On May 2, 2017 Spectrum Pharmaceuticals, Inc. (NasdaqGS: SPPI), a biotechnology company with fully integrated commercial and drug development operations with a primary focus in Hematology and Oncology, reported results for the three-month period ended March 31, 2017 (Press release, Spectrum Pharmaceuticals, MAY 2, 2017, View Source [SID1234518788]).

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"We remain focused on our advanced stage pipeline and look forward to several important milestones in the near future," said Rajesh C. Shrotriya, MD, Chairman and Chief Executive Officer of Spectrum Pharmaceuticals. "Based on the preclinical results and clinical data from the first compassionate-use patient, treated at MD Anderson Cancer Center by Dr. John Heymach under a compassionate-use protocol approved by the FDA, enthusiasm is building in the scientific community about the potential of poziotinib in non-small cell lung cancer patients with exon 20 insertion mutations. There is immense need for effective therapies in this disease as the current progression free survival is under 2 months. In addition, I am delighted with the recent pace of enrollment of the ROLONTIS Phase 3 program. Since the beginning of this year, we have enrolled over 135 patients in the pivotal trial. We are looking forward to Phase 3 results and a BLA filing next year. With three advanced stage drugs being studied in multiple tumors, I believe Spectrum is poised for transformational growth."

Pipeline Update:

ROLONTIS (eflapegrastim), a novel long-acting GCSF: A pivotal Phase 3 study (ADVANCE) was initiated under an SPA from the FDA in 2016 to evaluate ROLONTIS in the management of chemotherapy-induced neutropenia. Based on the amended SPA, the size of the ADVANCE study was reduced to 400 from 580 evaluable patients. The ADVANCE study is now 75% enrolled and the Company expects to complete enrollment in the second half of this year. To strengthen the regulatory package in the U.S. and Europe, the Company has initiated the 218-patient RECOVER study, which is expected to include sites not only from the U.S., but also from Europe, Canada and South Korea. For the RECOVER Study, sites have been initiated and first patient enrollment is imminent. The Company continues to expect to file the BLA next year.
Poziotinib, a potential best-in-class, novel, pan-HER inhibitor: An investigator sponsored trial has been initiated at the University of Texas MD Anderson Cancer Center in non-small cell lung cancer patients with EGFR exon 20 insertion mutations. The study is expected to yield interim results before year end. Spectrum is also conducting a Phase 2 breast cancer study in the U.S., based on promising Phase 1 study efficacy data in breast cancer patients who had failed multiple HER2-directed therapies. Further, multiple Phase 2 studies are being conducted in South Korea by Hanmi Pharmaceuticals and National OncoVenture to study breast, lung, head-and-neck and gastric cancer indications.
QAPZOLA, a potent tumor-activated drug being investigated for low and intermediate risk non-muscle invasive bladder cancer: The Company received a new SPA from the FDA for a new Phase 3 study incorporating learnings from the previous studies, as well as recommendations from the FDA. Compared to the previous program, this new Phase 3 study will include fewer evaluable patients (n=425 versus 1,557 patients), use a higher dosage of QAPZOLA (8 mg versus 4 mg), and will evaluate time-to-recurrence as the primary endpoint. The Phase 3 trial is expected to start enrolling patients in the third quarter.
Three-Month Period Ended March 31, 2017 (All numbers are approximate)

GAAP Results

Total product sales were $25.8 million in the first quarter of 2017. Product sales in the first quarter included: FUSILEV (levoleucovorin) net sales of $2.6 million, FOLOTYN (pralatrexate injection) net sales of $9.3 million, ZEVALIN (ibritumomab tiuxetan) net sales of $2.8 million, MARQIBO (vinCRIStine sulfate LIPOSOME injection) net sales of $2.0 million, BELEODAQ (belinostat) for injection net sales of $2.9 million, and EVOMELA (melphalan) for injection net sales of $6.3 million.

Spectrum recorded net loss of $23.0 million, or $0.29 per basic and diluted share in the three-month period ended March 31, 2017, compared to net loss of $9.3 million, or $0.14 per basic and diluted share in the comparable period in 2016. Total research and development expenses were $14.7 million in the quarter, as compared to $15.5 million in the same period in 2016. Selling, general and administrative expenses were $18.6 million in the quarter, compared to $22.0 million in the same period in 2016.

The Company ended the quarter with Cash and Cash Equivalents of $137 million.

Non-GAAP Results

Spectrum recorded non-GAAP net loss of $11.4 million, or $0.14 per basic and diluted share in the three-month period ended March 31, 2017, compared to non-GAAP net income of $0.3 million, or $0.01 per basic share and less than $0.01 per diluted share in the comparable period in 2016. Non-GAAP research and development expenses were $14.3 million, as compared to $13.0 million in the same period of 2016. Non-GAAP selling, general and administrative expenses were $15.7 million, as compared to $16.7 million in the same period in 2016.

On May 2, 2017 Shire plc (Shire) (LSE: SHP, NASDAQ: SHPG) reported unaudited results for the three months ended March 31, 2017 (Press release, Shire, MAY 2, 2017, View Source [SID1234518784]).

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Flemming Ornskov, M.D., M.P.H., Shire Chief Executive Officer, commented:

"In the first quarter we delivered strong top-line growth with quarterly product sales of $3.4 billion. I am especially pleased to see that our sales growth came from across our broad portfolio, with genetic diseases growing 14%, our recently launched XIIDRA product achieving a 22% market share and the Baxalta business growing at 8% on a pro forma basis. We also improved our operational efficiency, and are ahead of plan on integrating Baxalta.

"Our priorities for the rest of 2017 remain unchanged: launching new products while driving commercial excellence, generating operational efficiencies, and advancing our pipeline of novel therapies. Additionally, we continue to prioritize paying down debt, and we are on track to achieve our full-year financial guidance.

"Looking ahead, I see tremendous opportunity for further growth as we continue to build on our position as the global leader in treating patients with rare diseases."

