On May 10, 2023 TRACON Pharmaceuticals, Inc. (Nasdaq: TCON), a clinical stage biopharmaceutical company utilizing a cost-efficient, CRO-independent product development platform to advance its pipeline of novel targeted cancer therapeutics and to partner with other life science companies, reported financial results for the first quarter ended March 31, 2023 (Press release, Tracon Pharmaceuticals, MAY 10, 2023, View Source [SID1234631404]). The Company will host a conference call and webcast today at 4:30 PM Eastern Time / 1:30 PM Pacific Time.

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"We were pleased with the arbitration award of approximately $23 million, which will extend our cash runway into early 2024, when collected," said Charles Theuer, M.D., Ph.D., President and CEO of TRACON. "Most importantly, in the third quarter we expect the second and final interim efficacy analysis in the ongoing ENVASARC pivotal trial that will review 46 patients in the cohort of single agent envafolimab and 46 patients in the cohort of envafolimab dosed with Yervoy (ipilimumab), after each patient has had two on-study scans. Accrual in ENVASARC remains ahead of projections and we expect to complete enrollment before year end, with final data anticipated in mid-2024 and potential commercial launch in 2025."

Recent Corporate Highlights

In March, we announced a private placement of approximately $3.0 million with an accredited institutional healthcare-focused fund, which was completed at market price.
In April, we announced we received an arbitration award of approximately $23.0 million from the arbitration with I-Mab Biopharma.
In May, we entered into a Common Stock Purchase Agreement with Lincoln Park Capital Fund, LLC ("LPC"), in which LPC has committed to purchase up to $26.0 million of shares of our common stock from time to time at prices based on the market price calculated over a certain period of time and in accordance with terms set forth in the Common Stock Purchase Agreement. Additionally, LPC has committed to purchase upon our request up to $1.0 million of shares of our common stock when all conditions to commencement are met, including that a resale registration statement is filed and declared effective.
Expected Upcoming Milestones

Report an ad hoc analysis from the ENVASARC pivotal trial by the independent data monitoring committee (IDMC) as required by the IDMC Charter that requires a review of available safety and efficacy data at a minimum of every six months, which we expect in the second quarter of 2023.
Report the second and final interim efficacy analysis from the ENVASARC pivotal trial following the review of more than 12 weeks of efficacy data (including two on-study CT scans) by the IDMC from 46 patients who receive envafolimab as a single agent and 46 patients who receive envafolimab in combination with Yervoy, which we expect in the third quarter of 2023 as the ENVASARC trial has enrolled more than 92 patients to date.
Complete full accrual of the ENVASARC pivotal trial before the end of 2023.
Report Phase 1 data from the Phase 1/2 clinical trial of YH001 in combination with envafolimab and doxorubicin in patients with soft tissue sarcoma, which we expect in the second half of 2023.
First Quarter 2023 Financial Results

Cash and cash equivalents were $6.6 million at March 31, 2023, compared to $17.4 million at December 31, 2022, which is expected to fund the Company into the third quarter of 2023, and with the amounts we expect to recover from I-Mab pursuant to the arbitration award, when received, into early 2024.
Research and development expenses for the first quarter of 2023 were $5.0 million, compared to $3.0 million for the first quarter of 2022. The increase was primarily related to envafolimab drug product purchased in the first quarter of 2023.
General and administrative expenses for the first quarter of 2023 were $2.3 million, compared to $6.5 million for the first quarter of 2022. The decrease was primarily attributable to legal expenses incurred in the first quarter of 2022 in connection with the arbitration hearing with I-Mab.
Net loss for the first quarter of 2023 was $8.5 million, compared to $9.5 million for the first quarter of 2022.
Conference Call Details

To access the call by phone, please register using this link and you will be provided with dial-in details.

A live webcast of the conference call will be available online from the Investor/Events and Presentation page of the Company’s website at www.traconpharma.com.

After the live webcast, a replay will remain available on TRACON’s website for 60 days.

About Envafolimab

Envafolimab (KN035), a single-domain antibody against PD-L1 invented by Alphamab Oncology and licensed by TRACON, is the first approved subcutaneously injected PD-(L)1 inhibitor. Envafolimab was approved by the Chinese NMPA in November 2021 in adult patients with MSI-H/dMMR advanced solid tumors who failed systemic treatment and have no satisfactory alternative treatment options. In December 2019, Alphamab Oncology, 3D Medicines and TRACON entered into a collaboration whereby TRACON has the right to develop and commercialize envafolimab in soft tissue sarcoma in North America. Envafolimab is currently being studied in the pivotal ENVASARC Phase 2 trial in the United States sponsored by TRACON and a Phase 3 pivotal trial in combination with gemcitabine and oxaliplatin in advanced biliary tract cancer patients as well as multiple Phase 1 and Phase 2 clinical trials in China sponsored by TRACON’s corporate partners, Alphamab Oncology and 3D Medicines. TRACON has received orphan drug designation from the U.S. Food and Drug Administration for envafolimab for patients with soft tissue sarcoma and fast track designation from the U.S. Food and Drug Administration for envafolimab for patients with locally advanced, unresectable or metastatic undifferentiated pleomorphic sarcoma (UPS) and myxofibrosarcoma (MFS) who have progressed on one or two prior lines of chemotherapy.

About ENVASARC (NCT04480502)

The ENVASARC pivotal trial is a multicenter, open label, randomized, non-comparative, parallel cohort study at 30 top cancer centers in the United States and the United Kingdom that began dosing in December 2020. TRACON expects the trial to enroll more than 160 patients with UPS or MFS who have progressed following one or two lines of prior treatment and have not received an immune checkpoint inhibitor, with 80 patients enrolled into a cohort of treatment with single agent envafolimab at 600 mg every three weeks and 80 patients enrolled into a cohort of treatment with envafolimab at 600 mg every three weeks with Yervoy. The primary endpoint is objective response rate by central review with duration of response a key secondary endpoint.

