On May 9, 2023 Exelixis, Inc. (Nasdaq: EXEL) reported financial results for the first quarter of 2023 and provided an update on progress toward achieving key corporate objectives, as well as commercial, clinical and pipeline development milestones (Press release, Exelixis, MAY 9, 2023, View Source [SID1234631244]).

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"The Exelixis team continued to execute on our key priorities and made significant progress in advancing our commercial business and our growing pipeline," said Michael M. Morrissey, Ph.D., President and Chief Executive Officer, Exelixis. "CABOMETYX maintained its status as the leading tyrosine kinase inhibitor in renal cell carcinoma in the first quarter, driven by its use in combination with nivolumab in the first-line setting. We’ve made important progress across our pipeline programs, including advancing the STELLAR-303 and STELLAR-304 phase 3 trials for zanzalintinib, as well as single-agent and combination dose-escalation cohorts of the phase 1 trial of XB002. We are on track to initiate additional pivotal studies for zanzalintinib in 2023 and are focused on accelerating XB002 into full development by year-end."

Dr. Morrissey continued: "Our collaborations with Cybrexa and Sairopa also made steady progress. Sairopa received clearance of its Investigational New Drug application for ADU-1805 from the U.S. Food and Drug Administration in February and subsequently initiated the phase 1 study in March. Cybrexa is planning to present updated phase 1 data for CBX-12 at the ASCO (Free ASCO Whitepaper) Annual Meeting in June. In March, we announced a share repurchase program for up to $550 million of our common stock before the end of 2023, which reflects continued confidence in our long-term prospects and the strength of our balance sheet and reinforces our commitment to deliver value to shareholders. I’d like to thank the entire Exelixis team for their collective hard work and dedication to improving the standard-of-care for patients while driving sustainable, long-term value for shareholders as we advance our mission to help cancer patients recover stronger and live longer."

First Quarter 2023 Financial Results

Total revenues for the quarter ended March 31, 2023 were $408.8 million, as compared to $356.0 million for the comparable period in 2022.

Total revenues for the quarter ended March 31, 2023 included net product revenues of $363.4 million, as compared to $310.3 million for the comparable period in 2022. The increase in net product revenues was primarily due to an increase in sales volume and an increase in average net selling price.

Collaboration revenues, composed of license revenues and collaboration services revenues, were $45.4 million for the quarter ended March 31, 2023, as compared to $45.7 million for the comparable period in 2022. The decrease in collaboration revenues was primarily related to a decrease in development cost reimbursements earned, which was offset by higher royalty revenues for the sales of cabozantinib outside of the U.S. generated by Exelixis’ collaboration partners, Ipsen Pharma SAS and Takeda Pharmaceutical Company Limited.

Research and development expenses for the quarter ended March 31, 2023 were $234.2 million, as compared to $156.7 million for the comparable period in 2022. The increase in research and development expenses was primarily related to increases in license and other collaboration costs, personnel expenses and manufacturing costs to support our development candidates, which were partially offset by lower stock-based compensation expense.

Selling, general and administrative expenses for the quarter ended March 31, 2023 were $131.4 million, as compared to $102.9 million for the comparable period in 2022. The increase in selling, general and administrative expenses was primarily related to an increase in personnel expenses.

Provision for income taxes for the quarter ended March 31, 2023 was $8.3 million, as compared to $16.7 million for the comparable period in 2022, primarily due to a decrease in pre-tax income.

GAAP net income for the quarter ended March 31, 2023 was $40.0 million, or $0.12 per share, basic and diluted, as compared to GAAP net income of $68.6 million, or $0.21 per share, basic and diluted, for the comparable period in 2022.

Non-GAAP net income for the quarter ended March 31, 2023 was $52.8 million, or $0.16 per share, basic and diluted, as compared to non-GAAP net income of $83.9 million, or $0.26 per share, basic and diluted, for the comparable period in 2022.

Non-GAAP Financial Measures

To supplement Exelixis’ financial results presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP), Exelixis presents non-GAAP net income (and the related per share measures), which excludes from GAAP net income (and the related per share measures) stock-based compensation expense, adjusted for the related income tax effect for all periods presented.

Exelixis believes that the presentation of these non-GAAP financial measures provides useful supplementary information to, and facilitates additional analysis by, investors. In particular, Exelixis believes that these non-GAAP financial measures, when considered together with its financial information prepared in accordance with GAAP, can enhance investors’ and analysts’ ability to meaningfully compare Exelixis’ results from period to period, and to identify operating trends in Exelixis’ business. Exelixis has excluded stock-based compensation expense, adjusted for the related income tax effect, because it is a non-cash item that may vary significantly from period to period as a result of changes not directly or immediately related to the operational performance for the periods presented. Exelixis also regularly uses these non-GAAP financial measures internally to understand, manage and evaluate its business and to make operating decisions.

These non-GAAP financial measures are in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Exelixis encourages investors to carefully consider its results under GAAP, as well as its supplemental non-GAAP financial information and the reconciliation between these presentations, to more fully understand Exelixis’ business. Reconciliations between GAAP and non-GAAP results are presented in the tables of this release.

2023 Financial Guidance

Exelixis is maintaining the previously provided financial guidance for fiscal year 2023:

Total revenues

$1.775 billion – $1.875 billion

Net product revenues

$1.575 billion – $1.675 billion

Cost of goods sold

4.0% – 5.0% of net product revenues

Research and development expenses (1)

$1,000 million – $1,050 million

Selling, general and administrative expenses (2)

$475 million – $525 million

Effective tax rate

20% – 22%

____________________

(1)

Includes $45 million of non-cash stock-based compensation expense.

(2)

Includes $55 million of non-cash stock-based compensation expense.
Cabozantinib Highlights

Cabozantinib Franchise Net Product Revenues and Royalties. Net product revenues generated by the cabozantinib franchise in the U.S. were $363.4 million during the first quarter of 2023, with net product revenues of $361.8 million from CABOMETYX (cabozantinib) and $1.6 million from COMETRIQ (cabozantinib). Based upon cabozantinib-related net product revenues generated by Exelixis’ collaboration partners during the quarter ended March 31, 2023, Exelixis earned $32.7 million in royalty revenues.