Financial Highlights Q1 2017(1) Growth(1) Non GAAP CER(1)(2)
Product sales $3,412 million +110% +110%
Product sales excluding legacy Baxalta $1,807 million +11% +11%
Total revenues $3,572 million +109% +110%

Operating income from continuing operations $497 million (9%)
Non GAAP operating income(2) $1,454 million +82% +82%

Net income margin(3)(4) 10% (15ppc)
Non GAAP EBITDA margin(2)(4) 44% (5ppc)

Net income $375 million (11%)
Non GAAP net income(2) $1,102 million +74%

Diluted earnings per ADS(5) $1.23 (42%)
Non GAAP diluted earnings per ADS(2)(5) $3.63 +14% +14%

Net cash provided by operating activities $459 million +18%
Non GAAP free cash flow (2) $247 million (27%)
(1) Results include Baxalta Inc. (Baxalta) (acquired on June 3, 2016) and Dyax Corp. (Dyax) (acquired on January 22, 2016), unless otherwise noted. Percentages compare to equivalent 2016 period.
(2) The Non GAAP financial measures included within this release are explained on pages 25 – 26, and are reconciled to the most directly comparable financial measures prepared in accordance with US GAAP on pages 19 – 21.
(3) US GAAP net income as a percentage of total revenues.
(4) Percentage point change (ppc).
(5) Diluted weighted average number of ordinary shares 911.8 million.

Financial Highlights

Delivered product sales growth of 110% with strong legacy Shire sales and the inclusion of legacy Baxalta sales.
Achieved combined pro forma sales growth of 9%; legacy Shire sales growth of 11% and legacy Baxalta pro forma sales growth of 8%.
Generated Non GAAP earnings per ADS of $3.63, reflecting strong business fundamentals and operational discipline.
Ahead of schedule with Baxalta integration and on-track to achieve at least $700 million in synergies by year 3.
Debt pay-down continued during the quarter and we remain on-track to achieve our year end debt target.
Product and Pipeline Highlights

Continued to drive expansion of the U.S. dry eye disease market, with XIIDRA increasing its market share to 22% as of March 2017.
Increased CINRYZE sales by 38% to $226 million, reflecting higher patient demand and improvements in available supply.
Increasing demand for our Immunology products, with pro forma sales growth for immunoglobulin therapies and bio therapeutics of 10% and 19% respectively.
Expect U.S. Food and Drug Administration (FDA) decision for SHP465 in Attention Deficit Hyperactivity Disorder (ADHD) on or before June 20, 2017.
Completed enrollment in SHP643 open-label extension study; topline pivotal study results expected in Q2 2017.
Initiated Phase 3 trials for SHP640 and SHP620 in patients with bacterial and adenoviral conjunctivitis and cytomegalovirus infection, respectively.

On May 2, 2017 6:45 Merck (NYSE:MRK), known as MSD outside the United States and Canada, reported financial results for the first quarter of 2017 (Press release, Merck & Co, MAY 2, 2017, View Source [SID1234518781]).

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"Merck delivered solid performance across our broad range of products that address major disease categories and the needs of global health," said Kenneth C. Frazier, chairman and chief executive officer, Merck. "The continued momentum of KEYTRUDA in oncology, along with the strength of the vaccine and other franchises and animal health, helped to drive revenue growth in the quarter."

Financial Summary


$ in millions, except EPS amounts First Quarter
2017 2016
Sales $9,434 $9,312
GAAP EPS 0.56 0.40
Non-GAAP EPS that excludes certain items1*
0.88 0.89
GAAP net income2
1,551 1,125
Non-GAAP net income that excludes certain items1,2* 2,437 2,492
*Refer to table on page 7.

Worldwide sales were $9.4 billion for the first quarter of 2017, an increase of 1 percent compared with the first quarter of 2016, including a 2 percent negative impact from foreign exchange.

GAAP (generally accepted accounting principles) earnings per share assuming dilution (EPS) were $0.56 for the first quarter of 2017. Non-GAAP EPS of $0.88 for the first quarter of 2017 excludes acquisition- and divestiture-related costs, restructuring costs and certain other items.

Pipeline Highlights

Merck continued to deliver significant progress in the development program for KEYTRUDA (pembrolizumab), an anti-PD-1 therapy, receiving key regulatory approvals or opinions and supplemental Biologics License Application (sBLA) acceptances.

The U.S. Food and Drug Administration (FDA) approved under its Accelerated Approval program KEYTRUDA for the treatment of patients with refractory classical Hodgkin lymphoma (cHL) or for patients with cHL who have relapsed after three or more prior lines of therapy.
The European Commission approved KEYTRUDA for the first-line treatment of non-small cell lung cancer (NSCLC) in adults whose tumors have high PD-L1 expression (tumor proportion score of 50 percent or more) with no EGFR or ALK positive tumor mutations.
The Committee for Medicinal Products for Human Use of the European Medicines Agency (EMA) adopted a positive opinion recommending approval of KEYTRUDA for the treatment of adult patients with relapsed or refractory cHL who have failed autologous stem cell transplant and brentuximab vedotin (BV), or who are transplant-ineligible and have failed BV.
The FDA accepted for review under its Accelerated Approval program the sBLA for KEYTRUDA in combination with pemetrexed and carboplatin for the treatment of patients with metastatic or advanced NSCLC regardless of PD-L1 expression. This is the first application for regulatory approval of KEYTRUDA in combination with another treatment. The FDA granted Priority Review with a PDUFA action date of May 10, 2017.
The FDA accepted and granted Priority Review for the sBLA for the treatment of patients with locally advanced or metastatic urothelial cancer, a type of bladder cancer, for first-line use in patients who are ineligible for cisplatin-containing therapy. The application for second-line use was also accepted for Priority Review. The PDUFA action date for both applications is June 14, 2017.
The company recently submitted additional data and analyses to the FDA for the pending sBLA application for the treatment of previously treated patients with advanced microsatellite instability-high cancer. The PDUFA action date for this Priority Review has been extended to June 9, 2017.
The FDA and EMA accepted for review three New Drug Applications (NDAs) in the company’s diabetes franchise for medicines containing ertugliflozin, an investigational SGLT2 inhibitor in development to help improve glycemic control in adults with type 2 diabetes as part of Merck’s collaboration with Pfizer Inc. The PDUFA action date from the FDA is in December 2017 for the three NDAs.

Merck presented phase 3 data across our late-stage pipeline in studies that met their primary endpoints.