About YH001

YH001 is an IgG1 antibody against CTLA-4 that has shown enhanced antibody dependent cellular cytotoxicity and complement dependent cytotoxicity in vitro. In preclinical studies YH001 demonstrated superior T cell activation and superior tumor growth inhibition activity compared to ipilimumab. YH001 also demonstrated superior activity compared to ipilimumab in human transgenic mouse tumor models when combined with a PD-(L)1 antibody. In these models, single agent YH001 depleted regulatory T cells and increased CD8+ T cells in tumor tissue. YH001 is being studied with envafolimab and doxorubicin in a Phase 1/2 clinical trial sponsored by TRACON (NCT05448820), and has been studied in multiple Phase 1 trials in China and Australia sponsored by TRACON’s corporate partner Eucure, a division of Biocytogen.

About TRC102

TRC102 (methoxyamine) is a novel small molecule inhibitor of the DNA base excision repair pathway, which is a pathway that causes resistance to alkylating and antimetabolite chemotherapeutics. TRC102 is currently being studied in multiple Phase 1 and Phase 2 clinical trials sponsored by the National Cancer Institute through a Cooperative Research and Development Agreement (CRADA) and has orphan drug designation from the FDA in malignant glioma, including glioblastoma.

On May 10, 2023 Teva Pharmaceutical Industries Ltd. (NYSE and TASE: TEVA) reported its results for the quarter ended March 31, 2023 (Press release, Teva, MAY 10, 2023, View Source [SID1234631403]).

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Revenues of $3.7 billion
GAAP loss per share of $0.18
Non-GAAP diluted EPS of $0.40
Cash flow used in operating activities of $145 million
Free cash flow of $41 million
Non-GAAP gross profit margin of 49.1% was mainly impacted by an unfavorable portfolio mix and an increase in COGS due to inflationary pressure. We expect our gross profit margin to improve in the coming quarters due to improved portfolio mix driven by our innovative products, namely AUSTEDO, AJOVY and UZEDY, as well as by lower COGS, driven by supply chain enhancements and easing of certain elements of inflationary pressure.
Full year 2023 business outlook reaffirmed:
Revenues of $14.8 – $15.4 billion
Adjusted EBITDA of $4.5 – $4.9 billion
Non-GAAP diluted EPS of $2.25 – $2.55
Free cash flow of $1.7 – $2.1 billion
Mr. Richard Francis, Teva’s President and CEO, said, "I am pleased to report that our revenues for the first quarter reached $3.7 billion, marking a 4% increase in local currency terms, compared to the first quarter of 2022: We have seen growth across all regions – Europe is experiencing a solid 9% increase, International Markets an 8% increase, and North America is up 2%."

Mr. Francis continued, "Our innovative brands performed well this quarter – AUSTEDO grew 10% year-over-year and AJOVY grew 35% across all regions in local currency. We are also excited about the recent approvals of AUSTEDO XR, the new once-daily formulation for AUSTEDO, and UZEDY (risperidone), our new long-acting injectable treatment for schizophrenia in adults. While we are seeing some positive tailwinds, we are also taking decisive actions to address some headwinds, mainly through improved portfolio mix driven by our innovative products and supply chain enhancements. We expect these actions will improve our gross profit margin in the coming quarters, and today, we are reaffirming our 2023 outlook which was provided in February.

As we prepare to launch our new strategy next week, I am filled with enthusiasm and optimism. This strategy will build on Teva’s strong foundations, key strengths, and sets the stage for long-term growth. We have worked hard over the last few months to challenge ourselves, look at how the market is evolving and how we can create substantial value both for Teva and for patients. I am really excited about the outcome – a new roadmap where we will make decisive choices and focus our resources to drive growth and innovation."

First Quarter 2023 Consolidated Results

Revenues in the first quarter of 2023 were $3,661 million, flat compared to the first quarter of 2022. In local currency terms, revenues increased by 4%, mainly due to higher revenues from generic products in our Europe and International Markets segments, certain innovative products primarily AUSTEDO and AJOVY, as well as from Anda in our North America segment, partially offset by lower revenues from generic products in our North America segment, API sales to third parties and BENDEKA and TREANDA in our North America segment.

Exchange rate movements during the first quarter of 2023, including hedging effects, negatively impacted our revenues by $128 million compared to the first quarter of 2022. Exchange rate movements during the first quarter of 2023, including hedging effects, negatively impacted our operating income and non-GAAP operating income by $32 million and $33 million, respectively, compared to the first quarter of 2022.

Gross profit was $1,582 million in the first quarter of 2023, a decrease of 9% compared to the first quarter of 2022. Gross profit margin was 43.2% in the first quarter of 2023, compared to 47.5% in the first quarter of 2022. Non-GAAP gross profit was $1,796 million in the first quarter of 2023, a decrease of 10% compared to the first quarter of 2022. Non-GAAP gross profit margin was 49.1% in the first quarter of 2023, compared to 54.2% in the first quarter of 2022. This decrease in both gross profit margin and non- GAAP gross profit margin was mainly driven by rising costs due to inflationary and other macroeconomic pressures, an increase in revenues with lower profitability from Anda in our North America segment, lower revenues from COPAXONE and BENDEKA and TREANDA, and an unfavorable impact of hedging activities, partially offset by higher revenues from AUSTEDO and AJOVY.

Research and Development (R&D) expenses in the first quarter of 2023 were $234 million, an increase of 4% compared to $225 million, in the first quarter of 2022, mainly due to an increase in neuroscience (mainly neuropsychiatry) and immunology as well as various generics and biosimilar products.

Selling and Marketing (S&M) expenses in the first quarter of 2023 were $546 million, a decrease of 6% compared to the first quarter of 2022.

General and Administrative (G&A) expenses in the first quarter of 2023 were $296 million, flat compared to the first quarter of 2022.

Other income in the first quarter of 2023 was $2 million, compared to $52 million in the first quarter of 2022. Other income in the first quarter of 2022 was mainly the result of settlement proceeds in our International Markets segment.

