoring Committee demonstrated that treatment with KEYTRUDA resulted in significantly longer OS than platinum-based chemotherapy (carboplatin plus paclitaxel or carboplatin plus pemetrexed) in patients with a PD-L1 tumor proportion score (TPS) of ≥1 percent.
The FDA accepted for review a new sBLA for KEYTRUDA as a treatment in previously treated patients with recurrent or metastatic head and neck squamous cell carcinoma based on data from the Phase 3 KEYNOTE-040 trial. The FDA has set a PDUFA date of Dec. 28, 2018.
Merck and the European Organisation for Research and Treatment of Cancer (EORTC), announced findings from the Phase 3 EORTC1325/KEYNOTE-054 trial investigating KEYTRUDA as adjuvant therapy in resected, high-risk stage III melanoma. The results of the study showed KEYTRUDA significantly prolonged recurrence-free survival, reducing the risk of disease recurrence or death by 43 percent compared to placebo in the overall study population. The results were presented in the opening plenary session at the AACR (Free AACR Whitepaper) Annual Meeting with simultaneous publication in NEJM.
Merck and Incyte Corporation announced that an external Data Monitoring Committee (eDMC) review of the pivotal Phase 3 ECHO-301/KEYNOTE-252 study results evaluating Incyte’s epacadostat in combination with KEYTRUDA in patients with unresectable or metastatic melanoma determined that the study did not meet the primary endpoint of improving PFS in the overall population compared to KEYTRUDA monotherapy. The study’s second primary endpoint of OS also is not expected to reach statistical significance. Based on these results, and at the recommendation of the eDMC, the study will be stopped. The safety profile observed in ECHO-301/KEYNOTE-252 was consistent with that observed in previously reported studies of epacadostat in combination with KEYTRUDA.
The FDA accepted a new sBLA and granted Priority Review for KEYTRUDA as a treatment for patients with advanced cervical cancer with disease progression on or after chemotherapy. The FDA has set a PDUFA date of June 28, 2018.
The sBLA for KEYTRUDA for the treatment of adult and pediatric patients with refractory primary mediastinal B-cell lymphoma, or who have relapsed after two or more prior lines of therapy, remains under review with the FDA. The FDA has extended the PDUFA date by 90 days to July 3, 2018 due to additional data and analyses submitted by Merck.
The Committee for Medicinal Products for Human Use of the EMA adopted a positive opinion, recommending a marketing authorization of Lynparza for use as a maintenance therapy for patients with platinum-sensitive relapsed high grade, epithelial ovarian, fallopian tube, or primary peritoneal cancer who are in complete response or partial response to platinum-based chemotherapy.
The EMA validated for review the Marketing Authorization Application for Lynparza for use in patients with deleterious or suspected deleterious BRCA-mutated, human epidermal growth factor receptor 2 (HER2)-negative metastatic breast cancer who have been previously treated with chemotherapy in the neoadjuvant, adjuvant or metastatic setting. This is the first regulatory submission for a PARP inhibitor in breast cancer in Europe. In January 2018, Lynparza was approved by the FDA for use in the treatment of BRCA-mutated HER2-negative metastatic breast cancer, becoming the first PARP inhibitor to be approved beyond ovarian cancer.
The FDA granted Orphan Drug Designation for selumetinib, a MEK 1/2 inhibitor being co-developed with AstraZeneca, for the treatment of neurofibromatosis type 1.
Merck and Viralytics Limited signed a definitive agreement under which it is proposed that Merck will acquire Viralytics, an Australian publicly traded company focused on oncolytic immunotherapy treatments for a range of cancers. Upon completion of the transaction, Merck will gain full rights to Cavatak (CVA21), Viralytics’s investigational oncolytic immunotherapy.
Other Pipeline Highlights

The company also continued to advance its vaccines, HIV and infectious diseases pipelines.

Merck announced the beginning of two Phase 3 studies of V114, an investigational polyvalent conjugate vaccine for the prevention of pneumococcal disease. The first study will evaluate the safety, tolerability and immunogenicity of V114 followed by Pneumococcal Vaccine Polyvalent one year later in healthy adult subjects 50 years of age or older. The second study will evaluate the safety, tolerability and immunogenicity of V114 followed by Pneumococcal Vaccine Polyvalent administered eight weeks later in adults infected with HIV. Results from Phase 1 and Phase 2 studies were presented at the International Society on Pneumococci and Pneumococcal Diseases.
Merck presented data from its robust HIV pipeline, including doravirine, a late-stage investigational non-nucleoside reverse transcriptase inhibitor, and MK-8591, an investigational nucleoside reverse transcriptase translocation inhibitor, at the Conference on Retroviruses and Opportunistic Infections. Doravirine is currently under review with the EMA and FDA with a PDUFA date of Oct. 23, 2018 in the United States.
Merck announced that a pivotal Phase 3 study of relebactam, the company’s investigational beta-lactamase inhibitor, in combination with imipenem/cilastatin, demonstrated a favorable overall response in the treatment of certain imipenem–non-susceptible bacterial infections, the primary endpoint, with lower treatment-emergent nephrotoxicity (kidney toxicity), a secondary endpoint, compared to a Colistin (colistimethate sodium) plus imipenem regimen. Based on these results, the company plans to submit a New Drug Application to the FDA.
First-Quarter Revenue Performance

