On July 26, 2018 West Pharmaceutical Services, Inc. (NYSE: WST) reported its financial results for the second-quarter 2018 and reaffirmed financial guidance for full-year 2018 (Press release, West Pharmaceutical Services, JUL 26, 2018, View Source [SID1234527882]).

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Executive Summary

Second-quarter 2018 reported net sales of $447.5 million grew 12.6% over the prior-year quarter. At constant currency, organic sales growth was 9.0%.
Second-quarter 2018 reported-diluted EPS was $0.75, as compared to $0.51 in the same period last year. Excluding restructuring charges and a non-recurring tax benefit, second-quarter 2018 adjusted-diluted EPS was $0.70, as compared to adjusted-diluted EPS of $0.66 in the same period last year.
The Company reaffirms full-year 2018 net sales guidance range of $1.720 billion to $1.730 billion and full-year 2018 adjusted-diluted EPS range of $2.80 to $2.90.
Last week, West officially opened its Waterford, Ireland facility, a global center of excellence for West’s advanced manufacturing network. The Waterford site will also be among the first in West’s global manufacturing network to commercialize Westar Select, the latest in its portfolio of high-value product solutions.
"Adjusted-diluted EPS," "net sales at constant currency" and "organic sales" are Non-GAAP measurements. See discussion under the heading "Non-GAAP Financial Measures" in this release.

Executive Commentary

"Second-quarter 2018 sales performance was fueled by solid Proprietary Products segment sales, led by double-digit high-value products growth, and robust growth in the Contract-Manufactured Products segment," said Eric M. Green, President and Chief Executive Officer. "The Generics market unit generated double-digit sales growth and, as expected, the Pharma and Biologics market units had improved sales growth over the first-quarter 2018.

"We expanded both gross profit and reported- and adjusted-operating profit margins. A combination of high-value product sales growth and cost efficiencies more than offset unabsorbed overhead at our Waterford facility, as well as start-up costs and low-margin tooling sales associated with increasing customer demand in our Contract-Manufactured Products segment."

Mr. Green concluded, "With a solid second-quarter, we are on track to achieve our full-year 2018 organic sales growth and adjusted earnings targets. Our markets are stable, and West continues to address the needs of our customers by providing the quality, availability and scientific excellence required to support their regulated injectable and diagnostic products."

Second-Quarter Financial Results (comparisons to prior-year period)

Second-quarter 2018 reported net sales of $447.5 million grew 12.6% over the prior-year quarter. At constant currency, organic sales growth was 9.0%.

Proprietary Products segment organic sales growth was 6.9%. By market unit, second-quarter 2018 Proprietary Products segment sales growth was led by double-digit growth in Generics and high-single digit growth in Pharma, along with low-single digit growth in Biologics. High-value products returned to double-digit organic sales growth, led by solid adoption in the Pharma and Generics market units.

Contract-Manufactured Products segment organic sales growth was 16.9%, despite the loss of a consumer-product contract manufacturing customer in early 2018. This growth was fueled by demand for diagnostic and drug delivery devices, offsetting declines in the mature consumer-product category. Second-quarter 2018 performance also benefited from timing of tooling orders, as well as initial orders from recent competitive takeaways.

Second-quarter 2018 gross profit margin was 31.8%, compared to 31.4% in the same period last year, an increase of 40 basis points. Correlated with double-digit sales of high-value products, Proprietary Products segment gross margin increased year-over-year by 180 basis points, more than offsetting unabsorbed overhead from the start-up of our Waterford facility. Contract-Manufactured Products segment gross margin declined year-over-year by 370 basis points due to unabsorbed overhead from plant consolidation activities and start-up costs associated with the launch of new programs.

The Company has adopted new rules for pension accounting. Instead of recognizing pension gains or losses in the "Selling, general and administrative expenses" line on the income statement, these gains or losses are now located "below the line" in nonoperating income. The Company has restated all prior periods to allow year-over-year comparisons with 2018 performance.

Second-quarter 2018 reported operating profit margin was 13.5%, as compared to 10.6% in the same period last year. Excluding restructuring charges and charges associated with the Venezuela deconsolidation last year, second-quarter 2018 adjusted operating profit margin was 14.0%, compared to 13.4% in the same period last year. Higher gross profit margin, coupled with lower other expense, more than offset moderately higher SG&A expense as a percentage of reported net sales. SG&A expense in the second-quarter 2018 was higher than the same period last year due to increased accruals for incentive compensation and the impact of changes in foreign currency exchange rates.

For the second-quarter 2018, reported income tax expense was $6.0 million, representing a reported effective tax rate of 9.9%. Excluding benefits associated with a reduction in the estimated liability that we recorded in 2017 in anticipation of U.S. tax reform and the impact of restructuring charges, the adjusted income tax expense in the quarter was $11.4 million. Tax benefits from stock-based compensation were $3.4 million in the second-quarter 2018, as compared to $9.6 million in the same period last year. Excluding tax benefits from stock-based compensation and restructuring and related charges, the adjusted income tax rate would have been 24% in the second-quarter 2018.

During the second-quarter 2018, the Company repurchased 260,000 shares of common stock at a cost of $22.9 million under its share repurchase program. The second-quarter 2018 repurchase completes the 800,000 share repurchase program authorized by our Board of Directors.

Full-Year 2018 Financial Guidance

The Company reaffirms full-year 2018 net sales guidance range of $1.720 billion to $1.730 billion. The Company assumes an expected translation exchange rate of $1.15 per Euro for the second half of 2018, as compared to a prior expectation of $1.20 per Euro.

The Company also reaffirms full-year 2018 adjusted-diluted EPS guidance to be in a range of $2.80 to $2.90. The Company estimates, excluding tax benefits from stock-based compensation, a full-year effective tax rate of 24.5%.

The Company is revising its 2018 capital spending guidance to be in a range of between $120 million and $130 million, as compared to prior guidance of less than $150 million. Successful progress by our Global Operations team in managing our worldwide network of manufacturing plants in a consolidated, comprehensive system is driving efficiencies and better capacity utilization. This also results in lower infrastructure capital spending requirements to support the same future sales and profit growth goals of the Company.

Second-Quarter Conference Call

The Company will host a conference call to discuss the results and business expectations at 9:00 a.m. Eastern Time today. To participate on the call please dial 877-930-8295 (U.S.) or 253-336-8738 (International). The conference ID is 6196359.

A live broadcast of the conference call will be available at the Company’s website, www.westpharma.com, in the "Investors" section. Management will refer to a slide presentation during the call, which will be made available on the day of the call. To view the presentation, select "Presentations" in the "Investors" section of the Company’s website.

An online archive of the broadcast will be available at the website three hours after the live call and will be available through Thursday, August 2, 2018, by dialing 855-859-2056 (U.S.) or 404-537-3406 (International) and entering conference ID 6196359.

Forward-Looking Statements

Certain forward-looking statements are included in this release. They use such words as "reaffirmed," "reaffirms," "will," "on track," "achieve," "expected," "increasing," "to be," "continue," "continues," "assumes," "offsetting," "estimates," "revising" and other similar terminology. These statements reflect management’s current expectations regarding future events and operating performance and speak only as of the date of this release. There is no certainty that actual results will be achieved in-line with current expectations. These forward-looking statements involve a number of risks and uncertainties. The following are some of the factors that could cause our actual results to differ materially from those expressed in or underlying our forward-looking statements: customers’ changing inventory requirements and manufacturing plans; customer decisions to move forward with our new products and product categories; average profitability, or mix, of the products we sell; dependence on third-party suppliers and partners; interruptions or weaknesses in our supply chain; increased raw material costs; fluctuations in currency exchange; and the ability to meet development milestones with key customers. This list of important factors is not all inclusive. For a description of certain additional factors that could cause the Company’s future results to differ from those expressed in any such forward-looking statements, see Item 1A, entitled "Risk Factors," in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

Except as required by law or regulation, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise.