Operating income in the first quarter of 2023 was $2 million, compared to an operating loss of $713 million in the first quarter of 2022. Operating income as a percentage of revenues was 0.1% in the first quarter of 2023, compared to operating loss as a percentage of revenues of 19.5% in the first quarter of 2022. The increase in operating income and in operating margin in the first quarter of 2023 was mainly due to higher legal settlements and loss contingencies in the first quarter of 2022. Non-GAAP operating income in the first quarter of 2023 was $785 million representing a non-GAAP operating margin of 21.4%, compared to non-GAAP operating income of $1,013 million, representing a non-GAAP operating margin of 27.7%, in the first quarter of 2022. The decrease in non-GAAP operating margin in the first quarter of 2023 was mainly impacted by lower non-GAAP gross profit margin as discussed above, as well as higher other income in the first quarter of 2022, which primarily included settlement proceeds in our International Markets segment.

Adjusted EBITDA was $899 million in the first quarter of 2023, a decrease of 21%, compared to $1,135 million in the first quarter of 2022.

Financial expenses, net in the first quarter of 2023 were $260 million, compared to $258 million in the first quarter of 2022. Financial expenses, net in the first quarter of 2023 and 2022 were mainly comprised of interest expenses of $260 million and $238 million, respectively.

In the first quarter of 2023, we recognized a tax benefit of $19 million on a pre-tax loss of $258 million. In the first quarter of 2022, we recognized a tax expense of $2 million on a pre-tax loss of $971 million.

Non-GAAP tax rate in the first quarter of 2023 was 15.5%, compared to 18.5% in the first quarter of 2022. Our non-GAAP tax rate in the first quarter of 2023 was mainly affected by the geographic mix of earnings and interest expense disallowances.

We expect our annual non-GAAP tax rate for 2023 to be between 14%-17%, higher than our non-GAAP tax rate for 2022, which was 11.7%, mainly due to the effect of a portion of the realization of losses related to an investment in one of our U.S. subsidiaries in 2022.

Net loss attributable to Teva and loss per share in the first quarter of 2023 were $205 million and $0.18, respectively, compared to $955 million and $0.86, respectively, in the first quarter of 2022. Non-GAAP net income attributable to Teva and non-GAAP diluted earnings per share in the first quarter of 2023 were $457 million and $0.40, respectively, compared to $609 million and $0.55, respectively, in the first quarter of 2022.

As of March 31, 2023 and 2022, the fully diluted share count for purposes of calculating our market capitalization was approximately 1,158 million and 1,145 million, respectively.

Non-GAAP information: net non-GAAP adjustments in the first quarter of 2023 were $661 million. Non-GAAP net income attributable to Teva and non-GAAP diluted EPS for the first quarter of 2023 were adjusted to exclude the following items:

Amortization of purchased intangible assets of $165 million, of which $145 million is included in cost of sales and the remaining $20 million in S&M expenses;
Legal settlements and loss contingencies of $233 million;
Impairment of long-lived assets of $188 million;
Restructuring expenses of $56 million;
Equity compensation expenses of $32 million;
Accelerated depreciation of $25 million;
Financial expenses of $23 million;
Contingent consideration expense of $20 million;
Costs related to regulatory actions taken in facilities of $1 million;
Other non-GAAP items of $63 million;
Items attributable to non-controlling interests of $40 million; and
Corresponding tax effects and unusual tax items of $104 million.
We believe that excluding such items facilitates investors’ understanding of our business.

For further information, see the tables below for a reconciliation of the U.S. GAAP results to the adjusted non-GAAP figures and the information under "Non-GAAP Financial Measures." Investors should consider non-GAAP financial measures in addition to, and not as replacement for, or superior to, measures of financial performance prepared in accordance with GAAP.

Cash flow used in operating activities during the first quarter of 2023 was $145 million, compared to $49 million in the first quarter of 2022. The higher cash flow used in the first quarter of 2023 resulted mainly from lower profit and changes in working capital items, including an increase in accounts receivables net of SR&A, partially offset by an increase in accounts payables.

During the first quarter of 2023, we generated free cash flow of $41 million, which we define as comprising $145 million in cash flow used in operating activities, $323 million in beneficial interest collected in exchange for securitized accounts receivables (under our EU securitization program) and $2 million in proceeds from divestitures of businesses and other assets, partially offset by $139 million in cash used for capital investment. During the first quarter of 2022, we generated free cash flow of $117 million, which we define as comprising $49 million in cash flow used in operating activities, $305 million in beneficial interest collected in exchange for securitized accounts receivables (under our EU securitization program) and $25 million in proceeds from divestitures of businesses and other assets, partially offset by $157 million in cash used for capital investment and $7 million in cash used for acquisition of businesses, net of cash acquired. The decrease in the first quarter of 2023, resulted mainly from higher cash flow used in operating activities, as discussed above.

As of March 31, 2023, our debt was $20,691 million, compared to $21,212 million as of December 31, 2022. This decrease was mainly due to $646 million senior notes repaid at maturity, partially offset by $176 million of exchange rate fluctuations. Additionally, during the first quarter of 2023, we repurchased $2,506 million aggregate principal amount of notes upon consummation of a cash tender offer, and issued $2,445 million of sustainability-linked senior notes, net of issuance costs. The portion of our total debt classified as short-term as of March 31, 2023 was 5%, compared to 10% as of December 31, 2022. Our average debt maturity was approximately 6.4 years as of March 31, 2023, compared to 5.8 years as of December 31, 2022.

Segment Results for the first Quarter of 2023

North America Segment

Our North America segment includes the United States and Canada.

The following table presents revenues, expenses and profit for our North America segment for the three months ended March 31, 2023 and 2022:

Three months ended March 31,

2023

2022

(U.S. $ in millions / % of Segment Revenues)

Revenues

$

1,766

100%

$

1,737

100%

Gross profit

812

46.0%

890

51.2%

R&D expenses

156

8.8%

143

8.2%

S&M expenses

223

12.6%

245

14.1%

G&A expenses

102

5.8%

112

6.4%

Other income

(1)

§

(11)

(0.7%)

Segment profit*

$

332

18.8%

$

402

23.1%

* Segment profit does not include amortization and certain other items.

