On August 5, 2020 Teva Pharmaceutical Industries Ltd. (NYSE: TEVA, TASE: TEVA) reported results for the quarter ended June 30, 2020 (Press release, Teva, AUG 5, 2020, View Source [SID1234562869]).

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Mr. Kåre Schultz, Teva’s President and CEO, said, "As the COVID-19 pandemic continues to impact the globe, Teva remains focused on our patients and communities while continuing to take robust measures to safeguard the health and well-being of our employees. During the quarter, we experienced lower sales of our generic and OTC products in all regions. The lower generics and OTC sales in Europe and International Markets were in line with our expectations, after the unusually high demand seen in the prior quarter due to the initial response to the pandemic. Our performance in the first half of the year, however, matched or exceeded that of the similar period last year. Our profitability – and in particular our free cash flow – were strong, allowing us to continue to reduce our net debt to $23.9 billion and to reaffirm our 2020 outlook."

Mr. Schultz continued, "During the quarter we made progress with many of our growth drivers, including the launch of the AJOVY auto-injector in the U.S., the continued launch of AJOVY in the EU, the launch of the biosimilar TRUXIMA for rheumatoid arthritis in the U.S. and approval of AUSTEDO in China. Additionally, we recently announced the launch of ProAir DigiHaler in the U.S. and the submission of an application for manufacturing and marketing approval of AJOVY in Japan. As we look forward to the second half of 2020, we remain fully committed to serving society and our stakeholders with critical and accessible medicines and to ensuring Teva meet its targets."

Phase 3 fasinumab results announced with Regeneron

In September 2016, Teva and Regeneron Pharmaceuticals, Inc. ("Regeneron") entered into a collaborative agreement to develop and commercialize Regeneron’s pain medication product, fasinumab. Results for two phase 3 clinical trials, FACT OA1 and FACT OA2, were released on August 5, 2020, indicating that the co-primary endpoints for fasinumab were achieved. Fasinumab 1 mg monthly demonstrated significant improvements in pain and physical function over placebo at week 16 and week 24, respectively. Fasinumab 1 mg monthly also showed nominally significant benefits in physical function in two trials and pain in one trial, when compared to the maximum FDA-approved prescription doses of non-steroidal anti-inflammatory drugs for osteoarthritis. The FACT OA1 trial included an additional treatment arm, fasinumab 1 mg every two months, which showed numerical benefit over placebo, but did not reach statistical significance. In initial safety analyses from the phase 3 trials, there was an increase in arthropathies reported with fasinumab. In a sub-group of patients from one phase 3 long-term safety trial, there was an increase in joint replacement with fasinumab 1 mg monthly treatment during the off-drug follow-up period, although this increase was not seen in the other trials to date. Additional longer-term safety data from the ongoing trials are being collected, and are expected to be reported early next year.

Second Quarter 2020 Consolidated Results

Revenues in the second quarter of 2020 were $3,870 million, a decrease of 7%, or 5% in local currency terms, compared to the second quarter of 2019. This decrease was mainly due to lower revenues from generics, OTC and COPAXONE in all regions and lower revenues from QVAR and BENDEKA/TREANDA in our North America segment, as well as reduced demand for certain products resulting from the impact the COVID-19 pandemic had on purchasing patterns, partially offset by higher revenues from AUSTEDO, Anda and AJOVY in the U.S.

Exchange rate differences between the second quarter of 2020 and the second quarter of 2019, net of hedging, negatively impacted our revenues by $79 million and negatively impacted our GAAP and non-GAAP operating income by $35 million and $37 million, respectively.

GAAP gross profit was $1,763 million in the second quarter of 2020, a decrease of 7% compared to the second quarter of 2019. GAAP gross profit margin was 45.5% in the second quarter of 2020, compared to 45.3% in the second quarter of 2019. Non-GAAP gross profit was $2,011 million in the second quarter of 2020, a decrease of 8% compared to the second quarter of 2019. Non-GAAP gross profit margin was 52.0% in the second quarter of 2020, compared to 52.4% in the second quarter of 2019. The decrease in gross profit margin was mainly due to lower profitability in Europe resulting from price decreases in our specialty products and lower profitability in International Markets primarily resulting from lower sales in Japan and the impact the COVID-19 pandemic had on purchasing patterns, as well as lower sales of COPAXONE and other specialty products, partially offset by higher profitability in North America resulting from the change in mix of products.

GAAP Research and Development (R&D) expenses in the second quarter of 2020 were $225 million, a decrease of 19% compared to the second quarter of 2019. Non-GAAP R&D expenses were $233 million, or 6.0% of quarterly revenues, in the second quarter of 2020, compared to $271 million, or 6.5%, in the second quarter of 2019. The decrease in R&D expenses resulted primarily from the life cycle and stage of various projects, as well as an impact related to the COVID-19 pandemic.

GAAP Selling and Marketing (S&M) expenses in the second quarter of 2020 were $597 million, a decrease of 10% compared to the second quarter of 2019. Non-GAAP S&M expenses were $559 million, or 14.4% of quarterly revenues, in the second quarter of 2020, compared to $621 million, or 14.9%, in the second quarter of 2019. The decrease was mainly due to cost reductions and efficiency measures, as well as lower marketing and travel costs attributed to restrictions related to the COVID-19 pandemic.

GAAP General and Administrative (G&A) expenses in the second quarter of 2020 were $264 million, a decrease of 11% compared to the second quarter of 2019. Non-GAAP G&A expenses were $245 million, or 6.3% of quarterly revenues, in the second quarter of 2020, compared to $286 million, or 6.8%, in the second quarter of 2019.

GAAP other income in the second quarter of 2020 was $9 million, flat compared to the second quarter of 2019. Non-GAAP other income in the second quarter of 2020 was $6 million. We did not have any non-GAAP other income in the second quarter of 2019.