Non-GAAP Financial Measures

This press release and the preceding discussion of the Company’s results, financial guidance, and the accompanying financial tables use the following financial measures that have not been calculated in accordance with U.S. generally accepted accounting principles (GAAP), and therefore are referred to as Non-GAAP financial measures:

Net sales at constant currency (organic sales growth)
Adjusted operating profit
Adjusted operating profit margin
Adjusted income tax expense
Adjusted net income
Adjusted diluted EPS
Net debt
Total invested capital
Net debt-to-total invested capital
The Company believes that these Non-GAAP measures of financial results provide useful information to management and investors regarding business trends, results of operations, and the Company’s overall performance and financial position. The Company’s executive management team uses these financial measures to evaluate the performance of the Company in terms of profitability and efficiency, to compare operating results to prior periods, to evaluate changes in the operating results of each segment, and to measure and allocate financial resources to its segments. The Company believes that the use of these Non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends in comparing its financial measures with other companies.

The Company’s executive management does not consider such Non-GAAP measures in isolation or as an alternative to such measures determined in accordance with GAAP. The principal limitation of these financial measures is that they exclude significant expenses and income that are required by GAAP to be recorded. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management about which items are excluded. To compensate for these limitations, Non-GAAP financial measures are presented in connection with GAAP results. The Company urges investors and potential investors to review the reconciliations of its Non-GAAP financial measures to the comparable GAAP financial measures, and not to rely on any single financial measure to evaluate the Company’s business.

Net sales at constant currency translates the current-period reported sales of subsidiaries whose functional currency is other than the U.S. dollar at the applicable foreign exchange rates in effect during the comparable prior-year period. In calculating adjusted operating profit, adjusted operating profit margin, adjusted income tax expense, adjusted net income and adjusted diluted EPS, the Company excludes the impact of items that are not considered representative of ongoing operations. Such items may include restructuring and related costs, certain asset impairments, other specifically-identified gains or losses, and discrete income tax items. A reconciliation of these adjusted Non-GAAP financial measures to the comparable GAAP financial measures is included in the accompanying tables.

The following is a description of the items excluded from adjusted operating profit, adjusted income tax expense, adjusted net income, and adjusted-diluted EPS for the three and six months presented in the accompanying tables:

Restructuring and related charges – During the three months ended June 30, 2018, the Company recorded $2.2 million in restructuring and related charges, consisting of $1.3 million for severance charges, $0.3 million for non-cash asset write-downs, and $0.6 million for other charges. During the six months ended June 30, 2018, the Company recorded $5.5 million in restructuring and related charges, consisting of $3.3 million for severance charges, $0.4 million for non-cash asset write-downs, and $1.8 million for other charges. The plan will require restructuring and related charges in the range of $8.0 million to $13.0 million and capital expenditures in the range of $9.0 million to $14.0 million. Once fully completed, we expect that the plan will provide the Company with annualized savings in the range of $17.0 million to $22.0 million.

Tax law changes – During the three and six months ended June 30, 2018, the Company recorded a net tax benefit of $4.8 million to reflect a reduction to its one-time mandatory deemed repatriation tax of post-1986 undistributed foreign subsidiary earnings and profits. In April 2018, the U.S. Internal Revenue Service issued guidance, which provided that certain foreign taxes accrued by specified corporations in the toll tax year reduce post-1986 earnings and profits. In addition, during the six months ended June 30, 2018, the Company recorded a net tax charge of $0.3 million to adjust its estimated impact of the 2017 Tax Act. During the three and twelve months ended December 31, 2017, the Company had recorded a provisional charge for the estimated impact of the 2017 Tax Act, based upon its then-current understanding of the 2017 Tax Act and the guidance available at the time. The Company will continue to actively monitor the developments relating to the 2017 Tax Act and will adjust its estimate as necessary during the one-year measurement period.

Venezuela deconsolidation – During the three and six months ended June 30, 2017, as a result of the continued deterioration of conditions in Venezuela as well as its continued reduced access to U.S. dollar settlement controlled by the Venezuelan government, the Company recorded a charge of $11.1 million related to the deconsolidation of its Venezuelan subsidiary, following its determination that it no longer met the GAAP criteria for control of that subsidiary. As of April 1, 2017, the Company’s consolidated financial statements exclude the results of its Venezuelan subsidiary.

On July 26, 2018 VBI Vaccines Inc. (NASDAQ: VBIV) ("VBI"), a commercial-stage biopharmaceutical company developing next-generation infectious disease and immuno-oncology vaccines, reported financial results for the second quarter ending June 30, 2018, and provided a corporate update (Press release, VBI Vaccines, JUL 26, 2018, View Source [SID1234527881]).

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"We continue to make strong progress in all three of our lead clinical programs," said Jeff Baxter, President and CEO of VBI. "Our pivotal Phase 3 program of Sci-B-Vac, our hepatitis B vaccine, is advancing well towards topline data from the PROTECT study expected mid-year 2019. Our eVLP technology-based pipeline showed exciting results in the clinic in May, when we reported positive final safety and immunogenicity data from our Phase 1 randomized study of VBI-1501 for CMV. This study was the first in-human study of a vaccine developed with our eVLP technology. We were excited to be able to demonstrate a robust immunologic response at a dose that is one-tenth the amount of other organizations’ CMV vaccine candidates. For our immuno-oncology pipeline, also developed with our eVLP technology, we look forward to reporting initial immunologic data from the Phase 1/2a study of VBI-1901 in recurrent GBM patients, which we expect in the second half of this year."

Recent Highlights and Upcoming Milestones
Sci-B-Vac for Hepatitis B
Sci-B-Vac, the Company’s Hepatitis B vaccine, is currently being studied in a pivotal Phase 3 clinical program in the U.S., Europe, and Canada. This program consists of two concurrent Phase 3 studies, the PROTECT study and the CONSTANT study.
Topline data from the PROTECT study are expected mid-year 2019, with topline data from the CONSTANT study expected in the second half of 2019.
The results from this pivotal Phase 3 program are intended to support future regulatory filings in the U.S., Europe, and Canada.

VBI-1501 for Congenital Cytomegalovirus (CMV)
In May 2018, VBI reported positive safety and immunogenicity data from a Phase 1 randomized, observer-blind, placebo-controlled study designed to evaluate the safety, tolerability, and immunogenicity of VBI-1501 in 128 CMV-negative, healthy adults aged 18-40 years.

Subjects were randomized into five arms to receive various dose levels of a modified form of the CMV gB antigen, gB-g, with or without the adjuvant alum, or to receive placebo. The highest does of antigen tested was 2.0μg of gB-g content with alum (VBI-1501A 2.0μg).
The final Phase 1 study results demonstrated that VBI-1501A was safe and well-tolerated at all doses.
VBI-1501A 2.0μg elicited CMV-neutralizing antibodies against fibroblast cell infection in 100% of subjects after the third vaccination (85% after two vaccinations), inducing titers comparable to those observed in patients protected as a result of natural infection (CMV-positive controls).
In epithelial cells, which have historically been the much harder cell type to protect against infection, VBI-1501A 2.0μg demonstrated a 31% neutralizing antibody seroconversion rate after three vaccinations, up from 17% after two vaccinations.
Discussions with regulatory bodies are planned for the second half of 2018 to discuss the next stage of development for VBI-1501A.