§ Represents an amount less than 0.5%.

Revenues from our North America segment in the first quarter of 2023 were $1,766 million, an increase of $29 million, or 2%, compared to the first quarter of 2022, mainly due to higher revenues from certain innovative products, primarily AUSTEDO and AJOVY, as well as Anda, partially offset by lower revenues from generic products and BENDEKA and TREANDA.

Revenues in the United States, our largest market, were $1,677 million in the first quarter of 2023, an increase of $39 million or 2% compared to the first quarter of 2022.

Revenues by Major Products and Activities

The following table presents revenues for our North America segment by major products and activities for the three months ended March 31, 2023 and 2022:

Three months ended

March 31,

Percentage

Change

2023

2022

2023-2022

(U.S. $ in millions)

Generic products

$

824

$

899

(8%)

AJOVY

49

36

36%

AUSTEDO

170

154

10%

BENDEKA and TREANDA

63

82

(23%)

COPAXONE

76

86

(12%)

Anda

424

342

24%

Other (*)

160

139

15%

Total

$

1,766

$

1,737

2%

____________________

(*) Other revenues in the first quarter of 2023 increased mainly due to a reduction in estimated liabilities in connection with ProAir HFA following its discontinuation on October 1, 2022.

Generic products revenues in our North America segment (including biosimilars) in the first quarter of 2023 were $824 million, a decrease of 8% compared to the first quarter of 2022, mainly due to increased competition to parts of our portfolio.

On March 9, 2023, Teva and Natco Pharma Ltd. announced the launch of additional strengths for lenalidomide capsules (the generic equivalent of Revlimid) in the U.S., in 2.5 mg and 20 mg strengths.

In the first quarter of 2023, our total prescriptions for generic products were approximately 81 million (based on trailing twelve months), representing 8.3% of total U.S. generic prescriptions according to IQVIA data.

AJOVY revenues in our North America segment in the first quarter of 2023 increased by 36% to $49 million, compared to the first quarter of 2022, mainly due to growth in volume. In the first quarter of 2023, AJOVY’s exit market share in the United States in terms of total number of prescriptions was 24.5% compared to 23.9% in the first quarter of 2022.

AUSTEDO revenues in our North America segment in the first quarter of 2023 increased by 10%, to $170 million, compared to $154 million in the first quarter of 2022, mainly due to growth in volume.

AUSTEDO XR (deutetrabenazine) extended-release tablets was approved by the FDA on February 17, 2023. AUSTEDO XR is a new once-daily formulation indicated in adults for tardive dyskinesia and chorea associated with Huntington’s disease, additional to the currently marketed twice-daily AUSTEDO.

On April 28, 2023, the FDA approved UZEDYTM (risperidone) extended-release injectable suspension for the treatment of schizophrenia in adults. UZEDY is the first subcutaneous, long-acting formulation of risperidone that controls the steady release of risperidone. UZEDY is expected to be available in the U.S. in the coming weeks.

BENDEKA and TREANDA combined revenues in our North America segment in the first quarter of 2023 decreased by 23% to $63 million, compared to the first quarter of 2022, mainly due to generic bendamustine product entry into the market. The orphan drug exclusivity that had attached to bendamustine products expired in December 2022.

COPAXONE revenues in our North America segment in the first quarter of 2023 decreased by 12% to $76 million, compared to the first quarter of 2022, mainly due to generic competition in the United States and a decrease in glatiramer acetate market share due to availability of alternative therapies.

Anda revenues from third-party products in our North America segment in the first quarter of 2023 increased by 24% to $424 million, compared to $342 million in the first quarter of 2022, mainly due to higher demand.

North America Gross Profit

Gross profit from our North America segment in the first quarter of 2023 was $812 million, a decrease of 9%, compared to $890 million in the first quarter of 2022.

Gross profit margin for our North America segment in the first quarter of 2023 decreased to 46.0%, compared to 51.2% in the first quarter of 2022. This decrease was mainly due to higher cost of goods sold, mainly driven by rising costs due to inflationary and other macroeconomic pressures, as well as an increase in revenues with lower profitability from Anda.

North America Profit

Profit from our North America segment consists of gross profit less R&D expenses, S&M expenses, G&A expenses and any other income related to this segment. Segment profit does not include amortization and certain other items.

Profit from our North America segment in the first quarter of 2023 was $332 million, a decrease of 17% compared to $402 million in the first quarter of 2022. This decrease was mainly due to lower gross profit.

Europe Segment

Our Europe segment includes the European Union, the United Kingdom and certain other European countries.

The following table presents revenues, expenses and profit for our Europe segment for the three months ended March 31, 2023 and 2022:

Three months ended March 31,

2023

2022

(U.S. $ in millions / % of Segment Revenues)

Revenues

$

1,184

100%

$

1,156

100%

Gross profit

655

55.3%

694

60.0%

R&D expenses

53

4.5%

58

5.0%

S&M expenses

187

15.8%

196

17.0%

G&A expenses

70

5.9%

59

5.1%

Other income

§

§

§

§

Segment profit*

$

345

29.1%

$

381

32.9%

§ Represents an amount less than $0.5 million or 0.5%, as applicable.

* Segment profit does not include amortization and certain other items.

Revenues from our Europe segment in the first quarter of 2023 were $1,184 million, an increase of 2%, or $28 million, compared to the first quarter of 2022. In local currency terms, revenues increased by 9%, mainly due to higher revenues from generic products and generic product launches.

In the first quarter of 2023, revenues were negatively impacted by exchange rate fluctuations of $79 million, net of hedging effects, compared to the first quarter of 2022. Revenues in the first quarter of 2023 included $6 million from a negative hedging impact, which is included in "Other" in the table below.