Cabozantinib Data at the 2023 American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) Genitourinary Cancers Symposium (ASCO GU 2023). In February, cabozantinib was the subject of multiple data presentations at ASCO (Free ASCO Whitepaper) GU 2023, held from February 16-18, 2023. Notable presentations included: 44-month median follow-up data and biomarker analyses from CheckMate -9ER, the phase 3 pivotal trial of cabozantinib in combination with nivolumab; outcomes by International Metastatic Renal Cell Carcinoma Database Consortium (IMDC) risk score in COSMIC-313, the phase 3 pivotal trial of cabozantinib, nivolumab and ipilimumab; and extended follow-up results from a non-clear cell renal cell carcinoma (RCC) cohort of COSMIC-021, the ongoing phase 1b trial of cabozantinib in combination with atezolizumab.

Cabozantinib Data Presentations at the 2023 ASCO (Free ASCO Whitepaper) Annual Meeting. In June 2023, cabozantinib will be the subject of 22 presentations at this year’s ASCO (Free ASCO Whitepaper) Annual Meeting, which is being held from June 2-6 in Chicago. Notable presentations will include results from the CONTACT-03 phase 3 trial evaluating the combination of cabozantinib and atezolizumab vs. cabozantinib alone in metastatic RCC patients who have progressed following treatment with an immune checkpoint inhibitor therapy, and three-year quality-of-life follow-up data from CheckMate -9ER.

Corporate Updates

Announcement of Key Priorities and Anticipated Milestones for 2023. In January 2023, Exelixis announced its key priorities and anticipated milestones for 2023, including: pivotal data readouts from the ongoing phase 3 studies evaluating the combination of cabozantinib with atezolizumab in patients with forms of metastatic castration-resistant prostate cancer (CONTACT-02) and RCC (CONTACT-03), the latter of which has subsequently occurred, and the next overall survival (OS) analysis from the phase 3 COSMIC-313 pivotal study for cabozantinib; expansion of the pivotal development program for zanzalintinib with multiple new phase 3 pivotal trial initiations; acceleration of the XB002 clinical program into full development by year-end; advancement of the XL102 QUARTZ-101 phase 1 study into the tumor-specific cohort-expansion stage and in planned combination cohorts; in collaboration with partner Cybrexa, progression of the phase 1 clinical study for CBX-12, including dose-expansion cohorts; expected filing of an Investigational New Drug application (IND) for ADU-1805 with the U.S. Food and Drug Administration (FDA) in the first quarter of 2023 by partner Sairopa B.V. (Sairopa), which has subsequently occurred; advancement of development candidates (DCs) XB010, XB014 and XB628 toward IND filings; and progress up to five new DCs into preclinical development across biotherapeutics and small molecules. Exelixis presented the details of its key priorities and anticipated milestones at the 41st Annual J.P. Morgan Healthcare Conference.

Cabozantinib Abbreviated New Drug Application (ANDA) Litigation Against MSN Pharmaceuticals, Inc. (MSN). In January 2023, the U.S. District Court for the District of Delaware (the Delaware District Court) ruled in Exelixis’ favor in the ANDA lawsuit against MSN (MSN I), rejecting MSN’s challenge to the cabozantinib compound patent (U.S. Patent No. 7,759,473). Additionally, the District Court ruled that MSN’s proposed ANDA product does not infringe Exelixis’ N-2 polymorph patent (U.S. Patent No. 8,877,776), expiring in October 2030. The decision in MSN I does not address the validity of the ‘776 patent, which was not contested by MSN, and the Delaware District Court entered judgment that any final FDA approval of MSN’s ANDA shall not be a date earlier than August 14, 2026, the expiration date of the ‘473 patent. In addition, this ruling in MSN I does not impact Exelixis’ separate and ongoing suit against MSN (MSN II) concerning four different Orange Book-listed patents related to cabozantinib, which expire between January 15, 2030, and February 10, 2032. A bench trial in MSN II is scheduled to begin in October 2023 in the U.S. District Court for the District of Delaware.

Announcement of $550 Million Share Repurchase Program. In March, Exelixis announced that the company’s Board of Directors authorized the repurchase of up to $550 million of the company’s common stock before the end of 2023. Share repurchases under the program may be made from time to time through a variety of methods, which may include open market purchases, in block trades, accelerated share repurchase transactions, exchange transactions, or any combination of such methods. The timing and amount of any share repurchases under the share repurchase program will be based on a variety of factors, including ongoing assessments of the capital needs of the business, alternative investment opportunities, the market price of Exelixis’ common stock and general market conditions.

Pipeline Highlights

Exelixis and Sairopa Announce FDA Clearance of IND for ADU-1805 in Patients with Advanced Solid Tumors. In February, Exelixis and Sairopa announced FDA clearance of Sairopa’s IND to evaluate the safety and pharmacokinetics in a Phase 1 clinical trial of ADU-1805 in adults with advanced solid tumors, which has since been initiated. As a monoclonal antibody active against all human alleles of SIRPα, ADU-1805 has the potential to address a broader patient population than other SIRPα-directed therapies. By blocking SIRPα, a significant immune-suppressive component of the tumor microenvironment, ADU-1805 has the potential to improve the immune system’s ability to attack tumors. Under the terms of the clinical development and option agreement announced in November 2022, Exelixis has the option to obtain an exclusive, worldwide license to develop and commercialize ADU-1805 and other anti-SIRPα antibodies upon review of data from prespecified phase 1 clinical studies to be completed by Sairopa during the option period. This IND clearance triggered a $35.0 million milestone payment to Sairopa, paid in the first quarter of 2023.

Basis of Presentation

Exelixis has adopted a 52- or 53-week fiscal year that generally ends on the Friday closest to December 31st. For convenience, references in this press release as of and for the fiscal period ended April 1, 2022 is indicated as being as of and for the period ended March 31, 2022.