GAAP operating income in the second quarter of 2020 was $173 million, compared to GAAP operating loss of $644 million in the second quarter of 2019. Non-GAAP operating income in the second quarter of 2020 was $979 million, a decrease of 3%, compared to $1,011 million in the second quarter of 2019. The increase in GAAP operating income was mainly due to higher legal settlements and loss contingencies charges in the second quarter of 2019 and lower intangible asset impairments charges in the second quarter of 2020, as well as the changes discussed above, partially offset by higher other assets impairments, restructuring and other items in the second quarter of 2020.

EBITDA (non-GAAP operating income, which excludes amortization and certain other items, as well as depreciation expenses) was $1,108 million in the second quarter of 2020, a decrease of 3% compared to $1,144 million in the second quarter of 2019.

GAAP financial expenses were $223 million in the second quarter of 2020, compared to $206 million in the second quarter of 2019. Non-GAAP financial expenses were $229 million in the second quarter of 2020, compared to $198 million in the second quarter of 2019.

In the second quarter of 2020, we recognized a GAAP tax benefit of $104 million, on pre-tax loss of $51 million. In the second quarter of 2019, we recognized a tax benefit of $179 million, on pre-tax loss of $850 million. Our tax rate for the second quarter of 2020 was mainly affected by impairments in jurisdictions in which tax rates are higher than Teva’s average tax rate on its ongoing business operations and other changes to tax positions and deductions. Non-GAAP income taxes for the second quarter of 2020 were $128 million, or 17%, on pre-tax non-GAAP income of $751 million. Non-GAAP income taxes in the second quarter of 2019 were $134 million, or 16%, on pre-tax non-GAAP income of $812 million. Our non-GAAP tax rate for the second quarter of 2020 was mainly affected by the mix of products sold and other changes to tax positions and deductions.

We expect our annual non-GAAP tax rate for 2020 to be 17-18%, unchanged from our outlook provided in February 2020.

GAAP net income attributable to Teva and GAAP diluted EPS were $140 million and $0.13 respectively, in the second quarter of 2020, compared to GAAP net loss and GAAP diluted loss per share of $689 million and $0.63 in the second quarter of 2019. Non-GAAP net income attributable to Teva and non-GAAP diluted EPS in the second quarter of 2020 were $605 million and $0.55, respectively, compared to $653 million and $0.60 in the second quarter of 2019. The decrease in non-GAAP net income and non-GAAP diluted EPS is mainly due to lower gross profit, partially offset by lower operating expenses.

The weighted average diluted shares outstanding used for the fully diluted share calculation for the three months ended June 30, 2020 and 2019 were 1,100 million and 1,092 million shares, respectively. The weighted average outstanding shares for the fully diluted EPS calculation on a non-GAAP basis for the three months ended June 30, 2020 and 2019 were 1,100 million and 1,093 million shares, respectively.

As of June 30, 2020 and 2019, the fully diluted share count for purposes of calculating our market capitalization was approximately 1,119 million and 1,107 million, respectively.

Non-GAAP information: Net non-GAAP adjustments in the second quarter of 2020 were $465 million. Non-GAAP net income and non-GAAP EPS for the second quarter of 2020 were adjusted to exclude the following items:

Impairment of long-lived assets of $396 million, mainly comprised of $261 million related to an agreement to sell certain assets from Teva’s business venture in Japan and $108 million impairment of intangible assets of product rights and IPR&D assets related to the Actavis Generics acquisition;
Amortization of purchased intangible assets of $249 million, of which $219 million is included in cost of sales and the remaining $30 million in S&M expenses;
Contingent consideration expenses of $76 million, mainly related to bendamustine;
Restructuring expenses of $33 million;
Equity compensation expenses of $30 million;
Other items of $4 million;
Legal settlements and loss contingencies of $13 million;
Minority income of $105 million; and
Income tax of $231 million.
Teva believes that excluding such items facilitates investors’ understanding of its 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 generated from operating activities during the second quarter of 2020 was $273 million, compared to cash flow used in operating activities of $227 million in the second quarter of 2019. The increase in the second quarter of 2020 was mainly due to favorable collection of payments from customers in the second quarter of 2020, resulting from increased sales in the first quarter.

Free cash flow (cash flow generated from operating activities, net of cash received for capital investments and beneficial interest collected in exchange for securitized trade receivables) was $582 million in the second quarter of 2020, compared to $168 million in the second quarter of 2019. The increase in the second quarter of 2020 resulted mainly from higher cash flow generated from operating activities.

As of June 30, 2020, our debt was $26,266 million, compared to $26,103 million as of March 31, 2020. This increase was mainly due to exchange rate fluctuations. The portion of total debt classified as short-term as of June 30, 2020 was 6%, similar to March 31, 2020. Our average debt maturity was approximately 6.1 years as of June 30, 2020 compared to 6.6 years as of March 31, 2020. In July 2020, we repaid at maturity debt of €1,010 million.

Segment Results for the Second Quarter of 2020

North America Segment

Our North America segment includes the United States and Canada.

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 second quarter of 2020 were $2,047 million, a decrease of $24 million, or 1%, compared to the second quarter of 2019, mainly due to a decrease in revenues of COPAXONE, generics products and BENDEKA/TREANDA, partially offset by higher revenues from AUSTEDO, Anda and AJOVY.

Revenues in the United States, our largest market, were $1,928 million in the second quarter of 2020, flat compared to the second quarter of 2019.

Revenues by Major Products and Activities

Generic products revenues in our North America segment (including biosimilars) in the second quarter of 2020 were $923 million, a decrease of 2% compared to the second quarter of 2019. This decrease was mainly due to lower volume and lower royalty income, offset by an increase in revenues from TRUXIMA and from our ProAir authorized generic due to higher demand related to the COVID-19 pandemic.

In the second quarter of 2020, we led the U.S. generics market in total prescriptions and new prescriptions, with approximately 376 million total prescriptions (based on trailing twelve months), representing 10.2% of total U.S. generic prescriptions according to IQVIA data.

AJOVY revenues in our North America segment in the second quarter of 2020 were $34 million, an increase of $11 million, or 50% compared to the second quarter of 2019, mainly due to growth in volume in the second quarter of 2020 and the introduction of the auto-injector device. AJOVY was approved by the FDA and launched in the United States in September 2018 for the preventive treatment of migraine in adults. On January 27, 2020, the FDA approved an auto-injector device for AJOVY in the U.S., which became commercially available in April 2020. In addition, AJOVY was approved in Canada on April 14, 2020.