Revenues by Major Products and Activities

The following table presents revenues for our Europe segment by major products and activities for the three months ended March 31, 2023 and 2022:

Three months ended

March 31,

Percentage

Change

2023

2022

2023-2022

(U.S. $ in millions)

Generic products

$

932

$

876

6%

AJOVY

36

30

17%

COPAXONE

59

72

(17%)

Respiratory products

68

71

(4%)

Other

89

107

(17%)

Total

$

1,184

$

1,156

2%

Generic products revenues (including OTC and biosimilar products) in our Europe segment in the first quarter of 2023, increased by 6% to $932 million, compared to the first quarter of 2022. In local currency terms, revenues increased by 12%, mainly due to higher revenues from generic and OTC products and from generic product launches.

AJOVY revenues in our Europe segment in the first quarter of 2023 increased by 17% to $36 million, compared to $30 million in the first quarter of 2022. In local currency terms, revenues increased by 28%, mainly due to growth in European countries in which AJOVY had previously been launched.

COPAXONE revenues in our Europe segment in the first quarter of 2023 decreased by 17% to $59 million, compared to the first quarter of 2022. In local currency terms, revenues decreased by 12%, due to price reductions and a decline in volume resulting from competing glatiramer acetate products.

Respiratory products revenues in our Europe segment in the first quarter of 2023 decreased by 4% to $68 million compared to the first quarter of 2022. In local currency terms, revenues increased by 2%, mainly due to higher demand.

Europe Gross Profit

Gross profit from our Europe segment in the first quarter of 2023 was $655 million, a decrease of 6% compared to $694 million in the first quarter of 2022.

Gross profit margin for our Europe segment in the first quarter of 2023 decreased to 55.3%, compared to 60.0% in the first quarter of 2022. This decrease was mainly due to higher cost of goods sold, mainly driven by rising costs due to inflationary and other macroeconomic pressures.

Europe Profit

Profit from our Europe segment consists of gross profit less R&D expenses, S&M expenses, G&A expenses and any other income related to this segment. Segment profit does not include amortization and certain other items.

Profit from our Europe segment in the first quarter of 2023 was $345 million, a decrease of 9%, compared to $381 million in the first quarter of 2022. This decrease was mainly due to lower gross profit as described above and exchange rate fluctuations.

International Markets Segment

Our International Markets segment includes all countries in which we operate other than those in our North America and Europe segments.

The following table presents revenues, expenses and profit for our International Markets segment for the three months ended March 31, 2023 and 2022:

Three months ended March 31,

2023

2022

(U.S. $ in millions / % of Segment Revenues)

Revenues

$

492

100%

$

492

100%

Gross profit

262

53.2%

286

58.1%

R&D expenses

20

4.0%

20

4.0%

S&M expenses

98

19.8%

97

19.8%

G&A expenses

31

6.4%

29

5.9%

Other income

(1)

§

(40)

(8.1%)

Segment profit*

$

114

23.1%

$

179

36.4%

* Segment profit does not include amortization and certain other items.

§ Represents an amount less than 0.5%.

Revenues from our International Markets segment in the first quarter of 2023 were $492 million, flat compared to the first quarter of 2022. In local currency terms, revenues increased by 8% compared to the first quarter of 2022.

In the first quarter of 2023, revenues were negatively impacted by exchange rate fluctuations of $41 million, net of hedging effects, compared to the first quarter of 2022. Revenues in the first quarter of 2023 included a minimal hedging impact, compared to a positive hedging impact of $12 million in the first quarter of 2022, which is included in "Other" in the table below.

Revenues by Major Products and Activities

The following table presents revenues for our International Markets segment by major products and activities for the three months ended March 31, 2023 and 2022:

Three months ended

March 31,

Percentage

Change

2023

2022

2023-2022

(U.S. $ in millions)

Generic products

$

400

$

388

3%

AJOVY

10

6

74%

COPAXONE

12

10

16%

Other

70

88

(20%)

Total

$

492

$

492

§

§ Represents an amount less than 0.5%.

Generic products revenues in our International Markets segment in the first quarter of 2023, which include OTC products, increased by 3% in U.S. dollars to $400 million. In local currency terms, revenues increased by 9% compared to the first quarter of 2022, mainly due to higher revenues in certain markets, as well as price increases largely as a result of rising costs due to inflationary pressure, partially offset by regulatory price reductions and generic competition to off-patented products in Japan.

AJOVY was launched in certain markets in our International Markets segment, including in Japan in August 2021. We are moving forward with plans to launch AJOVY in other markets. AJOVY revenues in our International Markets segment in the first quarter of 2023 were $10 million, compared to $6 million in the first quarter of 2022, mainly due to growth in volume.

COPAXONE revenues in our International Markets segment in the first quarter of 2023 were $12 million compared to $10 million in the first quarter of 2022.

AUSTEDO was launched in early 2021 in China and was also launched in Israel during 2021. During the third quarter of 2022, AUSTEDO was launched in Brazil. We continue with additional submissions in various other markets.

International Markets Gross Profit

Gross profit from our International Markets segment in the first quarter of 2023 was $262 million, a decrease of 8% compared to $286 million in the first quarter of 2022.

Gross profit margin for our International Markets segment in the first quarter of 2023 decreased to 53.2%, compared to 58.1% in the first quarter of 2022. This decrease was mainly due to regulatory price reductions and generic competition to off-patented products in Japan, the positive hedging impact of $12 million in the first quarter of 2022, as well as rising costs due to inflationary and other macroeconomic pressures, partially offset by price increases largely as a result of such rising costs.

International Markets Profit

Profit from our International Markets segment consists of gross profit less R&D expenses, S&M expenses, G&A expenses and any other income related to this segment. Segment profit does not include amortization and certain other items.

Profit from our International Markets segment in the first quarter of 2023 was $114 million, a decrease of 36%, compared to $179 million in the first quarter of 2022. This decrease was mainly due to higher other income and higher gross profit in the first quarter of 2022 as compared to the first quarter of 2023.

Other Activities

We have other sources of revenues, primarily the sale of active pharmaceutical ingredients ("APIs") to third parties, certain contract manufacturing services and an out-licensing platform offering a portfolio of products to other pharmaceutical companies through our affiliate Medis. Our other activities are not included in our North America, Europe or International Markets segments described above.

Revenues from other activities in the first quarter of 2023 were $219 million, a decrease of 20% compared to the first quarter of 2022. In local currency terms, revenues decreased by 19%.