At the Conference on Retroviruses and Opportunistic Infections in February, data were presented from the ongoing "DRIVE-FORWARD" phase 3 clinical trial evaluating the safety and efficacy of doravirine (MK-1439), an investigational non-nucleoside reverse transcriptase inhibitor for previously untreated adults with HIV-1 infection. The study met its primary efficacy endpoint, demonstrating the non-inferiority of once-daily doravirine to once-daily ritonavir-boosted darunavir.
Positive results from a study of letermovir, an investigational antiviral medicine for the prevention of cytomegalovirus infection in high-risk bone marrow transplant patients, were presented at the BMT Tandem Meetings in February.
Merck presented data from a trial for V212, an investigational inactivated varicella zoster virus vaccine for the prevention of herpes zoster or HZ, also known as shingles. The data demonstrated a reduction in the incidence of confirmed HZ cases by an estimated 64 percent in immunocompromised patients and also were presented at the BMT Tandem Meetings.
First-Quarter Revenue Performance

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


$ in millions First Quarter
Change
2017 2016 Change Ex-Exchange
Total Sales $9,434 $9,312 1% 3%
Pharmaceutical 8,185 8,104 1% 2%
JANUVIA / JANUMET 1,335 1,412 -5% -5%
KEYTRUDA 584 249 134% 137%
ZETIA / VYTORIN 575 889 -35% -35%
GARDASIL / GARDASIL 9 532 378 41% 41%
ZEPATIER 378 50 * *
PROQUAD, M-M-R II and VARIVAX
355 357 0% 1%
ISENTRESS 305 340 -10% -10%
REMICADE 229 349 -34% -31%
ROTATEQ 224 188 19% 19%
Animal Health 939 829 13% 14%
Other Revenues 310 379 -18% -5%
*Growth comparison not meaningful due to ongoing product launch.
Pharmaceutical Revenue

First-quarter pharmaceutical sales increased 1 percent to $8.2 billion, including a 1 percent negative impact from foreign exchange. The growth was driven by oncology, hepatitis C and vaccines, largely offset by the loss of market exclusivity for several products, as well as lower sales in the diabetes franchise.

Growth in oncology was due to higher sales of KEYTRUDA as the company continues to launch the product with new indications globally.

Growth in hepatitis C was driven by ZEPATIER (elbasvir and grazoprevir), a medicine for the treatment of chronic hepatitis C virus genotypes 1 or 4 infection, due to ongoing launches globally. Sales in the United States also reflect an approximately $40 million favorable adjustment to rebate accruals due to mix of business.

Growth in vaccines was primarily driven by higher sales of GARDASIL [Human Papillomavirus Quadrivalent (Types 6, 11, 16 and 18) Vaccine, Recombinant] and GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant), vaccines to prevent certain cancers and other diseases caused by HPV, in the United States reflecting the timing of public sector purchases, underlying demand and increased price, as well as higher sales of PNEUMOVAX 23 (pneumococcal vaccine polyvalent) largely driven by demand in the United States. Growth in vaccines also reflects incremental sales of approximately $65 million, of which approximately $50 million relates to GARDASIL and GARDASIL 9, due to Merck now recording vaccine sales in the 19 European countries previously part of the Sanofi Pasteur MSD vaccines joint venture, which was terminated on Dec. 31, 2016.

Pharmaceutical sales reflect a decrease in the diabetes franchise of JANUVIA (sitagliptin) and JANUMET (sitagliptin and metformin HCl), medicines that help lower blood sugar in adults with type 2 diabetes, primarily due to the timing of customer purchases in the United States as anticipated for the quarter.

Sales growth also was offset by the loss of U.S. market exclusivity in 2016 for ZETIA (ezetimibe), a medicine for lowering LDL cholesterol; CUBICIN (daptomycin for injection), an I.V. antibiotic; and NASONEX (mometasone furoate monohydrate), an inhaled nasal corticosteroid for the treatment of nasal allergy symptoms; as well as by the ongoing impact of biosimilar competition in the company’s marketing territories in Europe for REMICADE (infliximab), a treatment for inflammatory diseases. In the aggregate, sales of these products declined $686 million during the first quarter of 2017 compared to the first quarter of 2016.

Animal Health Revenue

Animal Health sales totaled $939 million for the first quarter of 2017, an increase of 13 percent compared with the first quarter of 2016, including a 1 percent negative impact from foreign exchange. Growth was primarily due to sales increases in companion animal products, driven by the BRAVECTO (fluralaner) line of products that kill fleas and ticks in dogs and cats for up to 12 weeks, as well as in ruminants, poultry and swine products. In March, Animal Health completed the acquisition of Vallée S.A., a leading privately held producer of animal health products in Brazil.

First-Quarter Expense, EPS and Related Information

The table below presents selected expense information.


$ in millions
Acquisition- and
Divestiture- Restructuring Certain Other
First-Quarter 2017 GAAP
Related Costs 3
Costs Items
Non-GAAP 1
Materials and production $3,015 $855 $63 $– $2,097
Marketing and administrative 2,411 20 1 – 2,390
Research and development 1,796 11 – – 1,785
Restructuring costs 151 – 151 – –
Other (income) expense, net 58 (3) – (9) 70

First-Quarter 2016
Materials and production $3,572 $1,386 $47 $– $2,139
Marketing and administrative 2,318 2 3 – 2,313
Research and development 1,659 35 55 – 1,569
Restructuring costs 91 – 91 – –
Other (income) expense, net 48 – – – 48
GAAP Expense, EPS and Related Information

On a GAAP basis, the gross margin was 68.0 percent for the first quarter of 2017 compared to 61.6 percent for the first quarter of 2016. The increase in gross margin for the first quarter of 2017 was primarily driven by a lower net impact from acquisition- and divestiture-related costs and restructuring costs which reduced gross margin by 9.8 percentage points in the first quarter of 2017 as compared with 15.4 percentage points in the first quarter of 2016. The increase in gross margin also reflects the favorable effects of foreign exchange and lower inventory write-offs.

Marketing and administrative expenses were $2.4 billion in the first quarter of 2017, a 4 percent increase compared to the first quarter of 2016. The increase primarily reflects higher health care reform fee expenses, administrative costs, and promotion and direct selling expenses.

Research and development (R&D) expenses were $1.8 billion in the first quarter of 2017, an 8 percent increase compared to the first quarter of 2016. The increase reflects higher clinical development spending, partially offset by lower restructuring costs.