AUSTEDO revenues in our North America segment in the second quarter of 2020 increased by 67% to $161 million, compared to $96 million in the second quarter of 2019. This increase was mainly due to growth in volume in the second quarter of 2020.

BENDEKA and TREANDA combined revenues in our North America segment in the second quarter of 2020 decreased by 18% to $103 million, compared to the second quarter of 2019, mainly due to the emergence of alternative novel therapies and continued competition from Belrapzo (a ready-to-dilute bendamustine hydrochloride product from Eagle Pharmaceuticals, Inc.).

COPAXONE revenues in our North America segment in the second quarter of 2020 decreased by 13% to $238 million, compared to the second quarter of 2019, mainly due to generic competition in the United States.

ProAir revenues in our North America segment in the second quarter of 2020 were $66 million, flat compared to the second quarter of 2019. In January 2019, we launched our own ProAir authorized generic in the United States following the launch of a generic version of Ventolin HFA, another albuterol inhaler. Revenues from our ProAir HFA authorized generic are included in "generic products" above. ProAir is the fourth-largest short-acting beta-agonist in the market, with an exit market share of 11.0% in terms of total number of prescriptions for albuterol inhalers during the second quarter of 2020, compared to 23.9% in the second quarter of 2019. The exit market share including our ProAir HFA authorized generic is 33.4%, making our overall albuterol product the second largest in the market, compared to 44.4% in the second quarter of 2019.

In July 2020, we announced the launch of ProAir Digihaler (albuterol sulfate 117 mcg) inhalation powder, which is the first and only digital rescue inhaler with built-in sensors which connects to a companion mobile application and provides inhaler use information to people with asthma and COPD.

QVAR revenues in our North America segment in the second quarter of 2020 decreased by 15% to $51 million, compared to the second quarter of 2019, mainly due to increased price competition and lower volumes. QVAR maintained its second-place position in the inhaled corticosteroids category in the United States, with an exit market share of 19.8% in terms of total number of prescriptions during the second quarter of 2020, compared to 20.2% in the second quarter of 2019.

Anda revenues in our North America segment in the second quarter of 2020 increased by 7% to $374 million, compared to $351 million in the second quarter of 2019, mainly due to higher volume increases primarily related to the COVID-19 pandemic.

North America Gross Profit

Gross profit from our North America segment in the second quarter of 2020 was $1,090 million, an increase of 2%, compared to $1,067 million in the second quarter of 2019.

Gross profit margin for our North America segment in the second quarter of 2020 increased to 53.3%, compared to 51.5% in the second quarter of 2019. This increase was mainly due to the change in mix of products.

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 second quarter of 2020 was $573 million, an increase of 14%, compared to $504 million in the second quarter of 2019. This increase was due to a favorable mix of products, including AUSTEDO and AJOVY, and lower expenses.

Europe Segment

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

Revenues from our Europe segment in the second quarter of 2020 were $1,001 million, a decrease of 15%, or $182 million, compared to the second quarter of 2019. In local currency terms, revenues decreased by 13%, mainly due to reduced demand for certain products resulting from the impact the COVID-19 pandemic had on purchasing patterns. The COVID-19 pandemic led to increased demand in the first quarter and a correlating decrease in demand in the second quarter, and also led to a decline in doctor visits by patients resulting in fewer prescriptions during the second quarter of 2020. The decrease is also attributed to price declines for oncology products as a result of generic competition and a decline in COPAXONE revenues due to competing glatiramer acetate products, partially offset by new generic product launches.

Generic products revenues in our Europe segment in the second quarter of 2020, including OTC products, decreased by 13% to $737 million, compared to the second quarter of 2019. In local currency terms, revenues decreased by 10% compared to the second quarter of 2019, mainly due to reduced demand for certain products resulting from the impact the COVID-19 pandemic had on purchasing patterns. The COVID-19 pandemic led to increased demand in the first quarter and a correlating decrease in demand in the second quarter, and also led to a decline in doctor visits by patients resulting in fewer prescriptions during the second quarter of 2020, partially offset by new generic product launches.

COPAXONE revenues in our Europe segment in the second quarter of 2020 decreased by 21% to $84 million, compared to the second quarter of 2019. In local currency terms, revenues decreased by 19%, mainly due to price reductions and a decline in volume resulting from competing glatiramer acetate products and by reduced demand resulting from the impact the COVID-19 pandemic had on purchasing patterns. The COVID-19 pandemic led to increased demand in the first quarter and a correlating decrease in demand in the second quarter.

Respiratory products revenues in our Europe segment in the second quarter of 2020 decreased by 11% to $80 million, compared to the second quarter of 2019. In local currency terms, revenues decreased by 8%, mainly due to reduced demand resulting from the impact the COVID-19 pandemic had on purchasing patterns. The COVID-19 pandemic led to increased demand in the first quarter and a correlating decrease in demand in the second quarter.

AJOVY revenues in our Europe segment in the second quarter of 2020 were $5 million, compared to $1 million in the second quarter of 2019. AJOVY was granted a Marketing Authorization in the European Union by the European Medicines Agency ("EMA") in a centralized process in April 2019. We commenced launching AJOVY in certain European markets in May 2019 and are moving forward with plans to launch in other European countries. In October 2019, we received approval from the EMA for AJOVY’s auto-injector submission in the European Union and we commenced launch in March 2020.

Europe Gross Profit

Gross profit from our Europe segment in the second quarter of 2020 was $548 million, a decrease of 19% compared to $674 million in the second quarter of 2019. This decrease was mainly due to lower revenues, partially offset by new generic product launches, as discussed above.

Gross profit margin for our Europe segment in the second quarter of 2020 decreased to 54.7%, compared to 56.9% in the second quarter of 2019. This decrease was mainly due to price decreases in certain specialty products.