API sales to third parties in the first quarter of 2023 were $132 million, a decrease of 27% in both U.S. dollars and local currency terms, compared to the first quarter of 2022 as many pharmaceutical customers de-stocked inventory levels that had remained high through the COVID-19 pandemic.

Conference Call

Teva will host a conference call and live webcast including a slide presentation on Wednesday, May 10, 2023, at 8:00 a.m. ET to discuss its first quarter 2023 results and overall business environment. A question & answer session will follow.

In order to participate, please register in advance here to obtain a local or toll-free phone number and your personal pin.

A live webcast of the call will be available on Teva’s website at: ir.tevapharm.com.

Following the conclusion of the call, a replay of the webcast will be available within 24 hours on Teva’s website.

On May 10, 2023 Tempest Therapeutics, Inc. (Nasdaq: TPST), a clinical-stage oncology company developing first-in-classi therapeutics that combine both targeted and immune-mediated mechanisms, reported its financial results for the quarter ended March 31, 2023 and provided a corporate update (Press release, Tempest Therapeutics, MAY 10, 2023, View Source [SID1234631402]).

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"The first few months of 2023 set the pace for what we believe will be a transformative year for Tempest," said Stephen Brady, chief executive officer of Tempest. "Recently, we announced exciting early data showing that TPST-1120, the company’s PPAR⍺ antagonist, combined with standard of care in first-line HCC patients demonstrated clinically meaningful improvement in multiple categories, including RECIST responses, over standard of care alone in an ongoing global randomized Phase 1b/2 study. Additionally, at AACR (Free AACR Whitepaper), we presented data highlighting new translational biomarker findings for TPST-1120, as well as the first-of-its-kind co-crystal structures of human TREX1 enzyme and a TREX1 inhibitor, which we believe is an important step forward towards systemic modulation of the STING pathway. We are excited to continue this momentum with multiple potential catalysts this year and in 2024, including more later-stage and biomarker data from the HCC study with TPST-1120."

Recent Highlights

TPST-1120 (clinical PPARα antagonist): (i) presented new biomarker data from Phase 1 patients at the 2023 American Association for Cancer Research (AACR) (Free AACR Whitepaper) Annual Meeting and Society for Immunotherapy of Cancer (SITC) (Free SITC Whitepaper) 2023 Spring Scientific Meeting; (ii) disclosed the completion of enrollment in the global randomized first-line Phase 1b/2 study in patients with hepatocellular carcinoma (HCC), under a collaboration with F. Hoffmann La Roche (Roche); and (iii) announced positive early results from the randomized HCC study, demonstrating clinically meaningful improvements in multiple categories and a favorable safety profile when combined with the standard-of-care regimen of atezolizumab and bevacizumab, compared head-to-head to standard-of-care alone, including:
Unconfirmed responses of 30% for the TPST-1120 triplet arm (12/40) vs. 17.2% for the active control arm (5/29), demonstrating a 74.4% relative improvement in objective response rate (ORR);
Confirmed responses of 17.5% for the TPST-1120 triplet arm (7/40) vs. 10.3% for the active control arm (3/29), demonstrating a 69.9% relative improvement in confirmed ORR;
47.5% (19/40) of the TPST-1120 arm patients are on treatment vs. 23.3% (7/30) in the control arm; and
80% (32/40) of the TPST-1120 arm patients are on study vs. 50% (15/30) in the control.ii
TPST-1495 (clinical dual EP2/4 prostaglandin receptor antagonist): (i) continued enrollment of a study evaluating combination dose and schedule optimization with the anti-PD-1 checkpoint inhibitor, pembrolizumab; and (ii) enrolled first patient in an endometrial cancer-specific arm investigating the two highest doses of TPST-1495 in combination with pembrolizumab.
TREX1 Inhibitor (preclinical tumor-selective STING pathway activator): presented data, including human TREX1 enzyme—TREX1 inhibitor X-ray co-crystal structures, at the 2023 AACR (Free AACR Whitepaper) Annual Meeting.
Potential Upcoming Milestones

TPST-1120 (clinical PPARα antagonist): we expect to receive updated data from the ongoing global randomized first-line Phase 1b/2 study in patients with HCC from Roche.
TPST-1495 (clinical dual EP2/4 prostaglandin receptor antagonist): we plan to report data from (i) the Phase 1 dose and schedule optimization trial studying monotherapy and combination therapy with an anti-PD1 therapy, pembrolizumab, at the 2023 American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) Annual Meeting, and (ii) a separate combination arm at the two highest TPST-1495 doses in patients with advanced endometrial cancer in 2024.
TREX1 Inhibitor (preclinical tumor-selective STING pathway activator): we expect to advance new proprietary small molecule series TREX1 inhibitors generated through insights resulting from human TREX1-inhibitor co-crystal structures.
Financial Results

First Quarter 2023

Tempest ended the first quarter with $22.9 million in cash and cash equivalents, compared to $31.2 million on December 31, 2022.
Net loss and net loss per share for the quarter ended March 31, 2023 were $7.6 million and $0.55, respectively, compared to $8.5 million and $1.18, respectively, for the same period in 2022.
Research and development expenses for the quarter ended March 31, 2023 were $4.7 million compared to $5.1 million for the same period in 2022. The decrease was primarily due to a decrease in research and development costs incurred from contract research organizations and third-party vendors, offset by an increase in personnel costs, as well as facilities expenses.
General and administrative expenses for the quarter ended March 31, 2023 were $2.9 million compared to $3.1 million for the same period in 2022. The decrease was primarily due to a decrease in consulting and professional services.
Based on the current cash position and operating plan, Tempest expects to have sufficient resources to fund operations through the second quarter of 2024.

On May 10, 2023 Step Pharma, the world leader in CTPS1 inhibition for the targeted treatment of cancer, reported that members of its management team will be participating at a number of conferences in May and June 2023 (Press release, Step Pharma, MAY 10, 2023, View Source [SID1234631401]).