GAAP EPS was $0.56 for the first quarter of 2017 compared with $0.40 for the first quarter of 2016.

Non-GAAP Expense, EPS and Related Information

The non-GAAP gross margin was 77.8 percent for the first quarter of 2017 compared to 77.0 percent for the first quarter of 2016. The increase in non-GAAP gross margin was largely driven by the favorable effects of foreign exchange and lower inventory write-offs.

Non-GAAP marketing and administrative expenses were $2.4 billion in the first quarter of 2017, an increase of 3 percent compared to the first quarter of 2016. The increase was driven primarily by higher health care reform fee expenses, administrative costs, and promotion and direct selling expenses.

Non-GAAP R&D expenses were $1.8 billion in the first quarter of 2017, a 14 percent increase compared to the first quarter of 2016. The increase primarily reflects higher clinical development spending.

Non-GAAP EPS was $0.88 for the first quarter of 2017 compared with $0.89 for the first quarter of 2016.

A reconciliation of GAAP to non-GAAP net income and EPS is provided in the table that follows.


$ in millions, except EPS amounts First Quarter
2017 2016
EPS
GAAP EPS $0.56 $0.40
Difference4
0.32 0.49
Non-GAAP EPS that excludes items listed below1 $0.88 $0.89

Net Income
GAAP net income2 $1,551 $1,125
Difference 886 1,367
Non-GAAP net income that excludes items listed below1,2 $2,437 $2,492

Decrease (Increase) in Net Income Due to Excluded Items:
Acquisition- and divestiture-related costs3 $883 $1,423
Restructuring costs 215 196
Other (9) –
Net decrease (increase) in income before taxes 1,089 1,619
Estimated income tax (benefit) expense (203) (252)
Decrease (increase) in net income $886 $1,367

Financial Outlook

Merck has narrowed and raised its full-year 2017 GAAP EPS range to be between $2.51 and $2.63. Merck has narrowed and raised its full-year 2017 non-GAAP EPS range to be between $3.76 and $3.88, including an approximately 1.5 percent negative impact from foreign exchange at mid-April 2017 exchange rates. The non-GAAP range excludes acquisition- and divestiture-related costs, costs related to restructuring programs and certain other items.

Merck has narrowed and raised its full-year 2017 revenue range to be between $39.1 billion and $40.3 billion, including an approximately 1.5 percent negative impact from foreign exchange at mid-April 2017 exchange rates.

The following table summarizes the company’s 2017 financial guidance.


GAAP Non-GAAP 1

Revenue $39.1 to $40.3 billion $39.1 to $40.3 billion**
Operating expenses Lower than 2016 Higher than 2016 by a low-single digit rate
Effective tax rate 22.0% to 23.0% 21.0% to 22.0%
EPS $2.51 to $2.63 $3.76 to $3.88
**The company does not have any non-GAAP adjustments to revenue.

A reconciliation of anticipated 2017 GAAP EPS to non-GAAP EPS and the items excluded from non-GAAP EPS are provided in the table below.


$ in millions, except EPS amounts

Full-Year 2017

GAAP EPS $2.51 to $2.63
Difference4 1.25
Non-GAAP EPS that excludes items listed below1 $3.76 to $3.88

Acquisition- and divestiture-related costs $3,600
Restructuring costs 600
Net decrease (increase) in income before taxes 4,200
Estimated income tax (benefit) expense (750)
Decrease (increase) in net income $3,450

The expected full-year 2017 GAAP effective tax rate of 22.0 to 23.0 percent reflects an unfavorable impact of approximately 1 percentage point from the above items.

Total Employees

As of March 31, 2017, Merck had approximately 69,000 employees worldwide.

On May 2, 2017 Corvus Pharmaceuticals, Inc. (NASDAQ:CRVS), a clinical-stage biopharmaceutical company focused on the development and commercialization of novel immuno-oncology therapies, reported that it has expanded its clinical collaboration with Genentech, a member of the Roche Group (Press release, Corvus Pharmaceuticals, MAY 2, 2017, View Source [SID1234518780]). Under the new agreement, CPI-444 administered in combination with atezolizumab (Tecentriq) will be evaluated in a Phase 1b/2 clinical study as second-line therapy in patients with non-small cell lung cancer (NSCLC) who are resistant/refractory to prior therapy with an anti-PD(L)-1 antibody. The study will be part of MORPHEUS, Genentech’s novel cancer immunotherapy platform established to develop immunotherapy combination therapies more rapidly and efficiently. It is anticipated that this randomized, controlled study will enroll up to 65 patients in the treatment arm.

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CPI-444, Corvus’ lead product, is a selective and potent inhibitor of the adenosine A2A receptor. Atezolizumab, developed by Genentech, is a monoclonal antibody designed to target and bind to a protein called PD-L1 (programmed death ligand-1).

"NSCLC patients who are resistant or refractory to prior treatment with anti-PD(L)-1 antibodies have few treatment options and we are very pleased that Genentech will include CPI-444 in MORPHEUS for this difficult-to-treat patient population," said Richard A. Miller, M.D., an oncologist and co-founder, president and chief executive officer of Corvus. "CPI-444 has demonstrated promising clinical activity and good tolerability, both as a single agent and in combination with atezolizumab, including in patients with PD-L1 negative tumors. In addition to the inclusion of CPI-444 in MORPHEUS, these encouraging results have also allowed us to expand the size of four cohorts, including for NSCLC patients, in our ongoing Phase 1/1b trial."

Under the terms of the collaboration agreement, Genentech will manage study operations for the Phase 1b/2 trial, which is expected to begin enrolling patients in the second half of 2017. Financial terms were not disclosed and Corvus will retain global development and commercialization rights to CPI-444. The original clinical trial collaboration agreement between Corvus and Genentech, announced in October 2015, was for the multicenter Phase 1/1b trial, which is ongoing and continuing to examine the safety and clinical activity of CPI-444 as a single agent and in combination with atezolizumab in patients with multiple types of advanced solid tumors who previously failed standard therapies, including those resistant or refractory to prior treatment with anti-PD(L)-1 antibodies.