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 second quarter of 2020 was $244 million, a decrease of 23%, compared to $316 million in the second quarter of 2019. This decrease was mainly due to lower revenues, partially offset by lower expenses.

International Markets Segment

Our International Markets segment includes all countries other than those in our North America and Europe segments. The key markets in this segment are Japan, Russia and Israel. On July 30, 2020, we entered into an agreement to sell the majority of the generic and operational assets of our business venture in Japan. We expect this transaction to close by early 2021.

Revenues from our International Markets segment in the second quarter of 2020 were $488 million, a decrease of $94 million, or 16%, compared to the second quarter of 2019. In local currency terms, revenues decreased 9% compared to the second quarter of 2019, mainly due to lower sales in Japan resulting from regulatory price reductions and generic competition to off-patented products and loss of revenues from the sale of certain assets in the Israeli market. Revenues in the second quarter of 2020 were also impacted by reduced demand for certain products resulting from the impact the COVID-19 pandemic had on purchasing patterns. The COVID-19 pandemic led to increased demand in the first quarter and a correlating decrease in demand in the second quarter. The revenues in the second quarter of 2020 included $16 million from a negative hedging impact, which are included in "Other" in the table below.

Revenues by Major Products and Activities

* The data presented for prior periods have been revised to reflect a revision in the presentation of net revenues and cost of sales in the consolidated financial statements. See note 1c to our consolidated financial statements for additional information.

Generic products revenues in our International Markets segment in the second quarter of 2020, which include OTC products, decreased by 13% to $426 million, compared to the second quarter of 2019. In local currency terms, revenues decreased by 7%, mainly due to lower sales in Japan resulting from regulatory price reductions and generic competition to off-patented products. Revenues in the second quarter of 2020 were also impacted by reduced demand for certain products resulting from the impact the COVID-19 pandemic had on purchasing patterns. The COVID-19 pandemic led to increased demand in the first quarter and a correlating decrease in demand in the second quarter.

COPAXONE revenues in our International Markets segment in the second quarter of 2020 decreased by 13% to $12 million, compared to $13 million in the second quarter of 2019. In local currency terms, revenues decreased by 2%.

In May 2020, AUSTEDO was approved in China for the treatment of chorea associated with Huntington disease and for the treatment of tardive dyskinesia.

International Markets Gross Profit

Gross profit from our International Markets segment in the second quarter of 2020 was $247 million, a decrease of 21% compared to $312 million in the second quarter of 2019.

Gross profit margin for our International Markets segment in the second quarter of 2020 decreased to 50.8%, compared to 53.7% in the second quarter of 2019. This decrease was mainly due to lower sales, as discussed above.

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 second quarter of 2020 was $97 million, a decrease of 29%, compared to $136 million in the second quarter of 2019. This decrease was mainly due to lower revenues and a negative hedging impact, partially offset by lower expenses.

Other Activities

We have other sources of revenue, primarily the sale of 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.

Our revenues from other activities in the second quarter of 2020 were $335 million, a decrease of 2% compared to the second quarter of 2019. In local currency terms, revenues decreased by 1%.

API sales to third parties in the second quarter of 2020 were $211 million, an increase of 4% in both U.S. dollar and local currency terms, compared to the second quarter of 2019.

Conference Call

Teva will host a conference call and live webcast along with a slide presentation on August 5, 2020 at 8:00 a.m. ET to discuss its second quarter of 2020 results and overall business environment. A question & answer session will follow.

A live webcast of the call will also be available on Teva’s website at: ir.tevapharm.com. Please log in at least 10 minutes prior to the conference call in order to download the required software.

On August 5, 2020 Perrigo Company plc (NYSE; TASE: PRGO), a leading provider of Quality, Affordable Self-Care Products, reported financial results for the second quarter ended June 27, 2020 (Press release, Perrigo Company, AUG 5, 2020, View Source [SID1234562868]).

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President and CEO Murray S. Kessler commented, "Strong second quarter and first half results in the face of COVID-19 pandemic uncertainty demonstrates just how far Perrigo has come over the past 2 years in its consumer self-care transformation and reflects the countless contributions from our dedicated employees worldwide. The Perrigo team met the challenge in the second quarter and first half of elevated consumer demand related to the COVID-19 surge, while remarkably continuing to make meaningful progress on our consumer self-care transformation."

Kessler continued, "While uncertainty related to the pandemic remains, we believe we now have sufficient line of sight to reaffirm 2020 adjusted diluted EPS guidance. We base this on the fact that our team has been able to keep 27 world-wide manufacturing facilities, most of which are running 24-hours a day, 7 days a week, without missing a single shift due to COVID-19. Demand on products within our portfolio deemed essential remains strong, non-essential product categories are slowly but surely recovering from the impact of reduced store traffic and patient visits, our e-Commerce business more than doubled, wholesale and retail inventories have been mostly restored, and we believe we have a good estimate of the incremental COVID related costs on our operations."

Kessler concluded, "Even though it will likely be a while before the COVID-19 pandemic is behind us, Perrigo’s transformed business model, now based on Self-Care and Value combined with its passionate workforce, have the Company well-positioned for sustainable and profitable long-term growth."

Second Quarter Financial Highlights

Consolidated second quarter net sales were $1.2 billion, an increase of 6.1% compared to the prior year quarter. Excluding the impact from divested businesses(2) and currency, net sales increased 10.0%.
Worldwide Consumer second quarter net sales grew 4.3% compared to the prior year quarter. Excluding the impact from divested businesses and currency, Worldwide Consumer net sales were 9.2% higher year-over-year.
Consumer Self-Care Americas ("CSCA") achieved second quarter net sales of $628 million, up 7.8% versus the prior year quarter on a reported basis and 12.9% higher, excluding the impact from divested businesses and currency; Consumer Self-Care International ("CSCI") second quarter net sales decreased 2.0% versus the prior year quarter and 2.9% higher, excluding the impact from divested businesses and currency.
Reported diluted EPS for the second quarter of 2020 was $0.44 per diluted share as compared to EPS of $0.07 in the prior year quarter.
Adjusted diluted EPS for the second quarter of 2020 increased 19.8% to $1.03 as compared to $0.86 per diluted share in the prior year quarter.
Cash flow from operations as a percentage to adjusted net income was 206%.
Provided assurance of liquidity by completing a $750 million bond offering to refinance bonds previously due in 2021.
First Half 2020 Financial Highlights