Conference Call and Webcast

Exelixis management will discuss the company’s financial results for the first quarter of 2023 and provide a general business update during a conference call beginning at 5:00 p.m. ET / 2:00 p.m. PT today, Tuesday, May 9, 2023.

To access the conference call, please register using this link. Upon registration, a dial-in number and unique PIN will be provided to join the call. To access the live webcast link, log onto www.exelixis.com and proceed to the News & Events / Event Calendar page under the Investors & Media heading. Please connect to the company’s website at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to listen to the webcast. A webcast replay of the conference call will also be archived on www.exelixis.com for one year.

On May 9, 2023 Exact Sciences Corp. (Nasdaq: EXAS), a leading provider of cancer screening and diagnostic tests, reported that the company generated revenue of $602.5 million for the first quarter ended March 31, 2023, compared to $486.6 million for the same period of 2022 (Press release, Exact Sciences, MAY 9, 2023, View Source [SID1234631243]).

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"Exact Sciences is changing the way cancer is detected and treated. Our first quarter results demonstrate the power of focusing on what is best for patients and our customers," said Kevin Conroy, chairman and CEO. "The many investments we’ve made over multiple years are translating into durable revenue growth, industry-leading gross margins, and growing profits. We are reinvesting a portion of those profits in the next wave of life-changing diagnostics and a seamless customer experience, creating an unstoppable innovation engine."

First quarter 2023 financial results

For the three-month period ended March 31, 2023, as compared to the same period of 2022 (where applicable):

Total revenue was $602.5 million, an increase of 24 percent
Core revenue was $597.8 million, an increase of 33 percent
Screening revenue was $443.2 million, an increase of 45 percent
Precision Oncology revenue was $155.4 million, an increase of 2 percent, or 8 percent on a core revenue basis
COVID-19 testing revenue was $3.8 million, a decrease of 86 percent
Gross margin including amortization of acquired intangible assets was 71 percent, and non-GAAP gross margin excluding amortization of acquired intangible assets was 74 percent
Net loss was $74.2 million, or $0.42 per share, compared to a net loss of $180.9 million, or $1.04 per share
EBITDA was $(26.9) million and adjusted EBITDA was $45.9 million
Cash, cash equivalents, and marketable securities were $698.6 million at the end of the quarter
Screening primarily includes laboratory service revenue from Cologuard tests and PreventionGenetics. Precision Oncology includes laboratory service revenue from global Oncotype DX products and therapy selection products.

2023 outlook

The company anticipates revenue of $2.380-$2.420 billion during 2023, assuming:

Screening revenue of $1.770-$1.795 billion,
Precision Oncology revenue of $605-$620 million, and
COVID-19 testing revenue of $5 million.
Revenue guidance has been raised from the previously expected range of $2.265-$2.315 billion, which assumed:

Screening revenue of $1.660-$1.690 billion,
Precision Oncology revenue of $600-$620 million, and
COVID-19 testing revenue of $5 million.
First quarter conference call & webcast
Company management will host a conference call and webcast on Tuesday, May 9, 2023, at 5 p.m. ET to discuss first quarter 2023 results. The webcast will be available at exactsciences.com. Domestic callers should dial 888-330-2384 and international callers should dial +1-240-789-2701. The access code for both domestic and international callers is 4437608.

An archive of the webcast will be available at exactsciences.com. A replay of the conference call will be available by calling 800-770-2030 domestically or +1-647-362-9199 internationally. The access code for the replay of the call is 4437608. The webcast, conference call, and replay are open to all interested parties.

Non-GAAP disclosure
In addition to the company’s financial results determined in accordance with U.S. GAAP, the company provides non-GAAP measures that it determines to be useful in evaluating its operating performance. The company presents EBITDA, adjusted EBITDA, non-GAAP gross margin, non-GAAP gross profit, core revenue, and free cash flow. EBITDA and adjusted EBITDA consist of net loss after adjustment for those items shown in the table below. The company defines non-GAAP gross profit and non-GAAP gross margin as GAAP gross profit and GAAP gross margin, respectively, excluding amortization of acquired intangible assets. The amortization of acquisition-related intangible assets used in the calculation of non-GAAP gross profit and non-GAAP gross margin pertain only to the amortization associated with developed technology acquired and recorded through purchase accounting transactions. The amortization of these intangible assets will recur in future periods until such intangible assets have been fully amortized. Core revenue is calculated to adjust for recent divestitures, COVID-19 testing revenue and foreign currency exchange rate fluctuations. To exclude the impact of change in foreign currency exchange rates from the prior period under comparison, the Company converts the current period non-U.S. dollar denominated revenue using the prior year comparative period exchange rates. The company defines free cash flow as net cash used in or provided by operating activities, reduced by purchases of property, plant and equipment. The company believes that these non-GAAP measures are useful in evaluating the company’s operating performance. The company uses this non-GAAP financial information to evaluate ongoing operations and for internal planning and forecasting. The company also uses adjusted EBITDA for incentive and compensation arrangements. Non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental information purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP. For example, non-GAAP gross margin and non-GAAP gross profit exclude the amortization of acquired intangible assets although such measures include the revenue associated with the acquisitions. Additionally, adjusted EBITDA excludes a number of expense items that are included in net loss. As a result, positive adjusted EBITDA may be achieved while a significant net loss persists. For a reconciliation of these non-GAAP measures to GAAP, see below "EBITDA and Adjusted EBITDA Reconciliations", "Non-GAAP Gross Profit and Non-GAAP Gross Margin Reconciliations" and "Reconciliation of Core Revenue." The company presents certain forward-looking statements about the company’s future financial performance that include non-GAAP measures. These non-GAAP measures include adjustments like stock-based compensation, acquisition and integration costs including gains and losses on contingent consideration liabilities that are difficult to predict for future periods because the nature of the adjustments pertain to events that have not yet occurred. Information reconciling forward-looking non-GAAP measures to U.S. GAAP measures is not available without unreasonable effort, and therefore is not provided.