VBI-1901 for Glioblastoma (GBM)
A Phase 1/2a Clinical Study of VBI-1901 for the treatment of recurrent glioblastoma (rGBM) is ongoing.
The multi-center, open-label, two-part study will enroll up to 28 patients and is designed to evaluate safety, tolerability, and the optimal therapeutic dose level of VBI-1901.
Extensive biomarker testing and tumor imaging is built into this clinical protocol to enable the Company to assess the robustness of the immune response induced by VBI-1901.
In the second half of 2018, VBI hopes to be able to correlate this immunologic and biomarker data with initial clinical outcomes from the low and mid dose cohorts, and expects 6-month overall survival (OS) and progression-free survival (PFS) data in the first half of 2019.

First Quarter 2018 Financial Results
VBI ended the second quarter of 2018 with $41.1 million in cash and cash equivalents compared with $67.7 million as of December 31, 2017. Net cash used in operations for the six months ended June 30, 2018 was $24.5 million.
Revenue for the second quarter of 2018 was $0.2 million and was primarily attributable to sales of Sci-B-Vac in Israel and in Europe, on a named-patient basis. Revenue for the second quarter of 2017 was $0.3 million and was primarily attributable to sales of Sci-B-Vac in Israel and to a services agreement that was completed during that time frame.
Research and development expenses were $10.9 million for the second quarter of 2018, as compared to $4.5 million for the same period in 2017. The increase was primarily due to the continuation of the Phase 3 program for Sci-B-Vacand the Phase 1/2a clinical study for VBI-1901 in recurrent GBM patients, but was partially offset by the reduction in research expenses due to the advancement of VBI-1901 into clinical development from pre-clinical development.

General and administrative expenses were $4.0 million for the second quarter of 2018, as compared to $2.8 million for the same period in 2017. The increase was primarily due to human resources expenses, stock-based compensation expenses, and impairment related to leasehold improvements and manufacturing equipment no longer being utilized in the business as a result of the renovation and capacity increases of our manufacturing facility in Rehovot, Israel.

Net loss and net loss per share for the second quarter of 2018 were $16.7 million and $0.26, respectively, compared to a net loss of $9.0 million and a net loss per share of $0.22 for the second quarter of 2017.

On July 26, 2018 Merck (NYSE:MRK), known as MSD outside the United States and Canada, reported that KEYTRUDA, Merck’s anti-PD-1 therapy, has been approved by the China National Drug Administration (CNDA) for the treatment of adult patients with unresectable or metastatic melanoma following failure of one prior line of therapy (Press release, Merck & Co, JUL 26, 2018, View Source [SID1234527880]). This is the first and only approval of an anti-PD-1 therapy for advanced melanoma in China.

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"Over the past decades, we have had limited effective options in the treatment of patients with advanced melanoma," Professor Jun Guo, M.D., Ph.D, director of the Department of Melanoma & Renal Cancer, Peking University Cancer Hospital and Institute Secretary-General of the Chinese Society of Clinical Oncology, primary investigator, KEYNOTE-151. "Advanced melanoma is one of the cancers that has been most responsive to immunotherapy, and outside of China, anti-PD-1 therapies such as pembrolizumab have become the standard therapy for this disease. With the approval of pembrolizumab in China, the treatment of advanced melanoma will now be aligned with international standards."

The approval of KEYTRUDA in China was based on overall response rate (ORR) data from the Phase 1b KEYNOTE-151 study, which evaluated KEYTRUDA monotherapy in Chinese patients with previously treated locally advanced or metastatic melanoma who received one prior line of systemic therapy. In 2018, the CNDA granted priority review status to KEYTRUDA, which accelerated the approval process by allowing for simultaneous clinical validation for the first time – creating an industry leading approval turnaround time for imported cancer medicine in China.

"Merck is committed to bringing new treatment advances, like KEYTRUDA, to cancer patients in China," said Dr. Roy Baynes, senior vice president and head of global clinical development, chief medical officer, Merck Research Laboratories. "The approval of KEYTRUDA in China, for this first indication, was made possible through extensive collaborative effort with the Chinese patients and investigators who participated in KEYNOTE-151, as well as the regulatory and government authorities who prioritized this filing. We appreciate their commitment to bringing forward the first anti-PD-1 therapy for advanced melanoma in China."

"The approval of our anti-PD-1 therapy reflects the Chinese government’s strong commitment to expedite the introduction of innovative therapies to Chinese patients," said Joseph Romanelli, president of MSD China. "The approval of KEYTRUDA in advanced melanoma marks the sixth new product approval for MSD China in 2018. We are encouraged that our scientific advancements are leading to new options for patients and their families."

About Melanoma in China

Malignant melanoma, the most serious form of skin cancer, is characterized by the uncontrolled growth of pigment-producing cells. The incidence of melanoma has been increasing over the past four decades – approximately 232,000 new cases were diagnosed worldwide in 2012. Melanoma is one of the fastest growing malignant cancers in China, increasing at an annual rate of 3-5 percent, which makes it one of the deadliest diseases in the country. Research data has shown that once the disease metastasizes, the five-year survival rate for metastatic melanoma in Chinese patients is only 4.6 percent.

About KEYNOTE-151

KEYNOTE-151 is an open-label, single-arm, multi-center, Phase 1b trial evaluating KEYTRUDA monotherapy in 103 Chinese patients with previously treated locally advanced or metastatic melanoma who received one prior line of systemic therapy. Patients were enrolled to receive KEYTRUDA at a dose of 2 mg/kg every three weeks. The primary efficacy outcome measure was ORR as assessed by Blinded Independent Central Review (BICR) using RECIST 1.1. Secondary efficacy outcome measures were duration of response (DOR) and progression-free survival (PFS; as assessed by BICR per RECIST 1.1 and irRECIST), ORR (as assessed by BICR per irRECIST) and overall survival (OS).

About KEYTRUDA (pembrolizumab) Injection, 100mg

KEYTRUDA is an anti-PD-1 therapy that works by increasing the ability of the body’s immune system to help detect and fight tumor cells. KEYTRUDA is a humanized monoclonal antibody that blocks the interaction between PD-1 and its ligands, PD-L1 and PD-L2, thereby activating T lymphocytes which may affect both tumor cells and healthy cells.

Merck has the industry’s largest immuno-oncology clinical research program, which currently involves more than 750 trials studying KEYTRUDA across a wide variety of cancers and treatment settings. The KEYTRUDA clinical program seeks to understand the role of KEYTRUDA across cancers and the factors that may predict a patient’s likelihood of benefitting from treatment with KEYTRUDA, including exploring several different biomarkers.

KEYTRUDA (pembrolizumab) Indications and Dosing in the U.S.

Melanoma

KEYTRUDA is indicated for the treatment of patients with unresectable or metastatic melanoma at a fixed dose of 200 mg every three weeks until disease progression or unacceptable toxicity.

Lung Cancer

KEYTRUDA, as a single agent, is indicated for the first-line treatment of patients with metastatic non-small cell lung cancer (NSCLC) whose tumors have high PD-L1 expression [tumor proportion score (TPS) ≥50%] as determined by an FDA-approved test, with no EGFR or ALK genomic tumor aberrations.

KEYTRUDA, as a single agent, is also indicated for the treatment of patients with metastatic NSCLC whose tumors express PD-L1 (TPS ≥1%) as determined by an FDA-approved test, with disease progression on or after platinum-containing chemotherapy. Patients with EGFR or ALK genomic tumor aberrations should have disease progression on FDA-approved therapy for these aberrations prior to receiving KEYTRUDA.