Consolidated first half net sales were $2.6 billion, up 10.2% compared to the prior year. Excluding the impact of currency and divested businesses, net sales increased 13.8%, with organic net sales growth of 6.8%.
Worldwide Consumer net sales increased 10.3% compared to the prior year. Excluding the impact of currency and divested businesses, Worldwide Consumer net sales were 15.0% higher year-over-year.
CSCA achieved first half net sales of $1.3 billion, a 14.1% increase versus the prior year, or 18.8% higher excluding the impact of currency and divested businesses, highlighted by 8.3% organic growth.
CSCI first half net sales increased 3.8% versus the prior year, or 8.7% higher excluding divested businesses and the impact of currency, with organic growth of 2.6%.
Cash flow from operations as a percentage to adjusted net income was 155%.
See attached Appendix for reconciliation of adjusted (non-GAAP) to reported (GAAP) financial measures.

(1) Organic net sales growth excluded oral self-care acquisitions, divested businesses and the impact of currency.

(2) Divested businesses excluded 1) $20 million and $22 million from the divested animal health business in the prior year first quarter and second quarter periods, respectively, and was previously included in the Consumer Self-Care Americas segment, and 2) $4 million and $3 million from the divested Canoderm prescription product in the prior year first quarter and second quarter periods, respectively, which was previously included in the Consumer Self-Care International segment.

Refer to Tables I – IV at the end of this press release for a reconciliation of non-GAAP adjustments to the current year and prior year periods and additional non-GAAP information. The Company’s reported results are included in the attached Condensed Consolidated Statements of Operations, Balance Sheets and Statements of Cash Flows.

Second Quarter 2020 Consolidated Results Versus Second Quarter 2019

Consolidated net sales for the second quarter of calendar year 2020 increased 6.1%, or $70.1 million, to $1.2 billion. Net sales excluding divested businesses and unfavorable currency movements increased 10.0%, with organic net sales growth of 2.6%.

The increase in net sales was driven by 1) $82 million from the oral self-care portfolio acquisitions, 2) a $31 million net increase from the Prescription Pharmaceuticals ("RX") segment as $73 million in net sales generated by the launch of generic albuterol sulfate were partially offset by lower U.S. prescription dermatology volumes, 3) increased U.S. OTC sales due to continued strong fundamentals and rapid growth from channel shifting into e-commerce, both accelerated by a surge in consumer demand related to COVID-19, and 4) a less than expected consumer pantry de-load in U.S. OTC. These gains were partially offset by 1) lower demand in a number of CSCI categories due to travel bans, school closings and country lock-downs resulting from COVID-19, and 2) $26 million from divested businesses, $16 million from unfavorable currency movements and discontinued products of $11 million.

Reported net income was $61 million, or $0.44 per diluted share, versus net income of $9 million, or $0.07 per diluted share in the prior year period. Excluding certain charges as outlined in Table I, second quarter 2020 adjusted net income was $141 million, or $1.03 per diluted share, versus $117 million, or $0.86 per diluted share, for the same period last year. The 19.8% growth in adjusted diluted EPS was due primarily to the sales drivers mentioned above, reduced and delayed advertising and promotion expenditures compared to a year ago to align with consumer behavior surrounding COVID-19, and a decrease of approximately 640 basis points, or $0.08 per adjusted diluted share, in the adjusted effective tax rate compared to the prior year. This decrease was due primarily to a positive impact from the CARES Act, which was enacted in the first quarter 2020.

Worldwide Consumer Self-Care Second Quarter 2020 Results Versus Second Quarter 2019

Worldwide Consumer is comprised of the CSCA segment, CSCI segment and Corporate.

Worldwide Consumer Self-Care second quarter net sales increased 4.3% to $949 million. Net sales excluding $26 million from divested businesses and $17 million from the impact of currency increased 9.2%, while organic net sales were flat.

Second quarter reported gross profit margin was 36.8%. Adjusted gross profit margin of 39.3%, was 190 basis points lower year-over-year due to product mix, prioritization of products most needed by society surrounding COVID-19 and the acquisition of the lower gross margin oral self-care portfolio. These were partially offset by favorable operational efficiencies versus last year.

Reported operating margin was 7.3%. Adjusted operating margin increased 60 basis points year-over-year to 13.9% due primarily to operating leverage on gross margin flow-through and purposefully reduced and delayed advertising and promotion expenditures in response to consumer behavior surrounding COVID-19.

CSCA Second Quarter 2020 Results Versus Second Quarter 2019

Consumer Self-Care Americas achieved second quarter net sales of $628 million, an increase of 7.8%, and included $63 million in net sales attributable to the oral self-care portfolio. Organic net sales were up 1.6%.

OTC net sales growth was driven by 1) continued robust growth in e-Commerce, more than offsetting category declines due to lower foot traffic at brick and mortar customers, 2) increased consumer COVID-19 related demand, and 3) increased distribution of Perrigo products to retail customers. All of these drivers, which benefited from $9 million in new products, led to a share gain of 60 basis points in the product categories where Perrigo competes. These growth drivers were partially offset by 1) lower net sales on products Perrigo de-prioritized in order to keep up with demand for products most needed by society during COVID-19, 2) $22 million from the divested animal health business, and 3) normal pricing pressure on specific products.

In Nutrition, an increase in net sales was led by the December 2019 store brand infant formula launch at a major retailer, greater shipments in the infant formula contract manufacturing business, and growth in customer e-Commerce activities.

Second quarter reported gross margin was 31.8%. Adjusted gross margin of 32.9% was 110 basis points lower than the prior year due to the impact of normal pricing pressure, incremental expenses related to COVID-19 and the addition of the oral self-care portfolio, partially offset by favorable operational efficiencies.