On May 2, 2017 Pfizer Inc. (NYSE:PFE) reported financial results for first-quarter 2017 and reaffirmed its 2017 financial guidance (Press release, Pfizer, MAY 2, 2017, View Source [SID1234518775]).

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On June 24, 2016, Pfizer acquired Anacor Pharmaceuticals, Inc. (Anacor). Therefore, financial results for first-quarter 2017 reflect three months of legacy Anacor operations, which were immaterial.

On September 28, 2016, Pfizer acquired Medivation, Inc. (Medivation). Therefore, financial results for first-quarter 2017 reflect three months of legacy Medivation operations.

On February 3, 2017, Pfizer completed the sale of its global infusion therapy net assets, Hospira Infusion Systems (HIS). Therefore, financial results for first-quarter 2017 reflect approximately one month of legacy HIS domestic operations and approximately two months of legacy HIS international operations, while financial results for first-quarter 2016 reflect three months of legacy HIS global operations.(3)

Some amounts in this press release may not add due to rounding. All percentages have been calculated using unrounded amounts. References to operational variances pertain to period-over-period growth rates that exclude the impact of foreign exchange.(4) Results for the first quarter of 2017 and 2016 are summarized below.

OVERALL RESULTS

($ in millions, except
per share amounts)
First-Quarter
2017 2016 Change
Revenues
$ 12,779 $ 13,005 (2%)
Reported Net Income(1)
3,121 3,038 3%
Reported Diluted EPS(1)
0.51 0.49 6%
Adjusted Income(2)
4,192 4,177 —
Adjusted Diluted EPS(2)
0.69 0.67 3%

REVENUES

($ in millions)
First-Quarter
2017 2016 % Change
Total Oper.
Innovative Health
7,415 7,033 5% 6%
Essential Health
5,364 5,972 (10%) (9%)
Total Company $ 12,779 $ 13,005 (2%) (1%)

Excluding HIS revenues from all periods:
Total Company
$ 12,682 $ 12,702 — 1%
Essential Health 5,267 5,668 (7%) (6%)

2017 FINANCIAL GUIDANCE(5)

Pfizer’s reaffirmed 2017 financial guidance is presented below:

Revenues $52.0 to $54.0 billion
Adjusted Cost of Sales(2) as a Percentage of Revenues 20.0% to 21.0%
Adjusted SI&A Expenses(2) $13.7 to $14.7 billion
Adjusted R&D Expenses(2) $7.5 to $8.0 billion
Adjusted Other (Income)/Deductions(2) Approximately $100 million of deductions
Effective Tax Rate on Adjusted Income(2) Approximately 23.0%
Adjusted Diluted EPS(2) $2.50 to $2.60

CAPITAL ALLOCATION

During first-quarter 2017, Pfizer returned $6.9 billion directly to shareholders, through a combination of:
a $1.9 billion dividend payment, or $0.32 per share of common stock; and
a $5.0 billion accelerated share repurchase agreement executed in February 2017.
As of May 2, 2017, Pfizer’s remaining share repurchase authorization was approximately $6.4 billion.
EXECUTIVE COMMENTARY

Ian Read, Chairman and Chief Executive Officer, stated, “I was pleased with our first-quarter 2017 financial performance, which was in line with our expectations, and it reinforces our confidence in the business going forward. I believe each of our businesses is well positioned within their individual markets with strong portfolios, highly skilled and accomplished leadership and focused strategies. Innovative Health’s core franchises — Prevnar 13, Lyrica, Ibrance, Eliquis, Xeljanz and Xtandi — have strong leadership positions in their respective therapeutic categories and are complemented by new product launches, including Eucrisa and Bavencio, as well as meaningful pipeline progress. Essential Health’s growth opportunities — Sterile Injectables, Biosimilars and Emerging Markets — continue to perform in line with our expectations while we refine the business and position it for potential sustainable revenue growth.

“Finally, we will continue to allocate our capital to initiatives that we believe will maximize value creation,” Mr. Read concluded.

Frank D’Amelio, Executive Vice President, Business Operations and Chief Financial Officer, stated, “Today we are reaffirming our 2017 financial guidance, reflecting our performance to date as well as our confidence in the business going forward. Excluding the negative impacts of the divestiture of HIS and foreign exchange, the midpoints of our 2017 revenue and Adjusted diluted EPS(2) guidance ranges reflect 4% and 10% operational growth, respectively.”

QUARTERLY FINANCIAL HIGHLIGHTS (First-Quarter 2017 vs. First-Quarter 2016)

First-quarter 2017 revenues totaled $12.8 billion, a decline of $226 million, or 2% compared to the prior-year quarter, reflecting an operational decline of $110 million, or 1%, and the unfavorable impact of foreign exchange of $116 million, or 1%.

Excluding the revenues for HIS in both periods and the unfavorable impact of foreign exchange, first-quarter 2017 revenues increased by $97 million, or 1%. First-quarter 2017 revenues excluding the net impact of acquisitions and divestitures completed in 2016 and 2017 were flat operationally compared to first-quarter 2016.

Of note, there was one less selling day in the U.S. and two fewer selling days in international markets during first-quarter 2017 compared to first-quarter 2016, resulting in a negative impact on first-quarter 2017 revenues of approximately $300 million compared to the prior-year quarter. Full-year 2017 will have one less U.S. selling day and one less international selling day compared to full-year 2016.

Innovative Health Highlights

IH revenues increased 6% operationally in first-quarter 2017, driven by continued growth from key brands including Ibrance and Eliquis globally, the addition of Xtandi revenues in the U.S. resulting from the September 2016 acquisition of Medivation, as well as Lyrica and Xeljanz, both primarily in the U.S. Global Ibrance revenue increased 59% operationally while global operational revenue growth for Eliquis and Xeljanz was 52% and 27%, respectively.
Global Prevnar 13/Prevenar 13 revenues declined 7% operationally. In the U.S., Prevnar 13 revenues decreased 9% primarily due to the continued decline in revenues for the Adult indication due to a smaller remaining “catch up” opportunity compared to the prior-year quarter, partially offset by the favorable impact from the timing of government purchases for the pediatric indication. Prevenar 13 revenues in international markets decreased 4% operationally, primarily due to the unfavorable timing of government purchases in certain emerging markets for the pediatric indication, partially offset by modest growth of the Adult indication in certain developed Europe markets.
First-quarter 2017 operational growth was also negatively impacted by lower revenues for Enbrel in most developed Europe markets, primarily due to continued biosimilar competition, as well as by Viagra in the U.S. primarily due to lower market demand.
Essential Health Highlights