KEYTRUDA, in combination with pemetrexed and carboplatin, is indicated for the first-line treatment of patients with metastatic nonsquamous NSCLC. This indication is approved under accelerated approval based on tumor response rate and progression-free survival. Continued approval for this indication may be contingent upon verification and description of clinical benefit in the confirmatory trials.

In metastatic NSCLC, KEYTRUDA is administered at a fixed dose of 200 mg every three weeks until disease progression, unacceptable toxicity, or up to 24 months in patients without disease progression.

When administering KEYTRUDA in combination with chemotherapy, KEYTRUDA should be administered prior to chemotherapy when given on the same day. See also the Prescribing Information for pemetrexed and carboplatin.

Head and Neck Cancer

KEYTRUDA is indicated for the treatment of patients with recurrent or metastatic head and neck squamous cell carcinoma (HNSCC) with disease progression on or after platinum-containing chemotherapy. This indication is approved under accelerated approval based on tumor response rate and durability of response. Continued approval for this indication may be contingent upon verification and description of clinical benefit in the confirmatory trials. In HNSCC, KEYTRUDA is administered at a fixed dose of 200 mg every three weeks until disease progression, unacceptable toxicity, or up to 24 months in patients without disease progression.

Classical Hodgkin Lymphoma

KEYTRUDA is indicated for the treatment of adult and pediatric patients with refractory classical Hodgkin lymphoma (cHL), or who have relapsed after three or more prior lines of therapy. This indication is approved under accelerated approval based on tumor response rate and durability of response. Continued approval for this indication may be contingent upon verification and description of clinical benefit in the confirmatory trials. In adults with cHL, KEYTRUDA is administered at a fixed dose of 200 mg every three weeks until disease progression or unacceptable toxicity, or up to 24 months in patients without disease progression. In pediatric patients with cHL, KEYTRUDA is administered at a dose of 2 mg/kg (up to a maximum of 200 mg) every three weeks until disease progression or unacceptable toxicity, or up to 24 months in patients without disease progression.

Primary Mediastinal Large B-Cell Lymphoma

KEYTRUDA is indicated for the treatment of adult and pediatric patients with refractory primary mediastinal large B-cell lymphoma (PMBCL), or who have relapsed after 2 or more prior lines of therapy. This indication is approved under accelerated approval based on tumor response rate and durability of response. Continued approval for this indication may be contingent upon verification and description of clinical benefit in confirmatory trials. KEYTRUDA is not recommended for the treatment of patients with PMBCL who require urgent cytoreductive therapy. In adults with PMBCL, KEYTRUDA is administered at a fixed dose of 200 mg every three weeks until disease progression, unacceptable toxicity, or up to 24 months in patients without disease progression. In pediatric patients with PMBCL, KEYTRUDA is administered at a dose of 2 mg/kg (up to a maximum of 200 mg) every three weeks until disease progression or unacceptable toxicity, or up to 24 months in patients without disease progression.

Urothelial Carcinoma

KEYTRUDA is indicated for the treatment of patients with locally advanced or metastatic urothelial carcinoma (mUC) who are not eligible for cisplatin-containing chemotherapy and whose tumors express PD-L1 [Combined Positive Score (CPS) ≥10], or in patients who are not eligible for any platinum-containing chemotherapy regardless of PD-L1 status. This indication is approved under accelerated approval based on tumor response rate and duration of response. Continued approval for this indication may be contingent upon verification and description of clinical benefit in the confirmatory trials.

KEYTRUDA is also indicated for the treatment of patients with locally advanced or metastatic urothelial carcinoma (mUC) who have disease progression during or following platinum-containing chemotherapy or within 12 months of neoadjuvant or adjuvant treatment with platinum-containing chemotherapy.

In locally advanced or metastatic urothelial carcinoma, KEYTRUDA is administered at a fixed dose of 200 mg every three weeks until disease progression or unacceptable toxicity, or up to 24 months in patients without disease progression.

Microsatellite Instability-High (MSI-H) Cancer

KEYTRUDA is indicated for the treatment of adult and pediatric patients with unresectable or metastatic microsatellite instability-high (MSI-H) or mismatch repair deficient (dMMR)

solid tumors that have progressed following prior treatment and who have no satisfactory alternative treatment options, or
colorectal cancer that has progressed following treatment with fluoropyrimidine, oxaliplatin, and irinotecan.
This indication is approved under accelerated approval based on tumor response rate and durability of response. Continued approval for this indication may be contingent upon verification and description of clinical benefit in the confirmatory trials. The safety and effectiveness of KEYTRUDA in pediatric patients with MSI-H central nervous system cancers have not been established. In adult patients with MSI-H cancer, KEYTRUDA is administered at a fixed dose of 200 mg every three weeks until disease progression, unacceptable toxicity, or up to 24 months in patients without disease progression. In children with MSI-H cancer, KEYTRUDA is administered at a dose of 2 mg/kg (up to a maximum of 200 mg) every three weeks until disease progression or unacceptable toxicity, or up to 24 months in patients without disease progression.

Gastric Cancer

KEYTRUDA is indicated for the treatment of patients with recurrent locally advanced or metastatic gastric or gastroesophageal junction (GEJ) adenocarcinoma whose tumors express PD-L1 [Combined Positive Score (CPS) ≥1] as determined by an FDA-approved test, with disease progression on or after two or more prior lines of therapy including fluoropyrimidine- and platinum-containing chemotherapy and if appropriate, HER2/neu-targeted therapy. This indication is approved under accelerated approval based on tumor response rate and durability of response. Continued approval for this indication may be contingent upon verification and description of clinical benefit in the confirmatory trials. The recommended dose of KEYTRUDA is 200 mg every three weeks until disease progression, unacceptable toxicity, or up to 24 months in patients without disease progression.

Cervical Cancer

KEYTRUDA is indicated for the treatment of patients with recurrent or metastatic cervical cancer with disease progression on or after chemotherapy whose tumors express PD-L1 (CPS ≥1) as determined by an FDA-approved test. This indication is approved under accelerated approval based on tumor response rate and durability of response. Continued approval for this indication may be contingent upon verification and description of clinical benefit in the confirmatory trials. The recommended dose of KEYTRUDA is 200 mg every three weeks until disease progression, unacceptable toxicity or up to 24 months in patients without disease progression.

Selected Important Safety Information for KEYTRUDA

KEYTRUDA can cause immune-mediated pneumonitis, including fatal cases. Pneumonitis occurred in 94 (3.4%) of 2799 patients receiving KEYTRUDA, including Grade 1 (0.8%), 2 (1.3%), 3 (0.9%), 4 (0.3%), and 5 (0.1%) pneumonitis, and occurred more frequently in patients with a history of prior thoracic radiation (6.9%) compared to those without (2.9%). Monitor patients for signs and symptoms of pneumonitis. Evaluate suspected pneumonitis with radiographic imaging. Administer corticosteroids for Grade 2 or greater pneumonitis. Withhold KEYTRUDA for Grade 2; permanently discontinue KEYTRUDA for Grade 3 or 4 or recurrent Grade 2 pneumonitis.

KEYTRUDA can cause immune-mediated colitis. Colitis occurred in 48 (1.7%) of 2799 patients receiving KEYTRUDA, including Grade 2 (0.4%), 3 (1.1%), and 4 (<0.1%) colitis. Monitor patients for signs and symptoms of colitis. Administer corticosteroids for Grade 2 or greater colitis. Withhold KEYTRUDA for Grade 2 or 3; permanently discontinue KEYTRUDA for Grade 4 colitis.