Reported operating margin was 16.9%. Adjusted operating margin decreased 50 basis points to 19.8% as operating leverage on gross margin flow-through and delayed expenditures compared to a year ago in response to consumer behavior surrounding COVID-19 were more than offset by the addition of the oral self-care portfolio.

CSCI Second Quarter 2020 Results Versus Second Quarter 2019

Consumer Self-Care International net sales decreased 2.0% to $321 million. Excluding unfavorable currency movements of $12 million and $3 million from divested businesses, net sales were higher by 2.9%. Organic net sales were lower by 3.0%.

Net sales growth, excluding unfavorable currency movements and divested businesses, was due primarily to new product sales of $23 million, driven by XLS-Medical Forte 5 and products in the skincare and personal hygiene category, and $19 million in additional net sales from Ranir. These positive drivers were partially offset by 1) lower category sales due to COVID-19 travel bans, school closings and country lock-downs, which impacted consumer demand for certain CSCI products, and 2) some consumer pantry de-stocking of COVID-19 essential products after a surge in demand in the first quarter of 2020.

Reported gross margin was 46.5%. Adjusted gross margin of 51.7% declined 180 basis points as favorable operational efficiencies versus last year were more than offset by less favorable product mix and the addition of the oral self-care portfolio, which has a relatively lower gross margin than the legacy CSCI portfolio.

Reported operating margin was 3.3% and adjusted operating margin improved 30 basis points year over year to 15.6%. Lower gross profit flow-through was more than offset by purposefully delayed advertising and promotion expenditures in response to consumer behavior surrounding COVID-19.

RX Second Quarter 2020 Results Versus Second Quarter 2019

RX net sales increased 12.9% to $270 million due primarily to new product sales of $81 million led by the generic albuterol sulfate inhalation aerosol. This was partially offset by fewer patient visits to dermatologists compared to last year, leading to lower new and total U.S. prescription dermatology volumes(3) of 16% and 4%, respectively, which impacted Rx. Discontinued low margin products were $9 million.

Reported gross margin was 31.7% and adjusted gross margin was 39.5%. The 220 basis point decline in adjusted gross margin was due primarily to less favorable product mix.

Reported operating margin was 17.6%. Adjusted operating margin was 25.3%, down 210 basis points due primarily to gross profit flow-through.

(3) Source: IQVIA: COVID-19 Market Impact – w/e July 3, 2020; National Prescription Audit (NPA), National Prescription Audit: New to Brand (NPA NTB); 2019-2020.

Fiscal 2020 Outlook

The Company reaffirms its fiscal 2020 outlook with expected net sales growth of 6% to 7% highlighted by organic net sales growth of approximately 3%. Adjusted diluted EPS is expected to be in the range of $3.95 to $4.15. The Company reaffirms its adjusted EPS guidance despite the addition of $0.12 – $0.15 per adjusted diluted share of incremental COVID-19 related costs and a $0.06 per share impact from the divested Rosemont Rx business, which the Company sold on June 19, 2020.

The Company cannot reconcile its expected adjusted diluted earnings per share to diluted earnings per share under "Fiscal 2020 Outlook" without unreasonable effort because certain items that impact net income and other reconciling metrics are out of the Company’s control and/or cannot be reasonably predicted at this time.

On August 5, 2020 Constellation Pharmaceuticals, Inc. (Nasdaq: CNST), a clinical-stage biopharmaceutical company using its expertise in epigenetics to discover and develop novel therapeutics, reported its second-quarter 2020 financial results. Constellation also announced its plans for a Phase 3 clinical trial of the BET inhibitor CPI-0610 following scientific advice and regulatory meetings with the U.S. Food and Drug Administration (FDA) (Press release, Constellation Pharmaceuticals, AUG 5, 2020, View Source [SID1234562867]).

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The Company is preparing to initiate a global, randomized, double-blind, pivotal Phase 3 clinical trial for CPI-0610, to be called MANIFEST-2, in the second half of 2020. MANIFEST-2 is designed to enroll approximately 310 JAK-inhibitor-naïve patients with advanced primary myelofibrosis (MF), post-essential-thrombocythemia MF, or post-polycythemia-vera MF. Patients will be randomized 1:1 to CPI-0610 plus ruxolitinib or placebo plus ruxolitinib. The primary endpoint will be spleen volume reduction at 24 weeks, and the key secondary endpoint will be Total Symptom Score measured by Myelofibrosis Symptom Assessment Form version 4.0 at 24 weeks.

The Company plans to continue to explore other regulatory pathways for bringing CPI-0610 to MF patients.

"Having seen signals of clinical benefit for CPI-0610 in patients with MF as well as preliminary evidence of disease modification, we are pleased that we have aligned with the FDA on the design of the pivotal trial, MANIFEST-2," said Jigar Raythatha, president and chief executive officer of Constellation Pharmaceuticals. "We look forward to continuing the constructive dialogue we have had with the FDA and are committed to bringing CPI-0610 to patients in need as soon as possible."

Program Updates

CPI-0610

On June 12, 2020, Constellation presented an update of MANIFEST data as of an April 17, 2020, data cutoff in three posters at the European Hematology Association (EHA) (Free EHA Whitepaper) meeting, which are shown on Constellation’s website. Constellation plans to provide its next MANIFEST update, including both clinical and translational data, by the end of 2020.

To expand the use of CPI-0610 into indications for other hematologic malignancies, the Company announced today that it intends to explore the potential for CPI-0610 in approximately 20 patients with high-risk essential thrombocythemia (ET) who are intolerant of, or refractory to, hydroxyurea by initiating a new arm of MANIFEST in the second half of 2020.
CPI-0209

We are currently conducting the Phase 1 dose escalation portion of a Phase 1/2 clinical trial of the EZH2 inhibitor CPI-0209 in solid tumors, which is proceeding as planned. After determining the recommended Phase 2 dose for the monotherapy, which we expect to accomplish in 2020, we intend to pursue monotherapy expansion arms in selected solid tumor indications with a biomarker enrichment strategy. We will also determine the recommended Phase 2 dose in combination therapy and then pursue expansion arms for this combination therapy.
Leadership Updates

During the second quarter, Constellation strengthened its board of directors and senior management with two appointments:

On April 6, Dr. Richard Levy was appointed to the board of directors. Dr. Levy has nearly 30 years of experience in the pharmaceutical and biotechnology sectors, where he held senior clinical development positions at Incyte, Celgene, DuPont Pharmaceuticals, and Sandoz / Novartis. He served as Executive Vice President and Chief Drug Development and Medical Officer at Incyte, where from 2003 to 2016 he was responsible for the expansion of the clinical development portfolio in oncology and inflammation.