First-quarter 2017 EH revenues declined 9% operationally, primarily resulting from a 23% operational decline from Peri-LOE Products, including Pristiq in the U.S., which lost marketing exclusivity in the U.S. in March 2017, Lyrica in most developed Europe markets and Zyvox in developed Europe and in the U.S., a 68% decline in HIS revenues, reflecting its February 3, 2017 divestiture, and a 5% operational decline from Legacy Established Products (LEP). These declines were partially offset by 3% operational growth from the Sterile Injectable Pharmaceuticals (SIP) portfolio and 62% operational growth from Biosimilars, primarily driven by Inflectra in certain developed Europe markets and in the U.S. EH revenues excluding the performance of HIS in both periods declined 6% operationally.
Developed markets revenues declined 14% operationally, negatively impacted by a 34% operational decline from Peri-LOE Products, a 72% operational decline in HIS revenues and a 9% operational decline from the LEP portfolio, partially offset by 62% operational growth from Biosimilars. Excluding the performance of HIS in both periods, EH revenues in developed markets declined 10% operationally.
Revenues in emerging markets grew 5% operationally, primarily driven by 21% operational growth from the SIP portfolio. Excluding the performance of HIS in both periods, EH revenues in emerging markets grew 6% operationally.
GAAP Reported(1) Income Statement Highlights

SELECTED TOTAL COMPANY REPORTED COSTS AND EXPENSES(1)

($ in millions)
(Favorable)/Unfavorable
First-Quarter
2017 2016 % Change
Total Oper.
Cost of Sales(1) $ 2,470 $ 2,851
(13%)
(12%)
Percent of Revenues 19.3 % 21.9 % N/A N/A
SI&A Expenses(1) 3,308 3,385 (2%) (2%)
R&D Expenses(1) 1,708 1,731 (1%) (1%)
Total $ 7,486 $ 7,967 (6%) (5%)

Other
(Income)/Deductions––net(1)
($1 ) $ 330 * *
Effective Tax Rate on
Reported Income(1)
20.8 % 14.4 %

* Indicates calculation not meaningful.

Adjusted(2) Income Statement Highlights

SELECTED TOTAL COMPANY ADJUSTED COSTS AND EXPENSES(2)

($ in millions)
(Favorable)/Unfavorable

First-Quarter
2017 2016 % Change
Total Oper.
Adjusted Cost of Sales(2) $ 2,434 $ 2,565 (5%) (4%)
Percent of Revenues 19.1 % 19.7 %
N/A
N/A
Adjusted SI&A Expenses(2) 3,288 3,368 (2%) (2%)
Adjusted R&D Expenses(2) 1,705 1,723 (1%) —
Total $ 7,428 $ 7,656 (3%) (2%)

Adjusted Other
(Income)/Deductions––net(2)
($88 ) ($149 )
(41%)
(63%)
Effective Tax Rate on
Adjusted Income(2)
22.3 % 23.4 %

The diluted weighted-average shares outstanding used to calculate Reported(1) and Adjusted(2) diluted EPS declined by 133 million shares compared to the prior-year quarter due to Pfizer’s share repurchase program, reflecting the impact of a $5 billion accelerated share repurchase agreement executed in March 2016 and completed in June 2016 and another $5 billion accelerated share repurchase agreement executed in February 2017.

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

RECENT NOTABLE DEVELOPMENTS (Since January 31, 2017)

Product Developments

Bavencio (avelumab)
In March 2017, EMD Serono Inc. (EMD Serono), the biopharmaceutical business of Merck KGaA, Darmstadt, Germany, in the U.S. and Canada, and Pfizer announced that the U.S. Food and Drug Administration (FDA) approved Bavencio Injection 20 mg/mL, for intravenous use, for the treatment of adults and pediatric patients 12 years and older with metastatic Merkel cell carcinoma (mMCC). This indication is approved under accelerated approval based on tumor response and duration of response. Continued approval for this indication may be contingent upon verification and description of clinical benefit in confirmatory trials. Bavencio, a human anti-PD-L1 antibody, is the first FDA-approved therapy for patients with mMCC, a rare and aggressive skin cancer.
In February 2017, EMD Serono and Pfizer announced that the FDA accepted for Priority Review EMD Serono’s Biologics License Application (BLA) for avelumab as a treatment for patients with locally advanced or metastatic urothelial carcinoma with disease progression on or after platinum-based therapy. The FDA has set a Prescription Drug User Fee Act (PDUFA) target action date of August 27, 2017 for avelumab in this indication.
Eliquis (apixaban) — In March 2017, Bristol-Myers Squibb Company and Pfizer announced findings from a real-world data analysis of the U.S. Medicare database comparing the risk of stroke or systemic embolism and rate of major bleeding among patients with non-valvular atrial fibrillation who were treated with direct oral anticoagulants versus warfarin. In the analysis, titled Effectiveness and Safety of Apixaban, Dabigatran, and Rivaroxaban Compared to Warfarin among Non-Valvular Atrial Fibrillation Patients in the U.S. Medicare Population, Eliquis was associated with a significantly lower risk of stroke or systemic embolism and lower rate of major bleeding compared to warfarin. These data, which supplement results from randomized trials, were presented at the American College of Cardiology’s 66th Annual Scientific Session.
Ibrance (palbociclib) — In March 2017, Pfizer announced that the FDA approved a supplemental New Drug Application for Ibrance, based on the results from the confirmatory Phase 3 trial, PALOMA-2. The FDA action converts the accelerated approval of Ibrance to regular approval and broadens the range of anti-hormonal therapy that may be administered with Ibrance. Ibrance now is indicated in combination with an aromatase inhibitor, expanding on its earlier indication in combination with letrozole, as initial endocrine based therapy for postmenopausal women with hormone receptor-positive, human epidermal growth factor receptor 2-negative advanced or metastatic breast cancer.
Inflectra (infliximab-dyyb) — In February 2017, Pfizer and Celltrion Healthcare announced that data presented at the 12th Congress of the European Crohn’s and Colitis Organisation showed that for patients with moderate-to-severe Crohn’s disease (CD), treatment with Inflectra has similar efficacy and safety to treatment with Remicade(6), its reference product. The randomized 54-week clinical trial in 214 patients met its primary endpoint demonstrating that, at six weeks, Inflectra was similar to Remicade(6) in the treatment of CD thereby meeting the criterion for non-inferiority. Further results on the longer-term safety and efficacy of Inflectra from this ongoing 54-week study in CD are expected later this year. The study is also examining the treatment response and safety profile in patients when switched from Remicade(6) to Inflectra, and from Inflectra to Remicade(6).
Trumenba (Meningococcal Serogroup B Bivalent Recombinant Lipoprotein vaccine) — In March 2017, Pfizer announced that the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) has adopted a positive opinion recommending that Trumenba be granted marketing authorization in the European Union (EU) for active immunization of individuals 10 years and older to prevent invasive meningococcal disease caused by Neisseria meningitidis serogroup B. The CHMP’s opinion will now be reviewed by the European Commission (EC), which has the authority to approve medicines for the EU.
Xeljanz (tofacitinib)
In March 2017, Pfizer announced that the EC approved Xeljanz 5 mg twice daily (BID) oral tablets in combination with methotrexate (MTX) for the treatment of moderate to severe active rheumatoid arthritis (RA) in adult patients who have responded inadequately to, or who are intolerant to one or more disease-modifying antirheumatic drugs (DMARDs). Xeljanz can be given as monotherapy in case of intolerance to MTX or when treatment with MTX is inappropriate.
In March 2017, Pfizer announced that the Chinese Food and Drug Administration approved Xeljanz 5 mg BID in China for the treatment of adult patients with moderately to severely active RA who have had an inadequate response or intolerance to MTX. Xeljanz may be used in combination with MTX or other non-biologic DMARDs.
In February 2017, Pfizer announced top-line results from ORAL Strategy, a Phase 3B/4 study of Xeljanz 5 mg BID in the treatment of moderate to severe RA. ORAL Strategy is the first trial to compare a JAK inhibitor as monotherapy or in combination with MTX versus adalimumab (Humira(7)) plus MTX in MTX inadequate responders using ACR50 at Month 6 as the primary endpoint. There were three comparisons, which found:
Xeljanz 5 mg plus MTX met its primary endpoint in demonstrating non-inferiority versus Humira(7) plus MTX; and
Xeljanz 5 mg monotherapy did not meet its primary endpoint of non-inferiority versus Humira(7) plus MTX or versus Xeljanz plus MTX.