KEYTRUDA can cause immune-mediated hepatitis. Hepatitis occurred in 19 (0.7%) of 2799 patients receiving KEYTRUDA, including Grade 2 (0.1%), 3 (0.4%), and 4 (<0.1%) hepatitis. Monitor patients for changes in liver function. Administer corticosteroids for Grade 2 or greater hepatitis and, based on severity of liver enzyme elevations, withhold or discontinue KEYTRUDA.

KEYTRUDA can cause hypophysitis. Hypophysitis occurred in 17 (0.6%) of 2799 patients receiving KEYTRUDA, including Grade 2 (0.2%), 3 (0.3%), and 4 (<0.1%) hypophysitis. Monitor patients for signs and symptoms of hypophysitis (including hypopituitarism and adrenal insufficiency). Administer corticosteroids and hormone replacement as clinically indicated. Withhold KEYTRUDA for Grade 2; withhold or discontinue for Grade 3 or 4 hypophysitis.

KEYTRUDA can cause thyroid disorders, including hyperthyroidism, hypothyroidism, and thyroiditis. Hyperthyroidism occurred in 96 (3.4%) of 2799 patients receiving KEYTRUDA, including Grade 2 (0.8%) and 3 (0.1%) hyperthyroidism. Hypothyroidism occurred in 237 (8.5%) of 2799 patients receiving KEYTRUDA, including Grade 2 (6.2%) and 3 (0.1%) hypothyroidism. The incidence of new or worsening hypothyroidism was higher in patients with HNSCC, occurring in 28 (15%) of 192 patients with HNSCC, including Grade 3 (0.5%) hypothyroidism. Thyroiditis occurred in 16 (0.6%) of 2799 patients receiving KEYTRUDA, including Grade 2 (0.3%) thyroiditis. Monitor patients for changes in thyroid function (at the start of treatment, periodically during treatment, and as indicated based on clinical evaluation) and for clinical signs and symptoms of thyroid disorders. Administer replacement hormones for hypothyroidism and manage hyperthyroidism with thionamides and beta-blockers as appropriate. Withhold or discontinue KEYTRUDA for Grade 3 or 4 hyperthyroidism.

KEYTRUDA can cause type 1 diabetes mellitus, including diabetic ketoacidosis, which have been reported in 6 (0.2%) of 2799 patients. Monitor patients for hyperglycemia or other signs and symptoms of diabetes. Administer insulin for type 1 diabetes, and withhold KEYTRUDA and administer antihyperglycemics in patients with severe hyperglycemia.

KEYTRUDA can cause immune-mediated nephritis. Nephritis occurred in 9 (0.3%) of 2799 patients receiving KEYTRUDA, including Grade 2 (0.1%), 3 (0.1%), and 4 (<0.1%) nephritis. Monitor patients for changes in renal function. Administer corticosteroids for Grade 2 or greater nephritis. Withhold KEYTRUDA for Grade 2; permanently discontinue KEYTRUDA for Grade 3 or 4 nephritis.

Immune-mediated rashes, including Stevens-Johnson syndrome (SJS), toxic epidermal necrolysis (TEN) (some cases with fatal outcome), exfoliative dermatitis, and bullous pemphigoid, can occur. Monitor patients for suspected severe skin reactions and based on the severity of the adverse reaction, withhold or permanently discontinue KEYTRUDA and administer corticosteroids. For signs or symptoms of SJS or TEN, withhold KEYTRUDA and refer the patient for specialized care for assessment and treatment. If SJS or TEN is confirmed, permanently discontinue KEYTRUDA.

Immune-mediated adverse reactions, which may be severe or fatal, can occur in any organ system or tissue in patients receiving KEYTRUDA. While immune-mediated adverse reactions usually occur during treatment with PD-1/PD-L1 blocking antibodies, they may occur after discontinuation of treatment. For suspected immune-mediated adverse reactions, ensure adequate evaluation to confirm etiology or exclude other causes. Based on the severity of the adverse reaction, withhold KEYTRUDA and administer corticosteroids. Upon improvement to Grade 1 or less, initiate corticosteroid taper and continue to taper over at least 1 month. Based on limited data from clinical studies in patients whose immune-related adverse reactions could not be controlled with corticosteroid use, administration of other systemic immunosuppressants can be considered. Resume KEYTRUDA when the adverse reaction remains at Grade 1 or less following corticosteroid taper. Permanently discontinue KEYTRUDA for any Grade 3 immune-mediated adverse reaction that recurs and for any life-threatening immune-mediated adverse reaction.

The following clinically significant immune-mediated adverse reactions occurred in less than 1% (unless otherwise indicated) of 2799 patients: arthritis (1.5%), uveitis, myositis, Guillain-Barré syndrome, myasthenia gravis, vasculitis, pancreatitis, hemolytic anemia, sarcoidosis, and encephalitis. In addition, myelitis and myocarditis were reported in other clinical trials, including cHL, and postmarketing use.

Solid organ transplant rejection has been reported in postmarketing use of KEYTRUDA. Treatment with KEYTRUDA may increase the risk of rejection in solid organ transplant recipients. Consider the benefit of treatment with KEYTRUDA vs the risk of possible organ rejection in these patients.

KEYTRUDA can cause severe or life-threatening infusion-related reactions, including hypersensitivity and anaphylaxis, which have been reported in 6 (0.2%) of 2799 patients. Monitor patients for signs and symptoms of infusion-related reactions, including rigors, chills, wheezing, pruritus, flushing, rash, hypotension, hypoxemia, and fever. For Grade 3 or 4 reactions, stop infusion and permanently discontinue KEYTRUDA.

Immune-mediated complications, including fatal events, occurred in patients who underwent allogeneic hematopoietic stem cell transplantation (HSCT) after treatment with KEYTRUDA. Of 23 patients with cHL who proceeded to allogeneic HSCT after KEYTRUDA, 6 developed graft-versus-host disease (GVHD) (one fatal case), and two developed severe hepatic veno-occlusive disease (VOD) after reduced-intensity conditioning (one fatal case). Cases of fatal hyperacute GVHD after allogeneic HSCT have also been reported in patients with lymphoma who received a PD-1 receptor–blocking antibody before transplantation. Follow patients closely for early evidence of transplant-related complications such as hyperacute GVHD, Grade 3 to 4 acute GVHD, steroid-requiring febrile syndrome, hepatic VOD, and other immune-mediated adverse reactions, and intervene promptly.

In patients with a history of allogeneic HSCT, acute GVHD, including fatal GVHD, has been reported after treatment with KEYTRUDA. Patients who experienced GVHD after their transplant procedure may be at increased risk for GVHD after KEYTRUDA. Consider the benefit of KEYTRUDA vs the risk of GVHD in these patients.

In clinical trials in patients with multiple myeloma, the addition of KEYTRUDA to a thalidomide analogue plus dexamethasone resulted in increased mortality. Treatment of these patients with a PD-1 or PD-L1 blocking antibody in this combination is not recommended outside of controlled clinical trials.

Based on its mechanism of action, KEYTRUDA can cause fetal harm when administered to a pregnant woman. If used during pregnancy, or if the patient becomes pregnant during treatment, apprise the patient of the potential hazard to a fetus. Advise females of reproductive potential to use highly effective contraception during treatment and for 4 months after the last dose of KEYTRUDA.

In KEYNOTE-006, KEYTRUDA was discontinued due to adverse reactions in 9% of 555 patients with advanced melanoma; adverse reactions leading to discontinuation in more than one patient were colitis (1.4%), autoimmune hepatitis (0.7%), allergic reaction (0.4%), polyneuropathy (0.4%), and cardiac failure (0.4%). Adverse reactions leading to interruption of KEYTRUDA occurred in 21% of patients; the most common (≥1%) was diarrhea (2.5%). The most common adverse reactions with KEYTRUDA vs ipilimumab were fatigue (28% vs 28%), diarrhea (26% with KEYTRUDA), rash (24% vs 23%), and nausea (21% with KEYTRUDA). Corresponding incidence rates are listed for ipilimumab only for those adverse reactions that occurred at the same or lower rate than with KEYTRUDA.