About Cologuard
The Cologuard test was approved by the FDA in August 2014, and results from Exact Sciences’ prospective 90-site, point-in-time, 10,000-patient pivotal trial were published in the New England Journal of Medicine in March 2014. The Cologuard test is included in the American Cancer Society’s (2018) colorectal cancer screening guidelines and the recommendations of the U.S. Preventive Services Task Force (2021) and National Comprehensive Cancer Network (2016). The Cologuard test is indicated to screen adults 45 years of age and older who are at average risk for colorectal cancer by detecting certain DNA markers and blood in the stool. Do not use the Cologuard test if you have had precancer, have inflammatory bowel disease and certain hereditary syndromes, or have a personal or family history of colorectal cancer. The Cologuard test is not a replacement for colonoscopy in high risk patients. The Cologuard test performance in adults ages 45-49 is estimated based on a large clinical study of patients 50 and older. The Cologuard test performance in repeat testing has not been evaluated.

The Cologuard test result should be interpreted with caution. A positive test result does not confirm the presence of cancer. Patients with a positive test result should be referred for colonoscopy. A negative test result does not confirm the absence of cancer. Patients with a negative test result should discuss with their doctor when they need to be tested again. Medicare and most major insurers cover the Cologuard test. For more information about the Cologuard test, visit cologuardtest.com. Rx only.

On May 9, 2023 Enterome, a clinical-stage company developing first-in-class immunomodulatory drugs for cancer and inflammatory diseases based on its unique Mimicry platform, reported the creation of its international Scientific Advisory Board (SAB) and Medical Advisory Group (MAG) comprising highly respected and influential scientific and clinical leaders in oncology and immunotherapy (Press release, Enterome, MAY 9, 2023, View Source [SID1234631241]). The newly formed SAB and MAG will provide strategic, scientific, and clinical guidance to Enterome as it progresses its pipeline of innovative OncoMimics immunotherapies targeting solid and liquid tumors.

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Enterome’s Scientific Advisory Board comprises (biographies below):

David Klatzmann, MD, PhD – Professor of Immunology at the Sorbonne University (Paris, France)
Pedro Romero, MD, PhD – Director of Scientific and Medical Affairs, Novigenix, Professor Emeritus at University of Lausanne (Lausanne, Switzerland)
Justin Eyquem, PhD – Assistant Professor in Microbiology and Immunology at the University of California (San Francisco, CA, US)
Enterome’s Medical Advisory Group comprises (biographies below):

Zuzana Jirakova, MD, PhD – Chief Medical Officer at Highlight Therapeutics (Madrid, ES)
Peter Kiener, PhD – Venture Partner at ICG Life Sciences (Portland, OR, US)
Alexander Zukiwski, MD – Chief Medical Officer at CASI Pharmaceuticals (Rockville, MD, US)
"We are very pleased to announce the creation of our Scientific Advisory Board and Medical Advisory Group," commented Pierre Belichard, CEO at Enterome. "Their combined knowledge and experience in immune-oncology will be fundamental as we look to advance and expand our pipeline of OncoMimics immunotherapies into and through clinical development targeting solid and liquid cancers. Their insights and expertise will be crucial to Enterome as we approach important near-term clinical readouts from the ROSALIE trial with EO2401 in recurrent glioblastoma and from the SIDNEY trial with EO2463 in Non-Hodgkin Lymphoma and as we consider the design and strategy for potentially pivotal clinical trials with these candidates. In addition, we look forward to their input to the development strategies around our other OncoMimics candidates, which are planned to enter clinical trials in 2023, including EO2040 in colorectal cancer with ctDNA-defined, minimal residual disease, and EO4010 for third-line colorectal cancer."

Scientific Advisory Board

David Klatzmann, MD, PhD is a world-renowned immunologist who contributed to the discovery of HIV (human immunodeficiency virus), revealing its preferential tropism and cytopathic effect- the first indication that HIV is the cause of AIDS. David is Professor of Immunology at the Sorbonne University. He also holds several roles at both the Pierre and Marie Curie Medical School and Pitié-Salpêtrière Hospital in Paris, including as Chief of Biotherapy, Coordinator of the Clinical Investigation Center for Biotherapy and Immunology. With a current focus on translational system immunology, David brings a wealth of expertise and knowledge on T cell-based therapies in cancer and auto-immune diseases.

Pedro Romero, MD, PhD is a specialist in translational tumor immunology and immunotherapy of cancer as well as immune and tumoral responses. He currently serves as Deputy Scientific Director of the Lausanne branch of the Ludwig Institute for Cancer Research in Switzerland and in 2021 was made Honorary Professor of the University of Lausanne. He joined Novigenix, Lausanne, as Director of Scientific and Medical Affairs in April 2023. Pedro was a postdoctoral fellow at the Institute of Immunology, the National University of Colombia and New York University School of Medicine. Pedro’s research which has been published in leading scientific journals has been instrumental to tumor immunology and clinical cancer immunotherapy developments.

Justin Eyquem, PhD is an Assistant Professor in the department of Medicine at the University of California, San Francisco (UCSF), Investigator at the Gladstone-UCSF Institute for Genomic Immunology and co-founder and scientific advisor for Mnemo Therapeutics. Justin brings with him a unique understanding of the engineering of T lymphocytes to enhance CAR T and natural killer (NK) cell functions in hematological and solid tumors. Justin earned his PhD from the University of Paris-Diderot (France) in collaboration with the biotech company Cellectis and trained as a postdoctoral fellow at the Memorial Sloan-Kettering Cancer Center in New York, US.

Medical Advisory Group

Zuzana Jirakova Trnkova, MD, PhD has over 20 years of pharmaceutical industry and leading biotech experience in global drug development. Zuzana serves as a Chief Medical Officer at Highlight Therapeutics. Previously, she was Vice President of Clinical Development and Medical Affairs Radiology at Bayer Pharmaceuticals. Before this, she served as Vice President of Clinical Research and Development at BioNTech in Germany. Zuzana earned her MD and PhD in immunology and molecular biology at Charles University in Prague, Czech Republic. Zuzana brings cross-disciplinary experience in early to late-stage oncology drug development of small molecules and biologics in various indications, translational research and clinical pharmacology.