The safety findings were consistent with the known adverse events and serious adverse events profile for Xeljanz.
Zavicefta (ceftazidime-avibactam)
In April 2017, Pfizer presented positive results of the REPROVE study (randomized, multi-center study of ceftazidime-avibactam versus meropenem in adults with nosocomial pneumonia including ventilator associated pneumonia) that showed that patients diagnosed with hospital-acquired pneumonia, treated with Zavicefta, a novel combination antibiotic for the treatment of certain known or suspected Gram-negative bacterial infections, or Meropenem (meropenem for injection), a broad spectrum carbapenem antibiotic currently considered the standard of care, experienced comparable rates of clinical cure at test-of-cure 21-25 days after randomization. Clinical cure was the primary endpoint of the study and defined as a complete resolution of all signs and symptoms of infection. In addition, patients treated with Zavicefta and Meropenem experienced comparable rates of tolerability consistent with the known profile of ceftazidime alone. In December 2016, Pfizer completed the acquisition of the development and commercialization rights to AstraZeneca’s small molecule anti-infective business, primarily outside the U.S., including the commercialization and development rights to Zavicefta outside North America.
In March 2017, Pfizer announced that Zavicefta is now available in the U.K. and Germany. Pfizer expects to launch Zavicefta in additional markets outside the U.S. throughout 2017 and 2018.
Pipeline Developments

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

Ertugliflozin (PF-04971729) — In March 2017, Merck, known as MSD outside the U.S. and Canada, and Pfizer, announced that the FDA has accepted for review three New Drug Applications (NDAs) for medicines containing ertugliflozin, an investigational SGLT2 inhibitor in development to help improve glycemic control in adults with type 2 diabetes: one for monotherapy, one for the fixed-dose combination of ertugliflozin and Januvia(8) (sitagliptin), and one for the fixed-dose combination of ertugliflozin and metformin. The PDUFA action date from the FDA is in December 2017 for the three NDAs. Additionally, in February 2017, the EMA validated for review three Marketing Authorization Applications for ertugliflozin monotherapy and the two fixed-dose combination products.
Inotuzumab Ozogamicin
In April 2017, Pfizer announced that the CHMP of the EMA adopted a positive opinion recommending approval of Besponsa (inotuzumab ozogamicin) in the EU as monotherapy for the treatment of adults with relapsed or refractory CD22-positive B-cell precursor Philadelphia chromosome negative (Ph-) acute lymphoblastic leukemia (ALL) and Philadelphia chromosome positive (Ph+) ALL, who have previously failed treatment with at least one tyrosine kinase inhibitor. The CHMP’s opinion will now be reviewed by the EC. If approved, Besponsa will be the first antibody drug conjugate available for patients with this type of leukemia.
In February 2017, Pfizer announced that a BLA for inotuzumab ozogamicin was accepted for filing and granted Priority Review by the FDA. Inotuzumab ozogamicin is being evaluated for the treatment of adult patients with relapsed or refractory B-cell precursor ALL. The PDUFA goal date for a decision by the FDA is in August 2017.
Lorlatinib (PF-06463922) — Pfizer announced in April 2017 that its investigational next-generation anaplastic lymphoma kinase (ALK)/ROS1 tyrosine kinase inhibitor, lorlatinib, was granted Breakthrough Therapy designation from the FDA for the treatment of patients with ALK-positive metastatic non-small cell lung cancer (NSCLC), previously treated with one or more ALK inhibitors. The Breakthrough Therapy designation is supported by the efficacy and safety data of an ongoing Phase 1/2 clinical trial of lorlatinib, which includes patients with ALK-positive NSCLC who were previously treated with one or more ALK inhibitors.
PF-06425090 (Clostridium difficile (C. difficile) vaccine candidate) — In March 2017, Pfizer initiated a randomized, placebo-controlled, observer-blinded Phase 3 study to evaluate the efficacy, safety and tolerability of its investigational C. difficile vaccine in adults aged 50 and over, who are at risk of developing C. difficile infection (CDI). The CLOVER (Clostridium difficile Vaccine Efficacy Trial) study will assess whether PF-06425090 prevents CDI, and whether it is safe and well tolerated. Each patient will receive three doses of PF-06425090 or placebo and be followed for up to three years after vaccination. The trial is expected to enroll nearly 16,000 patients.
Corporate Developments