In KEYNOTE-010, KEYTRUDA monotherapy was discontinued due to adverse reactions in 8% of 682 patients with metastatic NSCLC. The most common adverse event resulting in permanent discontinuation of KEYTRUDA was pneumonitis (1.8%). Adverse reactions leading to interruption of KEYTRUDA occurred in 23% of patients; the most common (≥1%) were diarrhea (1%), fatigue (1.3%), pneumonia (1%), liver enzyme elevation (1.2%), decreased appetite (1.3%), and pneumonitis (1%). The most common adverse reactions (occurring in at least 20% of patients and at a higher incidence than with docetaxel) were decreased appetite (25% vs 23%), dyspnea (23% vs 20%), and nausea (20% vs 18%).

In KEYNOTE-021(G1), when KEYTRUDA was administered in combination with carboplatin and pemetrexed (carbo/pem) in advanced nonsquamous NSCLC, KEYTRUDA was discontinued in 10% of 59 patients. The most common adverse reaction resulting in discontinuation of KEYTRUDA (≥2%) was acute kidney injury (3.4%). Adverse reactions leading to interruption of KEYTRUDA occurred in 39% of patients; the most common (≥2%) were fatigue (8%), neutrophil count decreased (8%), anemia (5%), dyspnea (3.4%), and pneumonitis (3.4%). The most common adverse reactions (≥20%) with KEYTRUDA compared to carbo/pem alone were fatigue (71% vs 50%), nausea (68% vs 56%), constipation (51% vs 37%), rash (42% vs 21%), vomiting (39% vs 27%), dyspnea (39% vs 21%), diarrhea (37% vs 23%), decreased appetite (31% vs 23%), headache (31% vs 16%), cough (24% vs 18%), dizziness (24% vs 16%), insomnia (24% vs 15%), pruritus (24% vs 4.8%), peripheral edema (22% vs 18%), dysgeusia (20% vs 11%), alopecia (20% vs 3.2%), upper respiratory tract infection (20% vs 3.2%), and arthralgia (15% vs 24%). This study was not designed to demonstrate a statistically significant difference in adverse reaction rates for KEYTRUDA as compared to carbo/pem alone for any specified adverse reaction.

In KEYNOTE-012, KEYTRUDA was discontinued due to adverse reactions in 17% of 192 patients with HNSCC. Serious adverse reactions occurred in 45% of patients. The most frequent serious adverse reactions reported in at least 2% of patients were pneumonia, dyspnea, confusional state, vomiting, pleural effusion, and respiratory failure. The most common adverse reactions (reported in at least 20% of patients) were fatigue, decreased appetite, and dyspnea. Adverse reactions occurring in patients with HNSCC were generally similar to those occurring in patients with melanoma or NSCLC, with the exception of increased incidences of facial edema (10% all Grades; 2.1% Grades 3 or 4) and new or worsening hypothyroidism.

In KEYNOTE-087, KEYTRUDA was discontinued due to adverse reactions in 5% of 210 patients with cHL, and treatment was interrupted due to adverse reactions in 26% of patients. Fifteen percent (15%) of patients had an adverse reaction requiring systemic corticosteroid therapy. Serious adverse reactions occurred in 16% of patients. The most frequent serious adverse reactions (≥1%) included pneumonia, pneumonitis, pyrexia, dyspnea, GVHD, and herpes zoster. Two patients died from causes other than disease progression; one from GVHD after subsequent allogeneic HSCT and one from septic shock. The most common adverse reactions (occurring in ≥20% of patients) were fatigue (26%), pyrexia (24%), cough (24%), musculoskeletal pain (21%), diarrhea (20%), and rash (20%).

In KEYNOTE-170, KEYTRUDA was discontinued due to adverse reactions in 8% of 53 patients with PMBCL, and treatment was interrupted due to adverse reactions in 15%. Twenty-five percent (25%) of patients had an adverse reaction requiring systemic corticosteroid therapy. Serious adverse reactions occurred in 26% of patients and included: arrhythmia (4%), cardiac tamponade (2%), myocardial infarction (2%), pericardial effusion (2%), and pericarditis (2%). Six (11%) patients died within 30 days of start of treatment. The most common adverse reactions (occurring in ≥20% of patients) were musculoskeletal pain (30%), upper respiratory tract infection and pyrexia (28% each), cough (26%), fatigue (23%), and dyspnea (21%).

In KEYNOTE-052, KEYTRUDA was discontinued due to adverse reactions in 11% of 370 patients with locally advanced or metastatic urothelial carcinoma. The most common adverse reactions (in ≥20% of patients) were fatigue (38%), musculoskeletal pain (24%), decreased appetite (22%), constipation (21%), rash (21%), and diarrhea (20%). Eighteen patients (5%) died from causes other than disease progression. Five patients (1.4%) who were treated with KEYTRUDA experienced sepsis which led to death, and 3 patients (0.8%) experienced pneumonia which led to death. Adverse reactions leading to interruption of KEYTRUDA occurred in 22% of patients; the most common (≥1%) were liver enzyme increase, diarrhea, urinary tract infection, acute kidney injury, fatigue, joint pain, and pneumonia. Serious adverse reactions occurred in 42% of patients, the most frequent (≥2%) of which were urinary tract infection, hematuria, acute kidney injury, pneumonia, and urosepsis.

In KEYNOTE-045, KEYTRUDA was discontinued due to adverse reactions in 8% of 266 patients with locally advanced or metastatic urothelial carcinoma. The most common adverse reaction resulting in permanent discontinuation of KEYTRUDA was pneumonitis (1.9%). Adverse reactions leading to interruption of KEYTRUDA occurred in 20% of patients; the most common (≥1%) were urinary tract infection (1.5%), diarrhea (1.5%), and colitis (1.1%). The most common adverse reactions (≥20%) in patients who received KEYTRUDA vs those who received chemotherapy were fatigue (38% vs 56%), musculoskeletal pain (32% vs 27%), pruritus (23% vs 6%), decreased appetite (21% vs 21%), nausea (21% vs 29%), and rash (20% vs 13%). Serious adverse reactions occurred in 39% of KEYTRUDA-treated patients, the most frequent (≥2%) of which were urinary tract infection, pneumonia, anemia, and pneumonitis.

In KEYNOTE-158, KEYTRUDA was discontinued due to adverse reactions in 8% of 98 patients (in Cohort E) with recurrent or metastatic cervical cancer. Serious adverse reactions occurred in 39% of patients receiving KEYTRUDA. The most frequent serious adverse reactions reported included anemia (7%), fistula, hemorrhage, and infections [except urinary tract infections] (4.1% each). The most common adverse reactions (occurring in ≥20% of patients) were fatigue (43%), musculoskeletal pain (27%), diarrhea (23%), pain and abdominal pain (22% each), and decreased appetite (21%).

It is not known whether KEYTRUDA is excreted in human milk. Because many drugs are excreted in human milk, instruct women to discontinue nursing during treatment with KEYTRUDA and for 4 months after the final dose.