Peter Kiener, PhD has extensive experience in research and development in biologics, immunotherapy and biopharmaceuticals and a brings a wealth of knowledge in drug development from discovery through to approval. He is a Venture Partner at ICG Life Sciences and the former Chief Scientific Officer at Sucampo. Prior to this, he was President and co-founder of Zyngenia and has held R&D leadership roles at Ambrx, MedImmune/AstraZeneca and Bristol-Myers Squibb. Peter earned his PhD in biochemistry at the University of Oxford.

Alexander Zukiwski, MD, has 25+ years of experience in global oncology drug development and serves as Chief Medical Officer at CASI Pharmaceuticals. He has held several leadership roles in the pharmaceutical industry, including in global drug development, clinical evaluation and registration of many successful oncology treatments at leading companies such as Hoffmann-LaRoche, Glaxo Wellcome, Johnson & Johnson, MedImmune, and Arno Therapeutics. Alexander received his MD from the University of Calgary and conducted his post-graduate training at St. Thomas Hospital Medical Center in Akron, Ohio, and the University of Texas MD Anderson Cancer Center.

On May 9, 2023 Emergent BioSolutions Inc. (NYSE: EBS) reported its financial results for the first quarter ended March 31, 2023 (Press release, Emergent BioSolutions, MAY 9, 2023, View Source [SID1234631240]). Among the highlights, Emergent has received from the U.S. government Notices of Intent to Purchase medical countermeasures to combat smallpox and botulism. Further, the Company expects to reach a deal with its lenders to amend and extend the terms of its debt obligations.

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Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

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"Since the beginning of the year, we have taken strategic actions to stabilize and strengthen our core businesses to create sustainable, long-term value for all our stakeholders," said Robert G. Kramer, president and CEO of Emergent BioSolutions. "The impending sale of our travel health business, notices of intent from the U.S. government to procure medical countermeasures, productive conversations with our lenders, and the anticipated launch of over-the-counter Narcan Nasal Spray later this summer all help build momentum for the rest of 2023 and beyond."

FINANCIAL HIGHLIGHTS (1)

Q1 2023 vs. Q1 2022

($ in millions, except per share amounts) Q1 2023 Q1 2022 % Change
Total Revenues $165.1 $307.5 (46)%
Net Loss $(183.0) $(3.7) *
Net Loss per Diluted Share $(3.65) $(0.07) *
Adjusted Net Income (Loss) (2) $(158.8) $9.1 *
Adjusted Net Income (Loss) (2) per Diluted Share $(3.17) $0.18 *
Adjusted EBITDA (2) $(100.8) $36.0 *
Gross Margin % 2% 48% NM
Adjusted Gross Margin % (2) 4% 48% NM
* % change is greater than +/- 100%
NM – Not Meaningful
SELECT Q1 2023 AND OTHER RECENT BUSINESS UPDATES

Received from the U.S. government Notices of Intent to Procure ACAM2000, (Smallpox (Vaccinia) Vaccine, Live), VIGIV [Vaccinia Immune Globulin Intravenous (Human)], and BAT [Botulism Antitoxin Heptavalent (A, B, C, D, E, F, G) – (Equine)], medical countermeasures that help address the threat of smallpox and botulism, for inclusion in the Strategic National Stockpile
Announced U.S. Food and Drug Administration ("FDA") approval of NARCAN (naloxone HCl) Nasal Spray 4 mg as an over-the-counter ("OTC") emergency treatment for known or suspected opioid overdose
Announced an agreement to sell the travel health business to Bavarian Nordic for up to $380 million, including $270 million upfront
Q1 2023 FINANCIAL PERFORMANCE (1)

Revenues

Beginning in 2023, the Company is revising the categories used in discussing product/service level revenues. The new categories are:

Anthrax MCM — comprises potential contributions from AV7909, BioThrax, Anthrasil and raxibacumab
NARCAN — comprises contributions from NARCAN Nasal Spray
Smallpox MCM — comprises potential contributions from ACAM2000, VIGIV and Tembexa
Other Products — includes potential contributions from BAT, RSDL, Trobigard, Vaxchora and Vivotif
CDMO — comprises service and lease revenues from the contract development and manufacturing business
($ in millions) Q1 2023 Q1 2022 % Change
Product sales, net (3):
Anthrax MCM
$21.9 $109.4 (80)%
NARCAN
$100.4 $93.1 8%
Smallpox MCM
$7.2 $23.3 (69)%
Other Products
$13.9 $11.3 23%
Total product sales, net $143.4 $237.1 (40)%
Contract development and manufacturing ("CDMO"):
Services
$13.4 $51.8 (74)%
Leases
$1.8 $9.0 (80)%
Total CDMO $15.2 $60.8 (75)%
Contracts and grants $6.5 $9.6 (32)%
Total revenues $165.1 $307.5 (46)%
Product Sales, net

Anthrax MCM

For Q1 2023, revenues from Anthrax MCM decreased $87.5 million as compared with Q1 2022. The decrease was primarily due to timing of sales related to AV7909 (Anthrax Vaccine Adsorbed, Adjuvanted) and BioThrax (Anthrax Vaccine Adsorbed) during Q1 2022, partially offset by an increase in Anthrasil [Anthrax Immune Globulin Intravenous (human)] sales.

NARCAN

For Q1 2023, revenues from NARCAN increased $7.3 million as compared with Q1 2022. The increase was primarily driven by an increase in branded NARCAN sales as well as an increase in Canadian public sales, partially offset by a reduction in commercial retail sales in the U.S.

Smallpox MCM

For Q1 2023, revenues from Smallpox MCM decreased $16.1 million as compared with Q1 2022. The decrease was primarily due to the timing of ACAM2000 international sales during Q1 2022.