On June 22, Dr. Jeffrey Humphrey was appointed Chief Medical Officer. Dr. Humphrey is a medical oncologist with over 20 years of experience in drug development. Prior to joining Constellation, he was Chief Development Officer at Kyowa Kirin Co., where he oversaw development of the company’s global portfolio of experimental therapeutics for Western markets. Dr. Humphrey began his work in industry clinical research at Bristol-Myers Squibb and subsequently served in management positions for early and late drug development and medical affairs at Pfizer, Bayer, and Bristol-Myers Squibb.
Milestones

The Company anticipates achieving the following milestones during 2020:

CPI-0610 – Initiate Phase 3 clinical trial in the second half of 2020

CPI-0610 – Provide additional MANIFEST program update by end of year

CPI-0209 – Provide program update, including recommended Phase 2 dose, by end of year

Second Quarter 2020 Financial Results

Cash, cash equivalents, and marketable securities as of June 30, 2020, were $520.5 million, an increase of 35.6% compared to December 31, 2019, primarily due to gross proceeds of $192.5 million from the public offering in June 2020, offset by operating expenses.
Research and development (R&D) expenses increased 41.8% year over year to $22.6 million in the second quarter of 2020, mainly due to increased clinical trial expenses.
General and administrative (G&A) expenses grew 42.4% year over year to $7.0 million in the second quarter of 2020, primarily due to building out the organization of the company.
The net loss attributed to common shareholders increased 43.3% year over year to $29.8 million for the second quarter of 2020, mainly due to increased R&D and G&A expenses. The net loss per share attributable to common shareholders decreased 12.5% to $0.70 per share due to an increase in shares outstanding as a result of the private placement in October 2019 and the public offerings in December 2019 and June 2020, offset in part by the increased net loss.
First Half 2020 Financial Results

Research and development (R&D) expenses increased 35.0% year over year to $42.7 million in the first half of 2020, mainly due to increased clinical trial expenses.
General and administrative (G&A) expenses grew 38.1% year over year to $12.9 million in the first half of 2020, primarily due to building out the organization of the company.
The net loss attributed to common shareholders increased 37.3% year over year to $55.2 million for the first half of 2020, mainly due to increased R&D and G&A expenses. The net loss per share attributable to common shareholders decreased 16.0% to $1.31 per share due to an increase in shares outstanding as a result of the private placement in October 2019 and the public offerings in December 2019 and June 2020, offset in part by the increased net loss.
Financial Guidance

Constellation expects that its current cash, cash equivalents, and marketable securities will fund operations into mid-2023.

Conference Call

Constellation will host a conference call at 8:00 AM EDT on August 5, 2020, to discuss its clinical programs and financial results. The event will be webcast live and can be accessed on the Investor Relations section of Constellation’s website at View Source To participate in the live question-and-answer session, please dial (877) 473-2077 (domestic) or (661) 378-9662 (international) and refer to conference ID 5692388.

On August 5, 2020 Bicycle Therapeutics plc (NASDAQ:BCYC), a biotechnology company pioneering a new and differentiated class of therapeutics based on its proprietary bicyclic peptide (Bicycles) technology, reported financial results for the second quarter ended June 30, 2020 and discussed recent corporate updates (Press release, Bicycle Therapeutics, AUG 5, 2020, View Source [SID1234562866]).

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"Despite the challenges presented by the ongoing COVID-19 pandemic, we have made significant progress towards achieving our 2020 objectives," said Kevin Lee, Ph.D., Chief Executive Officer of Bicycle Therapeutics. "In the coming months, we look forward to initiating the Phase IIa trial of BT1718 and the Phase I/II trial of BT8009. We are also continuing to advance BT5528 in the dose escalation portion of a Phase I/II trial, and we will be deploying our proprietary EphA2 immunohistochemistry, or IHC, assay to select and enroll EphA2-positive patients in the Phase I trial. We remain confident in our ability to achieve our near-term milestones, which should help enable our vision of pioneering the development of novel therapies for patients suffering from cancer and other serious diseases."

Second Quarter 2020 and Recent Highlights

Appointed Sir Keith Peters FRS as Chairman of the Company’s Scientific Advisory Board (SAB). Sir Keith Peters is a renowned expert in the field of clinical immunology and was appointed Chairman of Bicycle’s SAB in June 2020. He has worked closely with the Company’s leadership team as a member of the SAB since its inception in 2018.
Presented New Translational Data for BT5528 and Preclinical Data for Tumor-Targeted Immune Cell Agonists (TICAs) at the American Association for Cancer Research (AACR) (Free AACR Whitepaper) Virtual Annual Meeting II. Translational data presented at AACR (Free AACR Whitepaper) describe the development of Bicycle’s proprietary IHC assay for use in the Phase I/II trial of BT5528, a second-generation BTC that targets EphA2. This assay will be used to support patient selection and assess EphA2 expression levels in tumor samples collected in the ongoing Phase I/II trial. New preclinical data presented for BT7480, a TICA targeting Nectin-4 and agonizing CD137, demonstrate that anti-tumor responses in a syngeneic mouse model can be achieved with an intermittent dosing regimen, indicating that continuous target coverage may be unnecessary for efficacy.
Presented Trials in Progress Poster for BT5528 at the American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) 2020 Virtual Scientific Program. The poster describes the design of the ongoing Phase I/II trial of BT5528 in advanced solid tumors associated with EphA2 expression.
Announced Publication of BT5528 Mechanism of Action in AACR (Free AACR Whitepaper) Journal Molecular Cancer Therapeutics. The manuscript, titled "MMAE delivery using the Bicycle toxin conjugate BT5528," describes the physiochemical properties and preclinical profile of BT5528 that have enabled BT5528 to demonstrate a more favorable safety and efficacy profile than that of antibody drug conjugates (ADCs) with the same tumor antigen target and similar cytotoxic payload.
Upcoming Investor Conferences