There is limited experience in pediatric patients. In a study, 40 pediatric patients (16 children aged 2 years to younger than 12 years and 24 adolescents aged 12 years to 18 years) with advanced melanoma, lymphoma, or PD-L1–positive advanced, relapsed, or refractory solid tumors were administered KEYTRUDA 2 mg/kg every 3 weeks. Patients received KEYTRUDA for a median of 3 doses (range 1–17 doses), with 34 patients (85%) receiving 2 doses or more. The safety profile in these pediatric patients was similar to that seen in adults treated with KEYTRUDA. Toxicities that occurred at a higher rate (≥15% difference) in these patients when compared to adults under 65 years of age were fatigue (45%), vomiting (38%), abdominal pain (28%), hypertransaminasemia (28%), and hyponatremia (18%).

On July 26, 2018 CBT Pharmaceuticals (CBT), a U.S. and China-based innovative biopharmaceutical company committed to becoming a leader in the discovery and development of oncology combination therapies, reported the continuation of the CBT-501 (genolimzumab injection) Phase 1 clinical trial with the initiation of the Phase 1b segment of the study in patients with select advanced or relapsed/recurrent solid tumors (Press release, CBT Pharmaceuticals, JUL 26, 2018, View Source [SID1234527879]). CBT-501 is a novel IgG4 humanized monoclonal antibody against the Programmable Death-1 (PD-1) membrane receptor on immune cells.

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Following a meeting by the trial’s Safety Review Committee (SRC), the SRC determined that the safety data to date demonstrates CBT-501 is well tolerated and recommended a dose and schedule to advance the program. The Phase 1b segment will evaluate four tumor types, each expected to enroll approximately 20 patients. The ongoing clinical trial is being conducted in Australia.

"We are pleased that our PD-1 drug candidate, CBT-501, has demonstrated encouraging pharmacokinetics, pharmacodynamic engagement, a well-tolerated safety profile, and encouraging activity in advanced stage cancer patients," stated Sanjeev Redkar, PhD, President and Chief Executive Officer. "We expect the Phase 1b to further evaluate the safety profile of CBT-501 and its utility as a single agent in a number of homogenous tumor types. Results from this study may lead to a Phase 2 trial utilizing CBT-501 as a single agent or in combination with chemotherapy, radiation, targeted therapies, or other cancer immunotherapy agents."

For additional information regarding the trial, please visit clinicaltrials.gov identifier: NCT03053466.

About CBT-501 (genolimzumab Injection)

CBT-501 is a novel IgG4 humanized monoclonal antibody against the Programmable Death-1 (PD-1) membrane receptor on immune cells. It has a comparable efficacy profile in in vitro and in vivo studies to the marketed anti-PD-1 antibodies, nivolumab and pembrolizumab, and has a favorable profile with very low antibody-dependent cell-mediated cytotoxicity (ADCC) and complement dependent cytotoxicity (CDC) activity. In China, CBT-501 is referred to as GB226 where it is being developed by CBT partner Genor BioPharma Co. Ltd. Visit clinicaltrials.gov for additional information on the ongoing clinical trials: NCT03053466, NCT03374007, and NCT03502629.

On July 26, 2018 Allergan plc (NYSE: AGN) reported its second quarter 2018 performance (Press release, Allergan, JUL 26, 2018, View Source [SID1234527878]). Total second quarter 2018 GAAP net revenues were $4.12 billion, a 2.9 percent increase from the prior year quarter.

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Executive Commentary
"Allergan’s performance in the first half of 2018 demonstrates the strength of our strategy and a sharp focus on execution. We have driven strong growth in our key products and core business, delivered seven successful pivotal clinical trials for our key R&D programs and executed on our capital deployment strategy," said Brent Saunders, Chairman and CEO of Allergan.

"In the second quarter, our core business grew by 10.6 percent, led by Medical Aesthetics, BOTOX Therapeutic, VRAYLAR and LINZESS. Overall non-GAAP revenues rose 2.3 percent, even amid ongoing exclusivity challenges for older products," said Saunders. "At the same time, the positive clinical trial results on programs for migraine, glaucoma and age-related macular degeneration highlight the promise of our business for years to come."

"I’m extremely proud of the global Allergan team for their excellent work in delivering results for our customers and patients. Allergan’s many successes in the first half of 2018 demonstrate our commitment to driving long term value for shareholders."

Second Quarter 2018 Performance
GAAP operating loss in the second quarter 2018 was $467.0 million, including the impact of amortization and impairments. Non-GAAP operating income in the second quarter of 2018 was $1.97 billion, an increase of 4.6 percent versus the prior year quarter, driven by higher revenues and lower operating expenses.

Operating Expenses
Total GAAP Selling, General and Administrative (SG&A) Expense was $1.19 billion for the second quarter 2018, a decrease of 14.9 percent from the prior year quarter. Total non-GAAP SG&A expense decreased to $1.13 billion for the second quarter 2018, compared to $1.22 billion in the prior year period, driven in large part by a reduction in losses due to foreign exchange, as well as lower advertising and promotional expenses. GAAP R&D investment for the second quarter of 2018 was $689.2 million, compared to $489.4 million in the second quarter of 2017. Non-GAAP R&D investment for the second quarter 2018 was $388.9 million, compared to $393.9 million in the prior year quarter.

Asset Sales & Impairments, Net and In-Process R&D Impairments
Allergan incurred in-process research and development impairments in the three months ended June 30, 2018 of $276.0 million primarily due to a decrease in market opportunity based on clinical data relating to an eye care product acquired as part of the Allergan acquisition and timing delays in other non-strategic projects. Asset sales and impairments, net in the three months ended June 30, 2018 of $259.6 million were primarily related to an impairment on a non-strategic dermatology product held for sale based on estimates of current market value. The Company excludes asset sales and impairments, net and in-process research and development impairments from its non-GAAP performance net income attributable to shareholders as well as from Adjusted EBITDA and non-GAAP Operating Income.

Amortization, Other Income (Expense) Net, Tax and Capitalization
Amortization expense for the second quarter 2018 was $1.70 billion, compared to $1.76 billion in the second quarter of 2017. Other income (expense), net of $215.4 million in the three months ended June 30, 2018 was primarily attributed to a gain on selling the Company’s remaining equity stake in Teva as well as a gain on the divestiture of a business previously held for sale. The Company’s GAAP tax rate was 1.1 percent in the second quarter 2018. The Company’s non-GAAP adjusted tax rate was 14.3 percent in the second quarter 2018. As of June 30, 2018, Allergan had cash and marketable securities of $1.70 billion and outstanding indebtedness of $25.35 billion.

SECOND QUARTER 2018 BUSINESS SEGMENT RESULTS

U.S. Specialized Therapeutics
U.S. Specialized Therapeutics net revenues grew 6.5 percent in the second quarter of 2018 from the prior year quarter to $1.83 billion, driven primarily by growth in Medical Aesthetics, including BOTOX Cosmetic, ALLODERM and the addition of CoolSculpting, as well as growth in BOTOX Therapeutic. Demand growth across the U.S. Specialized Therapeutics portfolio was offset in part by lower net selling prices for RESTASIS and decreased revenues in Medical Dermatology due to generic pressure. Segment gross margin for the second quarter of 2018 was 91.9 percent, also impacted by CoolSculpting. Segment contribution for the second quarter 2018 remained strong at $1.29 billion, an increase of 9.1 percent versus the prior year quarter.