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By targeting CTPS1, an enzyme that catalyses a rate-limiting step in pyrimidine synthesis, Step Pharma has unlocked the ability to selectively inhibit the de novo pyrimidine synthesis pathway, enabling a highly selective treatment of cancer.

23rd Bio€quity Europe, Dublin, Ireland, 15-16 May & 22-23 May Digital Partnering

In person corporate presentation by Andrew Parker, CEO at 1.28pm on 5 May

2023 ASCO (Free ASCO Whitepaper) Annual Meeting, Chicago, IL, US, 2-6 June

Poster presentation: A phase 1/2 study of STP938, a first-in-class inhibitor of CTP synthase 1, in patients with relapsed/refractory B or T cell lymphoma.
Authors: Manish Patel, Matthew Ahearne, Kim Linton, Christopher Fox, David Lewis, Maureen Higgins, Brian Schwartz, Philip Beer, Michael Tees

Session Title: Hematologic Malignancies – Lymphoma and Chronic Lymphocytic Leukemia

Session Date and Time: 6/5/2023, 8:00 AM-11:00 AM CST

Track: Hematological Malignancies

Subtrack: Non-Hodgkin Lymphoma

Clinical Trial Registration Number: NCT05463263

Abstract #TPS7591

Poster Bd #135b

BIO International Convention Congress, Boston, MA, US, 5-8 June

International Conference of Malignant Lymphoma, Lugano, Switzerland, 13-17 June

On May 10, 2023 Sonnet BioTherapeutics Holdings, Inc. (NASDAQ:SONN) ("Sonnet" or the "Company"), a biopharmaceutical company developing innovative targeted biologic drugs, reported its financial results for the three months and six months ended March 31, 2023 and provided a business update (Press release, Sonnet BioTherapeutics, MAY 10, 2023, View Source [SID1234631400]).

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"We believe this quarter marked another noteworthy period of execution for Sonnet, where we made important progress with our pipeline, entered into a product development collaboration with Roche, and furthered our cost-cutting plan to extend our cash runway into the 2024 calendar year," said Pankaj Mohan, Ph.D., Sonnet Founder and Chief Executive Officer. "We remain incredibly enthusiastic about the best-in-class potential of our proprietary IL-12 therapeutic candidate, SON-1010, where our recent presentation at the 2023 American Association for Cancer Research (AACR) (Free AACR Whitepaper) Annual Meeting supported the consistency of the compound’s data and reiterated the robustness of its overall profile. Additionally, we are very excited about the non-human primate data that we have generated with SON-1210, our proprietary bifunctional version of human Interleukins 12 (IL-12) and 15 (IL-15), that we believe will help propel the compound into clinical development. We are looking forward to continuing this forward momentum over the balance of 2023."

FY 2023 Second Quarter and Recent Corporate Updates

Sonnet provided the following corporate updates:

● On January 9, 2023, announced a collaboration agreement with Roche for the clinical evaluation of SON-1010 with atezolizumab. The companies have entered into a Master Clinical Trial and Supply Agreement (MCSA), along with ancillary Quality and Safety Agreements, to study the safety and efficacy of the combination of SON-1010 and atezolizumab in a platinum-resistant ovarian cancer (PROC) patient setting. Further, the companies will provide SON-1010 and atezolizumab, respectively, for use in the Phase 1b/Phase 2a combination safety, dose-escalation, and efficacy study (SB221). The SB221 study has been formally submitted for final approval in Australia and preparations are on track to initiate the study during the second calendar quarter of 2023.

● On January 19, 2023, announced that the interim pharmacokinetic (PK) profile simulation of SON-1010 dosing had been completed in the randomized, placebo-controlled Phase 1 clinical trial (SB102) of healthy volunteers. Study SB102 is a single-ascending dose trial that was initiated in July 2022, to address the safety, PK, and PD of SON-1010 in subjects without interference from prior chemotherapy. Data from the first 24 of a total of 31 patients enrolled have been presented to date, most recently at the 2023 American Association for Cancer Research (AACR) (Free AACR Whitepaper) Annual Meeting. As an update, the 5th dose cohort was removed, as enough data have now been collected to support the dosing strategy in the cancer trials moving forward. Typical dose-related increases were seen with SON-1010, drug levels peaked at about 11 hours with a geometric mean maximum concentration (Cmax) of 29, 68, and 125 pg/mL for the 50, 100, and 150 ng/kg dose groups, respectively. The mean elimination half-life (t½) after a 150 ng/kg dose of SON-1010 was 112 hours, compared to the published value of 12 hours for rhIL-12. Observed increases in interferon gamma (IFNγ) were most pronounced and were dose-related, controlled, and prolonged. SON-1010 induced IFNγ in all active-drug subjects, which peaked at 24 to 48 hours then returned to baseline after 2 weeks. Low amounts of IL-10 were induced in a dose-dependent manner, which could also be due to the increase in IFNγ. There were small transient increases in IL-6, IL-8, and TNFα after dosing but no consistent pattern was seen with IL-1β, IL-2, or IL-4 and there was no evidence of cytokine release syndrome (CRS). Safety was consistent with what has been reported previously; adverse events have generally been mild/moderate, transient in nature, and have all been tolerable.

● On February 1, 2023, announced the successful completion of two IND-enabling toxicology studies with SON-1210 in non-human primates. SON-1210 is a proprietary, bispecific version of human Interleukins 12 (IL-12) and 15 (IL-15), configured using Sonnet’s Fully Human Albumin Binding (FHAB) platform. The first of two studies, a non-GLP toxicology study, was designed to elucidate the maximum tolerated dose (MTD) of SON-1210 in a dose-escalation format in four cohorts of NHPs. The second study was a GLP repeat-dose toxicology study that employed three dose levels of SON-1210 or a vehicle control, each dosed three times every two weeks. There were no SON-1210-related increases in toxicity, including liver enzymes, in the GLP study apart from the expected, and mild, on-target changes in hematology and clinical chemistry parameters that resolved completely within 14 to 21 days post-dosing. A significant increase in IFNγ, which was transient in nature, was noted as early as one day following administration, with no apparent increase in other proinflammatory cytokines. Sonnet remains on track to initiate the regulatory authorization process for SON-1210 in the first half of calendar 2023.