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

$ in millions First Quarter
2018 2017 Change Change
Ex-Exchange

Total Sales $ 10,037 $ 9,434 6 % 3 %
Pharmaceutical 8,919 8,185 9 % 4 %
KEYTRUDA 1,464 584 151 % 142 %
JANUVIA / JANUMET 1,424 1,335 7 % 2 %
GARDASIL / GARDASIL 9 660 532 24 % 20 %
ZETIA / VYTORIN 471 575 -18 % -26 %
PROQUAD,
M-M-R II and VARIVAX

392 355 10 % 9 %
ISENTRESS / ISENTRESS HD 281 305 -8 % -12 %
SIMPONI 231 184 26 % 11 %
NUVARING 216 160 36 % 32 %
BRIDION 204 148 38 % 31 %
Animal Health 1,065 939 13 % 7 %
Livestock 652 578 13 % 6 %
Companion Animals 413 361 14 % 9 %
Other Revenues 53 310 -83 % -19 %
Pharmaceutical Revenue

First-quarter pharmaceutical sales increased 9 percent to $8.9 billion, including a 5 percent positive impact from foreign exchange. The increase was primarily driven by growth in oncology, hospital acute care and diabetes, partially offset by lower sales in virology and the ongoing impacts of the loss of market exclusivity for several products.

Growth in oncology was driven by a significant increase in sales of KEYTRUDA, reflecting the company’s continued launches with new indications globally and the strong momentum for the treatment of patients with NSCLC, as KEYTRUDA is the only anti-PD-1 approved in the first-line setting. Additionally, oncology sales reflect alliance revenue of $33 million related to Lynparza.

Growth in hospital acute care reflects strong global demand of BRIDION (sugammadex) Injection 100 mg/mL, a medicine for the reversal of neuromuscular blockade induced by rocuronium bromide or vecuronium bromide in adults undergoing surgery.

Growth in diabetes was driven by JANUVIA (sitagliptin) and JANUMET (sitagliptin and metformin HCI), medicines that help lower blood sugar in adults with type 2 diabetes, reflecting growth in international markets driven by higher demand, partially offset by pricing pressure. Sales declines in the United States reflect continued pricing pressure that was partially offset by volume growth, as well as a favorable adjustment to rebate reserves.

Performance 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, reflecting growth in Asia Pacific, primarily due to the commercial launch in China, and growth in Europe, partially offset by lower sales in the United States. The decrease in GARDASIL/GARDASIL 9 sales in the United States was driven by declining volumes due to the continued transition to the two-dose regimen. Vaccines performance was negatively affected by a significant decrease in sales of ZOSTAVAX (zoster vaccine live), a vaccine for the prevention of herpes zoster, primarily due to the approval of a competitor product that received a preferential recommendation from the U.S. Advisory Committee on Immunization Practices in October 2017. The company anticipates that future sales of ZOSTAVAX will continue to be unfavorably affected by this competition.

Pharmaceutical sales growth in the quarter was partially offset by lower sales in virology, largely reflecting a significant decline in ZEPATIER (elbasvir and grazoprevir), a medicine for the treatment of chronic hepatitis C virus genotypes 1 or 4 infection, due to increasing competition and declining patient volumes, which the company expects to continue.

Pharmaceutical sales growth for the quarter was also partially offset by the ongoing impacts from the loss of United States market exclusivity for ZETIA (ezetimibe) in late 2016 and VYTORIN (ezetimibe/simvastatin) in April 2017, medicines for lowering LDL cholesterol; biosimilar competition for REMICADE (infliximab), a treatment for inflammatory diseases, in the company’s marketing territories in Europe; and the 2017 loss of exclusivity for CANCIDAS (caspofungin acetate for injection), an antifungal, in Europe.

Animal Health

Animal Health sales totaled $1.1 billion for the first quarter of 2018, an increase of 13 percent compared with the first quarter of 2017, including a 6 percent positive impact from foreign exchange. Growth was driven by higher sales of livestock products, primarily ruminants and poultry products, as well as higher sales of companion animal products.

In the first quarter of 2018, Animal Health became a reportable segment, resulting in additional disclosure requirements under U.S. GAAP related to segment performance, including segment profits. Animal Health segment profits were $413 million in the first quarter of 2018, a decrease of 1 percent compared with $417 million in the first quarter of 2017.