Medical Aesthetics

Facial Aesthetics
BOTOX Cosmetic net revenues rose 12.5 percent in the second quarter of 2018 from the prior year quarter to $236.5 million.
JUVÉDERM Collection (defined as JUVÉDERM, VOLUMA and other fillers) net revenues in the second quarter of 2018 were $139.8 million, an increase of 10.8 percent versus the prior year quarter.
Regenerative Medicine
ALLODERM net revenues in the second quarter of 2018 grew 26.6 percent from the prior year quarter to $107.1 million.
Body Contouring
CoolSculpting net revenues (including both CoolSculpting Systems/Applicators and Consumables) in the second quarter of 2018 were $108.3 million. The CoolSculpting acquisition closed on April 28, 2017.
Neurosciences & Urology

BOTOX Therapeutic net revenues in the second quarter of 2018 were $404.7 million, an increase of 16.7 percent versus the prior year quarter.
Eye Care

RESTASIS net revenues in the second quarter of 2018 were $318.2 million, a decrease of 5.4 percent versus the prior year quarter.
ALPHAGAN/COMBIGAN net revenues in the second quarter of 2018 were $98.1 million, compared with $96.4 million in the prior year quarter.
OZURDEX net revenues in the second quarter of 2018 increased 10.8 percent from the prior year quarter to $27.6 million.
U.S. General Medicine
U.S. General Medicine net revenues in the second quarter 2018 were $1.32 billion, a decrease of 7.5 percent versus the prior year quarter, impacted by lower revenues from NAMENDA XR and ESTRACE due to generic competition, offset by strong demand growth from VRAYLAR, LINZESS, Lo LOESTRIN and anti-infectives including AVYCAZ. Segment gross margin for the second quarter of 2018 was 84.7 percent. Selling and marketing expenses in the segment were $254.8 million, a decrease of 11.6 percent versus the prior year quarter, due in part to sales force expense reductions as a result of previous restructurings. Segment contribution for the second quarter 2018 was $828.7 million.

Central Nervous System

VRAYLAR net revenues grew 72.2 percent in the second quarter of 2018 from the prior year quarter to $114.2 million.
VIIBRYD/FETZIMA net revenues in the second quarter of 2018 were $86.7 million, compared with $85.2 million in the prior year quarter.
NAMENDA XR net revenues in the second quarter of 2018 were $3.4 million, versus $118.7 million in the prior year quarter, impacted by loss of patent exclusivity for NAMENDA XR in February 2018.
Gastrointestinal, Women’s Health & Diversified Brands

LINZESS net revenues in the second quarter of 2018 were $191.8 million, an increase of 14.3 percent versus the prior year quarter.
Lo LOESTRIN net revenues in the second quarter of 2018 were $127.8 million, an increase of 13.1 percent versus the prior year quarter.
BYSTOLIC/BYVALSON net revenues in the second quarter of 2018 were $148.1 million, compared to $150.7 million in the prior year quarter.
International
International net revenues in the second quarter of 2018 were $948.9 million, an increase of 8.1 percent versus the prior year quarter excluding foreign exchange impact, driven by growth in Medical Aesthetics, Eye Care and BOTOX Therapeutic. Segment gross margin for the second quarter of 2018 was 85.3 percent. Segment contribution was $529.4 million.

Facial Aesthetics

BOTOX Cosmetic net revenues in the second quarter of 2018 were $171.4 million, an increase of 14.1 percent versus the prior year quarter excluding foreign exchange impact, driven by continued strong growth in Europe and Asia Pacific/Middle East/Africa.
JUVÉDERM Collection net revenues in the second quarter of 2018 were $156.1 million, an increase of 11.2 percent versus the prior year quarter excluding foreign exchange impact, reflecting continued strong growth in Latin America/Canada and Asia Pacific/Middle East/Africa.
Eye Care

LUMIGAN/GANFORT net revenues in the second quarter of 2018 were $100.5 million, an increase of 1.6 percent versus the prior year quarter excluding foreign exchange impact.
OZURDEX net revenues in the second quarter of 2018 were $67.9 million, up 27.5 percent versus the prior year quarter excluding foreign exchange impact, reflecting continued strong growth in all regions.
Botox Therapeutic

BOTOX Therapeutic net revenues in the second quarter of 2018 were $104.6 million, an increase of 8.1 percent versus the prior year quarter excluding foreign exchange impact, reflecting growth in Europe and Latin America/Canada.
NEW SHARE REPURCHASE PROGRAM

Allergan’s Board of Directors has authorized a new $2.0 billion share repurchase program as part of the Company’s capital allocation strategy. Allergan expects to deploy the program over the next 12 months. The Company completed the $2 billion share repurchase that was previously authorized by the board in September 2017.

Allergan reaffirmed its commitment to maintaining investment grade credit ratings and achieving a net debt to adjusted EBITDA ratio of less than 2.5X by the end of 2020.

These actions reflect the Company’s conviction in its strategy and strong future cash flow position, allowing for periodic return of cash to shareholders through dividends and share buybacks while maintaining investment grade ratings and continuing its strategy to pay down debt.

PIPELINE UPDATE

Allergan R&D continues to deliver on its pipeline. Key development highlights included:

Regulatory Milestones & Clinical Updates

Allergan announced that the U.S. Food and Drug Administration (FDA) has granted Fast Track designation for AGN-241751, an investigational new treatment for Major Depressive Disorder (MDD). AGN-241751 is a novel, oral NMDA modulator that recently entered Phase 2 development.
Allergan announced positive topline results in the second of two pivotal phase 3 clinical trials evaluating Ubrogepant, an orally-administered calcitonin gene-related peptide (CGRP) receptor antagonist for the acute treatment of migraine. The results from the ACHIEVE I (UBR-MD-01) and ACHIEVE II (UBR-MD-02) studies support the efficacy, safety and tolerability profile of Ubrogepant. Allergan anticipates filing of a New Drug Application (NDA) to the FDA in 2019.

Allergan announced positive results from a Phase 2b/3 clinical trial evaluating the efficacy, safety, and tolerability of Atogepant, an oral CGRP receptor antagonist in development for migraine prevention. Allergan will continue with its Phase 3 program for Atogepant following discussions with regulatory authorities.
Allergan and Molecular Partners announced two positive Phase 3 clinical trials on Abicipar for the treatment of neovascular age-related macular degeneration. The two identical studies demonstrated that both the 8-week and 12-week treatment regimens met the pre-specified primary endpoint of non-inferiority to Ranibizumab. The filing for Abicipar is planned for the first half of 2019. Allergan will be requesting a meeting with the FDA to discuss our Biologics License Application (BLA) submission.

Allergan announced positive topline Phase 3 results for Bimatoprost SR, the first-in-class sustained-release, biodegradable implant for the reduction of intraocular pressure in patients with open-angle glaucoma or ocular hypertension. Additional safety data from the study and results from a second Phase 3 study with an identical design will be reported in the first half of 2019. Allergan anticipates filing of an NDA to the FDA in the second half of 2019.
Allergan expanded the REFRESH portfolio with the launch of REFRESH REPAIR Lubricant Eye Drops. The over-the-counter artificial tear formulation is clinically proven to treat the signs and symptoms of dry eye and improve visual performance due to dry eye, while offering patients improved comfort with low incidence of visual disturbances.

SECOND QUARTER 2018 CONFERENCE CALL AND WEBCAST DETAILS
Allergan will host a conference call and webcast today, Thursday, July 26, at 8:30 a.m. Eastern Time to discuss its second quarter 2018 results. The dial-in number to access the call is U.S./Canada (877) 251-7980, International (706) 643-1573, and the conference ID is 67781714. A taped replay of the conference call will also be available beginning approximately two hours after the call’s conclusion, and will remain available through 11:30 p.m. Eastern Time on August 26, 2018. The replay may be accessed by dialing (855) 859-2056 or (404) 537-3406 and entering the conference ID 67781714.
On June 1, 2018, Allergan received approval in Japan for JUVÉDERM VOLIFT XC for the treatment of nasolabial folds.