Other Products

For Q1 2023, revenues from other product sales increased $2.6 million as compared with Q1 2022. The increase was primarily due to higher Vivotif (Typhoid Vaccine Live Oral Ty21a) and Vaxchora (Cholera Vaccine, Live, Oral) product sales, partially offset by decreases in RSDL (Reactive Skin Decontamination Lotion Kit) and BAT product sales.

CDMO

CDMO Services

For Q1 2023, revenues from contract development and manufacturing services decreased $38.4 million as compared with Q1 2022. The decrease was primarily due to $19.2 million less of revenue related to reduced production activities at the Company’s Bayview facility as a result of a halt in manufacturing under the Janssen contract in 2022. Additionally, the decrease also reflects reduced production at the Company’s Camden facility. The decreases were slightly offset by an increase in production at the Company’s Canton facility.

CDMO Leases

For Q1 2023, revenues from contract development and manufacturing leases decreased $7.2 million as compared with Q1 2022. The decrease was primarily due to a reduction of lease revenues related to the Janssen contract termination.

Contracts and Grants

For Q1 2023, revenues from contracts and grants decreased $3.1 million as compared with Q1 2022. The decrease was primarily due to the conclusion of COVID-19 related studies in Q4 2022.

Operating Expenses

($ in millions) Q1 2023 Q1 2022 % Change
Cost of product sales $102.9 $80.3 28%
Cost of CDMO $52.2 $75.6 (31)%
Research and development ("R&D") $40.6 $46.4 (13)%
Selling, general and administrative $100.5 $84.8 19%
Amortization of intangible assets $17.0 $14.0 21%
Total operating expenses $313.2 $301.1 4%
Cost of Product Sales

For Q1 2023, cost of product sales increased $22.6 million as compared with Q1 2022. The increase was primarily due to lower overhead absorption coupled with higher allocations of product COGS at the Bayview facility, partially offset by lower period costs at our Bern facility and lower NARCAN royalty fees.

Cost of CDMO

For Q1 2023, cost of CDMO decreased $23.4 million as compared with Q1 2022. The decrease was primarily due to reduced production activities across the CDMO network of manufacturing sites in Q1 2023 compared to Q1 2022 resulting in decreased raw materials consumption, partially offset by increased costs at our Camden facility for additional investments in quality enhancement and improvement initiatives and increased costs associated with production activities at the Company’s Canton Facility.

Research and Development (2)

For Q1 2023, R&D expenses decreased $5.8 million as compared with Q1 2022. The decrease was primarily due to a reduction in R&D spend related to the next phase of the development program for the chikungunya vaccine candidate CHIKV VLP; this development program will be included in the sale of the Travel Health business to Bavarian Nordic, first announced in February 2023. Net of contracts and grants revenue, which consists primarily of reimbursements against development investments, adjusted research and development expenses were $34.1 million for Q1 2023.

Selling, General and Administrative

For Q1 2023, selling, general and administrative expenses increased $15.7 million as compared with Q1 2022. The increase was primarily due to higher professional services fees and severance costs related to our 2023 Restructuring Plan discussed further below.

Restructuring Expense

During Q1 2023, the Company incurred restructuring expense in connection with an organizational restructuring plan (the "2023 Plan") announced on January 9, 2023. The Company incurred approximately $9.7 million in charges in connection with the 2023 Plan during Q1 2023. These charges consist primarily of charges related to employee transition, severance payments and employee benefits. All activities related to the 2023 Plan were substantially completed during the first quarter of 2023.

Capital Expenditures

($ in millions) Q1 2023 Q1 2022 % Change
Capital expenditures $15.1 $32.2 (53)%
Capital expenditures as a % of total revenues 9% 10% (100) bps
For Q1 2023, gross capital expenditures decreased largely due to lower product development activities, including our chikungunya facility redesign project.

Segment Information

The Company manages the business with a focus on two reportable segments. Our Products segment, which includes the Anthrax MCM products, NARCAN products, Smallpox MCM products and Other products, and our Services segment consisting of our CDMO services. The Company evaluates the performance of these reportable segments based on revenue and Adjusted Gross Margin, which is a non-GAAP financial measure. Segment revenue includes external customer sales, but does not include inter-segment services. The Company does not allocate contracts and grants, R&D, SG&A, amortization of intangible assets, interest and other income (expense) or taxes to its evaluation of the performance of these segments.

($ in millions)

Products Services
Three Months Ended March 31, Three Months Ended March 31,
2023 2022 % Change 2023 2022 % Change
Revenues $143.4 $237.1 (40)% $15.2 $60.8 (75)%

Cost of sales $102.9 $80.3 28% $52.2 $75.6 (31)%
Less: Changes in fair value of contingent consideration $1.5 $0.5 * $— $— NM
Less: Restructuring costs $2.0 $— NM $— $— NM
Adjusted cost of sales ** $99.4 $79.8 25% $52.2 $75.6 (31)%

Gross margin *** $40.5 $156.8 (74)% $(37.0) $(14.8) *
Gross margin % *** 28% 66% NM
(243)% (24)% NM

Adjusted gross margin **** $44.0 $157.3 (72)% $(37.0) $(14.8) *
Adjusted gross margin % **** 31% 66% NM (243)% (24)% NM
* % change is greater than +/- 100%
** Adjusted cost of sales, which is a non-GAAP financial measure, is calculated as cost of sales less restructuring costs, and other special items and non-cash items related to changes in fair value of contingent consideration. See "Reconciliation of Non-GAAP Measures" for the reconciliation of this non-GAAP measure to the most closely related GAAP financial measure.
*** Gross margin is calculated as revenues less cost of sales. Gross margin % is calculated as gross margin divided by revenues.
**** Adjusted gross margin, which is a non-GAAP financial measure, is calculated as revenues less Adjusted cost of sales. Adjusted gross margin %, which is a non-GAAP financial measure, is calculated as Adjusted gross margin divided by revenues. See "Reconciliation of Non-GAAP Measures" for the reconciliation of this non-GAAP measure to the most closely related GAAP financial measure.
NM – Not Meaningful
For Q1 2023, Product gross margin and Product adjusted gross margin decreased $116.3 million and $113.3 million, respectively, as compared with Q1 2022. The decrease in Product gross margin and Product adjusted gross margin was primarily due to decreased sales volumes and increases in costs related to lower overhead absorption combined with a less favorable sales mix weighted more heavily towards lower margin products.