Bicycle will be participating in the following virtual investor conferences in the third quarter of 2020:

Canaccord Genuity 40th Annual Growth Conference, August 11-13, 2020
Citi 15th Annual BioPharma Conference, September 9-10, 2020
Goldman Sachs 10th Annual Biotech Symposium, September 11, 2020
H.C. Wainwright 22nd Annual Global Investment Conference, September 13-15, 2020
Cantor Global Healthcare Conference, September 15-17, 2020
Oppenheimer Fall Healthcare Life Sciences & MedTech Summit, September 21-23, 2020
Financial Results

Cash and cash equivalents were $96.9 million as of June 30, 2020, compared to $92.1 million as of December 31, 2019. Cash at June 30, 2020 does not include $17.6 million in net proceeds from the Company’s "at the market" (ATM) offering program or $6.7 million UK research and development tax credit reimbursement, both of which were received in July 2020.
Research and development expenses totaled $8.0 million for the three months ended June 30, 2020, compared to $6.5 million for the three months ended June 30, 2019. The increase of $1.4 million is primarily due to increased clinical and TICA program development expenses, partially offset by lower development expenses of other programs due to timing, and an increase in personnel related costs, including $0.2 million of incremental non-cash share-based compensation expense.
General and administrative expenses were $6.2 million for the three months ended June 30, 2020, compared to $3.0 million for the three months ended June 30, 2019. The increase of $3.2 million is primarily due to an increase in professional fees and costs related to operations as a public company, an unfavorable effect of foreign exchange rates, and an increase in personnel related costs, including $0.2 million of incremental non-cash share-based compensation expense.
Net loss was $12.1 million, or $(0.67) basic and diluted net loss per share, for the three months ended June 30, 2020, compared to net loss of $10.2 million, or $(1.40) basic and diluted net loss per share, for the three months ended June 30, 2019.

On August 5, 2020 Versant Ventures reported the debut of Matterhorn Biosciences AG, a biotechnology company developing T cell receptor therapies based on the recent discovery of MR1T cells that recognize and kill a wide range of tumors of various tissue origins (Press release, Versant Ventures, AUG 5, 2020, View Source [SID1234562864]). Versant has made a $30 million commitment to the new company, which was founded by pioneers in the MR1 field at the University of Basel. It is the most recent company to be launched out of Versant’s Ridgeline Discovery Engine based in Basel, Switzerland.

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While existing T cell receptor (TCR) therapies only recognize peptides in certain cancer patients, MR1T cells universally recognize and target cancer-specific metabolites presented by the MR1 molecule expressed on malignant cells. This is due to broad expression of MR1 over a range of tumor types and its conservation across all patients. The foundational know-how in Matterhorn includes a 2017 patent that describes the role of these MR1-restricted T cells in cancer immunotherapy.

"Targeting MR1 is a fundamentally new approach to cancer cell therapy. By recognizing the distorted metabolism within cancer cells, these T cell therapies can attack a wide range of liquid and solid tumors without affecting healthy tissue," said Alex Mayweg, Ph.D., managing director at Versant and Matterhorn board member.

Pan-cancer-targeting universal T cell therapies

T cell therapies have transformed the cancer landscape due to their effective killing of cancer cells and their continued persistence within the patient’s body. Current cell therapies such as CAR-Ts have shown dramatic survival improvements in liquid cancers but have been limited in solid tumors due to the lack of cancer-specific targets against which to direct the T cells.

TCR therapies overcome some of these limitations by targeting cancer-specific peptides presented on the cell surface by human leukocyte antigen (HLA) molecules. However, HLAs are highly polymorphic and current TCR therapies need to be matched to the patient’s HLA, significantly limiting the eligible patient population.

MR1 (MHC class I-related molecule 1) is monomorphic and is therefore the same in all patients. Since MR1 binds small metabolite antigens that are highly specific to cancer cells and are shared across liquid and solid tumors, it creates the opportunity for pan-cancer-targeting, off-the-shelf T cell therapies.

Matterhorn leadership and operating plans

The company’s scientific founders include:

Gennaro De Libero, M.D., Professor of Immunology at the Department of Biomedicine at the University of Basel, Switzerland. His group focuses on adaptive and innate T cells specific for non-peptidic antigens. He is a worldwide leader in the field of MR1T cells. During his career he held appointments at the Basel Institute for Immunology and at the Singapore Agency for Science, Technology and Research (A*STAR).
Lucia Mori, Ph.D., Chief Scientific Officer of Matterhorn and a faculty member in the Department of Biomedicine and University Hospital of Basel since 1994. Over the past 34 years her work has focused on antigen recognition of TCRs and non-classical T cell immunity, with appointments at A*STAR in Singapore and F. Hoffmann-La Roche in Basel, Switzerland.
The Matterhorn founders pioneered work in the MR1 field over the past decade. They first proposed the role of MR1 in cancer immunosurveillance in 2016 and subsequently described the utility of MR1T cells as cancer therapies. The mechanism and specific metabolite antigens that give MR1T cells their broad anti-tumor activity spectrum have now been elucidated. These insights provided a practical starting point for drug discovery in the field.

"It is gratifying to see the work that started 15 years ago now being translated into new therapies," said Dr. De Libero. "I look forward to working closely with the Matterhorn team to bring these treatments to patients."

During Matterhorn’s formative phase, the team at the University of Basel will continue to work alongside scientists at Versant’s Ridgeline Discovery Engine to build a platform of MR1-binding metabolites and develop a broad portfolio of TCR therapies. Based on progress to date, Matterhorn expects to start IND-enabling work on its first development candidates during 2020. Phase 1 studies should commence by late 2021.