● On February 8, 2023, announced the pricing of an underwritten public offering of 13,888,888 shares of common stock or common stock equivalents (which includes pre-funded warrants to purchase shares of common stock in lieu of shares of common stock) and investor warrants to purchase up to an aggregate of 27,777,776 shares of common stock. Each share of common stock (or pre-funded warrant in lieu thereof) were sold together with one investor warrant to purchase two shares of common stock at a combined offering price of $1.08, for total gross proceeds of $15.0 million, before underwriting discounts and commissions and offering expenses payable by Sonnet. The investor warrants have an exercise price of $1.08 per share, are exercisable for a period of five years and contain an alternative cashless exercise provision whereby, subject to certain conditions, a warrant may be exercised in a cashless transaction for shares of common stock at the rate of half a share of common stock per full share otherwise issuable upon a cash exercise.

● On April 18, 2023, presented additional data from the SB101 study of SON-1010 at the 2023 AACR (Free AACR Whitepaper) Annual Meeting. SB101 is a single-ascending dose (SAD) trial in adult patients with advanced solid tumors that commenced in the second quarter of 2022 and is currently enrolling the final dose cohort. Of the 15 patients from the first five cohorts of SB101 evaluable for follow-up at this latest cutoff, 9 had stable disease at the first follow-up scan, 4 of which were already progressing at study entry. At the four-month follow-up, 5 of 14 patients remained stable at the second scan, suggesting clinical benefit of SON-1010 in 36% of patients. As an example, the very first patient dosed, with an aggressive endometrial sarcoma, had target tumor shrinkage with complete resolution of ascites at one point and has been clinically stable for nearly a year. SON-1010 has been safe and tolerable at all doses tested to date. Adverse events have generally been mild/moderate and transient in nature, with no study discontinuations for safety reasons. In addition, adverse effects have been less numerous and less intense with subsequent doses. The geomean half-life (t½) of SON-1010 was 113 hours in SB101 and 122 hours in SB102, compared to the published value of 12 hours for recombinant IL-12 observed in prior studies. Comparison of the PK curves between the two studies suggests that SON-1010 may be targeting tumors, as it was designed to do. Cytokine analysis following each dose revealed controlled and prolonged induction of IFNγ that peaked at 24 to 48 hours and returned to baseline after 2 to 4 weeks. A small increase in IL-10 was observed with each dose as expected in response to IFNγ. There was either a minimal or no signal for IL-1β, IL-6, IL-8, and TNFα and no indication of any potential for cytokine release syndrome (CRS) at these doses.

● Sonnet has initiated an ex-U.S. Phase 1b/2a study with SON-080 in CIPN. This study is on track to yield initial clinical safety data during the first half of calendar 2023. Pursuant to a license agreement the Company entered with New Life Therapeutics Pte, Ltd. ("New Life") of Singapore in May 2021, Sonnet and New Life will be jointly responsible for developing SON-080 in DPN. The objective will be to evaluate the data and potentially initiate a Phase 2 study in the second half of calendar 2023, once the CIPN safety data has been evaluated.
● Preclinical development continues for SON-1410 (IL18-FHAB-IL12), Sonnet’s proprietary bispecific combination of Interleukins 18 (IL-18) and 12 (IL-12), with early experimental drug supply suitable for formulation and analytical method development activities, in addition to small quantities for use in early development proof-of-concept in vitro studies. Process development activities will continue through 2023, with the potential to generate a drug suitable for initial in vivo mouse studies by the end of the 2023 calendar year.
● As part of the ongoing cost-cutting evaluations, all antiviral development with SON-1010 has been suspended.

"After initiating human studies just over a year ago, the clinical development program is moving forward rapidly on several fronts with four active trials being conducted in collaboration with two external partners," said Richard Kenney, M.D., Sonnet Chief Medical Officer. "We are very pleased with the team’s progress to date and are on track to meet our projected targets. The dose of SON-1010 was escalated safely in both cancer patients in SB101 and in healthy volunteers in SB102. Comparison of the data from the two trials shows intriguing pharmacokinetic profiles that suggest direct targeting of tumor tissue, as we presented at AACR (Free AACR Whitepaper) last month. The combination of SON-1010 with atezolizumab in SB221 has the potential to induce a synergistic response in platinum-resistant ovarian cancer, and we are excited about the potential added benefit that SON-1010 can bring to these patients with this significant unmet medical need. While the SB211 trial with SON-080 in patients with chemotherapy-induced peripheral neuropathy is still blinded, no serious adverse events have been reported to date."

FY 2023 Second Quarter Ended March 31, 2023 Financial Results

● As of March 31, 2023, Sonnet had $11.4 million cash on hand and no debt. On February 10, 2023, the company closed a public offering for gross proceeds of $15.0 million (net proceeds of $13.6 million), issuing 11,664,888 shares of common stock, pre-funded warrants to purchase 2,224,000 shares of common stock, with an exercise of $0.0001 per share, and common warrants to purchase 27,777,776 shares of common stock, with an exercise price of $1.08 per share.
● Research and development expenses were $3.8 million for the three months ended March 31, 2023, compared to $6.4 million for the three months ended March 31, 2022. The decrease of $2.6 million was primarily due to the establishment of cost savings by transitioning product development activities to cost advantaged locations such as India and Australia and by reducing expenditures on tertiary programs such as SON-3015, which has been placed on a development hold, as well as a decrease in share-based compensation expense.

● General and administrative expenses were $1.9 million for each of the three months ended March 31, 2023 and 2022. There was no significant change in general and administrative expense as we are managing expenses for liquidity purposes.

"Following the successful completion of a $15.0 million financing in February and the cost-cutting objectives that we previewed during the first fiscal quarter of 2023, we have implemented constructive measures to extend our cash runway. These are important initiatives that we have undertaken to deliver on our stated objective of advancing our drug development pipeline, which has progressed considerably over the last 18 months" said Jay Cross, CFO.