For Q1 2023, Services gross margin and Services adjusted gross margin decreased $22.2 million and $22.2 million, respectively, as compared with Q1 2022. The decreases are primarily due to reduced production activities across our CDMO network including the halt in manufacturing under the Janssen contract and the decrease in margins at the Company’s Camden facility due to additional investments in quality enhancement and improvement initiatives.

2023 FINANCIAL FORECAST

The Company provides the following updated financial forecast for the full year 2023 and Q2 2023, in both instances reflecting management’s expectations based on the most current information available, and taking into account the actual performance in Q1 2023.

Full Year 2023

METRIC ($ in millions) Updated Range (as of 05/09/23) Action Previous Range (as of 02/27/23)
Total Revenues $1,100 – $1,200 UNCHANGED $1,100 – $1,200
Net Loss $(185) – $(135) REVISED $(180) – $(130)
Adjusted Net Loss (2) $(85) – $(35) REVISED $(80) – $(30)
Adjusted EBITDA (2) $100 – $150 REVISED $75 – $125
Adjusted Gross Margin % (2) 39% – 42% REVISED 41% – 44%

Product/Service Level Revenue
Anthrax MCM
$260 – $280 UNCHANGED $260 – $280
NARCAN
$360 – $380 REVISED $290 – $310
Smallpox MCM
$235 – $255 UNCHANGED $235 – $255
Other Products
$120 – $140 REVISED $165 – $185
CDMO
$90 – $110 REVISED $115 – $135
The 2023 financial forecast reflects the following key considerations.

OVERALL — Reflects the impact of the previously announced sale of the Travel Health business to Bavarian Nordic, which is anticipated to close in the second quarter.
Total Revenues — Unchanged, reflecting the neutral impact of the overall updates across all sources of revenues.
Anthrax MCM — Unchanged, reflecting assumptions that have remained constant regarding procurement and delivery of the Company’s related products to the U.S. and allied governments.
NARCAN — Revised, primarily reflecting robust demand from the U.S. PIP (public interest) channel and Canadian market.
Smallpox MCM — Unchanged, reflecting assumptions that have remained constant regarding procurement and delivery of the Company’s related products to the U.S. and allied governments.
Other Products — Revised, reflecting the removal of the Travel Health products, Vaxchora and Vivotif, following the anticipated completion of the divestiture of this business.
CDMO — Revised, reflecting the impact of recent changes to customer requirements for COVID-related products coupled with continued remediation costs and investments to improve quality and compliance across the Company’s manufacturing network.
Adjusted Net Loss — Revised, reflecting the impact of higher NARCAN sales and the Travel Health business divestiture, offset by lower CDMO revenues and an increase in the tax valuation allowance.
Adjusted EBITDA — Revised, reflecting the impact of higher NARCAN sales and the Travel Health business divestiture, offset by lower CDMO revenues.
Adjusted Gross Margin — Revised, reflecting the impact of overall revenue mix.
Q2 2023

METRIC ($ in millions) Initial Range (as of 05/09/23)
Total Revenues $210 – $230
FOOTNOTES

(1) All financial information incorporated within this release is unaudited.
(2) See "Reconciliation of Non-GAAP Measures" and the reconciliation tables for the definitions and reconciliations of these non-GAAP financial measures to the most closely related GAAP financial measures.
(3) Product sales, net are reported net of variable consideration including returns, rebates, wholesaler fees and prompt pay discounts in accordance with U.S. generally accepted accounting principles.

CONFERENCE CALL, PRESENTATION SUPPLEMENT AND WEBCAST INFORMATION

Company management will host a conference call at 5:00 pm eastern time today, May 9, 2023, to discuss these financial results. The conference call and presentation supplement can be accessed from the Company’s website or through the following:

By phone
Advance registration is required. Visit https://register.vevent.com/register/BIc8d797bf092b4802982a749c6726584d to register and receive an email with the dial-in number, passcode and registrant ID.

By webcast
Visit View Source

A replay of the call can be accessed from the Emergent website.

On May 9, 2023 Eagle Pharmaceuticals, Inc. (Nasdaq: EGRX) ("Eagle" or the "Company") reported financial results for the three months ended March 31, 2023 (Press release, Eagle Pharmaceuticals, MAY 9, 2023, View Source [SID1234631239]).

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Business and Recent Highlights:

· Net product sales of PEMFEXY totaled $22.9 million in the first quarter 2023. Based on internal data and customer feedback, the Company estimates that as of the second quarter to date, its U.S. share of commercial (non-340B) pemetrexed usage has grown to 15% up from 6% exiting the fourth quarter of 2022.

1 Adjusted non-GAAP net income, adjusted non-GAAP earnings per share, adjusted non-GAAP EBITDA, adjusted non-GAAP R&D expense and adjusted non-GAAP SG&A expense are non-GAAP financial measures. For descriptions and reconciliations of these non-GAAP financial measures to their most comparable GAAP financial measures, please see below and the tables at the end of this press release.

2 Based on IQVIA SMART-US weekly volume data and internal data.

3 View Source

4 View Source

5 IQVIA SMART-US weekly volume data for the first quarter of 2023 and 2022 historic IQVIA data.

· Centers for Medicare & Medicaid Services ("CMS") established a unique, product-specific billing code for Byfavo (remimazolam for injection)6, a short-acting sedative for procedures lasting 30 minutes or less. This new Healthcare Common Procedure Coding System (HCPCS) Level II code ("J-code") is J2249 "Injection, remimazolam, 1 mg." The J-code will be effective on July 1, 2023.