In February 2017, Pfizer announced that it entered into an accelerated share repurchase agreement with Citibank N.A. (Citibank) to repurchase $5 billion of Pfizer’s common stock. Pursuant to the terms of the agreement, on February 6, 2017, Pfizer paid $5 billion to Citibank and received an initial delivery of approximately 126 million shares of Pfizer common stock from Citibank. At settlement of the agreement, which is expected to occur during or prior to the third quarter of 2017, Citibank may be required to deliver additional shares of common stock to Pfizer, or, under certain circumstances, Pfizer may be required to deliver shares of its common stock or may elect to make a cash payment to Citibank, with the number of shares to be delivered or the amount of such payment based on the volume-weighted average price of Pfizer’s common stock during the term of the transaction.
In February 2017, Pfizer completed the sale of HIS to ICU Medical, Inc. (ICU Medical) for up to approximately $900 million, composed of cash and contingent cash consideration, ICU Medical common stock and seller financing.
Please find Pfizer’s press release and associated financial tables, including reconciliations of certain GAAP reported to non-GAAP adjusted information, at the following hyperlink:

View Source

(Note: If clicking on the above link does not open up a new web page, you may need to cut and paste the above URL into your browser’s address bar.)

For additional details, see the associated financial schedules and product revenue tables attached to the press release located at the hyperlink referred to above and the attached disclosure notice.

(1) Revenues is defined as revenues in accordance with U.S. generally accepted accounting principles (GAAP). Reported net income is defined as net income attributable to Pfizer Inc. in accordance with U.S. GAAP. Reported diluted earnings per share (EPS) is defined as reported diluted EPS attributable to Pfizer Inc. common shareholders in accordance with U.S. GAAP.

(2)
Adjusted income and its components and Adjusted diluted EPS are defined as reported U.S. GAAP net income(1) and its components and reported diluted EPS(1) excluding purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items (some of which may recur, such as restructuring or legal charges, but which management does not believe are reflective of ongoing core operations). Adjusted cost of sales, Adjusted selling, informational and administrative (SI&A) expenses, Adjusted research and development (R&D) expenses and Adjusted other (income)/deductions are income statement line items prepared on the same basis as, and therefore components of, the overall Adjusted income measure. As described in the Financial Review––Non-GAAP Financial Measure (Adjusted Income) section of Pfizer’s 2016 Financial Report, which was filed as Exhibit 13 to Pfizer’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, management uses Adjusted income, among other factors, to set performance goals and to measure the performance of the overall company. Because Adjusted income is an important internal measurement for Pfizer, management believes that investors’ understanding of our performance is enhanced by disclosing this performance measure. Pfizer reports Adjusted income, certain components of Adjusted income, and Adjusted diluted EPS in order to portray the results of the company’s major operations––the discovery, development, manufacture, marketing and sale of prescription medicines, vaccines and consumer healthcare (OTC) products––prior to considering certain income statement elements. See the accompanying reconciliations of certain GAAP Reported to Non-GAAP Adjusted information for the first quarter of 2017 and 2016. The Adjusted income and its components and Adjusted diluted EPS measures are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted EPS.

(3) Pfizer’s fiscal year-end for international subsidiaries is November 30 while Pfizer’s fiscal year-end for U.S. subsidiaries is December 31. Therefore, Pfizer’s first-quarter for U.S. subsidiaries reflects the three months ending on April 2, 2017 and April 3, 2016 while Pfizer’s first-quarter for subsidiaries operating outside the U.S. reflects the three months ending on February 26, 2017 and February 28, 2016.

(4) References to operational variances in this press release pertain to period-over-period growth rates that exclude the impact of foreign exchange. The operational variances are determined by multiplying or dividing, as appropriate, the current period U.S. dollar results by the current period average foreign exchange rates and then multiplying or dividing, as appropriate, those amounts by the prior-year period average foreign exchange rates. Although exchange rate changes are part of Pfizer’s business, they are not within Pfizer’s control. Exchange rate changes, however, can mask positive or negative trends in the business; therefore, Pfizer believes presenting operational variances provides useful information to evaluate the results of its business.

(5)
The 2017 financial guidance reflects the following:
Pfizer does not provide guidance for GAAP Reported financial measures (other than Revenues) or a reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP Reported financial measures on a forward-looking basis because it is unable to predict with reasonable certainty the ultimate outcome of pending litigation, unusual gains and losses, acquisition-related expenses and potential future asset impairments without unreasonable effort. These items are uncertain, depend on various factors, and could have a material impact on GAAP Reported results for the guidance period.
Does not assume the completion of any business development transactions not completed as of April 2, 2017, including any one-time upfront payments associated with such transactions.
Exchange rates assumed are a blend of the actual exchange rates in effect through first-quarter 2017 and mid-April 2017 exchange rates for the remainder of the year.
Reflects an anticipated negative revenue impact of $2.4 billion due to recent and expected generic and biosimilar competition for certain products that have recently lost or are anticipated to soon lose patent protection.
Reflects the anticipated negative impact of $0.5 billion on revenues and $0.03 on Adjusted diluted EPS(2) as a result of unfavorable changes in foreign exchange rates relative to the U.S. dollar compared to foreign exchange rates from 2016.
Guidance for Adjusted diluted EPS(2) assumes diluted weighted-average shares outstanding of between 6.0 to 6.1 billion shares, which reflects the impact of the $5 billion accelerated share repurchase agreement executed in February 2017.
(6) Remicade is a registered U.S. trademark of Janssen Biotech, Inc.

(7) Humira is a registered U.S. trademark of Abbvie Biotechnology Ltd.

(8) Januvia is a registered trademark of Merck Sharp & Dohme Corp., a subsidiary of Merck & Co., Inc.