· Reached a settlement agreement with Dr. Reddy’s Laboratories, Ltd. and Dr. Reddy’s Laboratories, Inc. (collectively, "Dr. Reddy’s"). Eagle had asserted its Orange Book-listed patents against Dr. Reddy’s related to its new drug application referencing BENDEKA. Under the settlement agreement, Dr. Reddy’s has the right to market its product beginning November 17, 2027, or earlier based on certain circumstances. The settlement with Dr. Reddy’s follows Eagle’s previously announced settlements with Hospira, Inc. ("Hospira") and Accord Healthcare, Inc. ("Accord") related to their new drug applications referencing BENDEKA.

o With the Dr. Reddy’s settlement, all the existing challenges, except for one, which is for a proposed powder, not liquid, formulation have been settled. The Company expects bendamustine to be a significant contributor for several more years.

· Reaffirms full-year Company guidance.

· The Company is also currently working with lenders to secure financing to support a potential accretive acquisition.

Financial Highlights

First Quarter 2023

· Total revenue for Q1 2023 was $66.3 million, compared to $115.9 million in Q1 2022.
· Q1 2023 net income was $5.8 million, or $0.44 per basic and diluted share, compared to net income of $44.1 million, or $3.47 per basic and $3.41 per diluted share, in Q1 2022.
· Q1 2023 adjusted non-GAAP net income was $16.5 million, or $1.27 per basic and $1.26 per diluted share, compared to adjusted non-GAAP net income of $52.2 million, or $4.10 per basic and $4.04 per diluted share, in Q1 2022.
· Cash and cash equivalents were $21.9 million, net accounts receivable was $115.0 million, and total debt was $77.5 million, as of March 31, 2023.

"Following on from our outstanding performance in 2022, we believe Eagle remains well positioned for another strong year, and therefore we are reiterating our 2023 guidance. Our products continue to track well, and we are on pace to surpass our 2022 net product sales for the full year 2023 for PEMFEXY, which continues to gain share in commercial (non-340B) pemetrexed usage in the U.S.," stated Scott Tarriff, President and Chief Executive Officer of Eagle Pharmaceuticals.

"To be clear, the investments we are making for the future account for much of the expected difference of our earnings in 2023 versus 2022. We are investing to support our products and advance our pipeline, notably CAL02, which bridges much of the year-over-year gap. We believe the expansion of our commercial team will enable us to capture synergies with an acquisition target and are currently working with lenders to secure financing to support a potentially accretive transaction," concluded Tarriff.

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First Quarter 2023 Financial Results

Total revenue for the three months ended March 31, 2023 was $66.3 million, as compared to $115.9 million for the three months ended March 31, 2022.

Q1 2023 RYANODEX net product sales were $8.8 million, compared to $6.6 million in the first quarter of 2022.

Q1 2023 BELRAPZO net product sales were $6.4 million, compared to $5.9 million in the first quarter of 2022.

Q1 2023 PEMFEXY net product sales were $22.9 million, compared to $37.2 million in the first quarter of 2022.

Q1 2023 vasopressin net product sales were $3.5 million, compared to $34.3 million in the first quarter of 2022. During the first quarter of 2023, the Company gave notice to customers and the FDA that it was withdrawing from the vasopressin market. Inventory on hand is expected to be depleted by the end of the second quarter of 2023.

Q1 2023 royalty revenue was $20.1 million, compared to $25.8 million in the prior year quarter.

A summary of total revenue is outlined below:

Three Months Ended March 31,
2023 2022
(unaudited) (unaudited)
Revenue (in thousands):
Product sales, net $ 46,221 $ 90,088
Royalty revenue 20,084 25,786
Total revenue $ 66,305 $ 115,874

Gross margin was 74% during the first quarter of 2023, compared to 76% in the first quarter of 2022. The decrease in gross margin was primarily the result of the inclusion of amortization of intangible assets related to the newly acquired products, which we expect to continue going forward.

R&D expense was $9.3 million for the first quarter of 2023, compared to $6.1 million for the first quarter of 2022. The increase was primarily due to higher spend of $2.0 million on CAL02 and $1.0 million on Byfavo and Barhemsys pediatric studies.

SG&A expenses in the first quarter of 2023 were $28.0 million compared to $22.2 million in the first quarter of 2022. This increase was driven by $3.3 million in salary and other personnel-related costs, $2.0 million in external sales and marketing spend, partially offset by $2.0 million in lower legal-related costs.

Net income for the first quarter of 2023 was $5.8 million, or $0.44 per basic and diluted share, compared to net income of $44.1 million, or $3.47 per basic and $3.41 per diluted share, in the first quarter of 2022, primarily as a result of the factors discussed above.

Adjusted non-GAAP net income for the first quarter of 2023 was $16.5 million, or $1.27 per basic and $1.26 per diluted share, compared to adjusted non-GAAP net income of $52.2 million, or $4.10 per basic and $4.04 per diluted share, in the first quarter of 2022.

Adjusted non-GAAP EBITDA for the first quarter of 2023 was $22.3 million, compared to adjusted non-GAAP EBITDA of $66.9 million in the first quarter of 2022.

2023 Full-Year Guidance

The Company continues to expect:

· Adjusted EBITDA of $74.0-$80.0 million
· Adjusted non-GAAP earnings per share of $4.20-$4.53
· Adjusted non-GAAP R&D expense of $41.0-$45.0 million
· Adjusted non-GAAP SG&A expense of $86.0-$90.0 million

Liquidity

As of March 31, 2023, Eagle had $21.9 million in cash and cash equivalents, $115.0 million in accounts receivable, net, and $77.5 million in outstanding debt on the Company’s $150 million credit facility with JPMorgan. As of March 31, 2023, Eagle had a working capital surplus of $94.7 million.

Conference Call

As previously announced, Eagle management will host its first quarter 2023 conference call as follows:

Date May 9, 2023
Time 8:30 A.M. ET
Toll free (U.S.) 800-274-8461
International 203-518-9814
Webcast (live and replay) www.eagleus.com, under the "Investor + News" section

A replay of the conference call will be available for two weeks after the call’s completion by dialing 888-566-0151 (U.S.) or 402-220-9181 (International) and entering conference call ID EGRXQ123. The webcast will be archived for 30 days at the aforementioned URL.