On November 1, 2016 Gilead Sciences, Inc. (Nasdaq: GILD) reported its results of operations for the third quarter ended September 30, 2016 (Press release, Gilead Sciences, NOV 1, 2016, View Source [SID1234516203]).

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The financial results that follow represent a year-over-year comparison of third quarter 2016 to the third quarter 2015. Total revenues were $7.5 billion in 2016 compared to $8.3 billion in 2015. Net income was $3.3 billion or $2.49 per diluted share in 2016 compared to $4.6 billion or $3.06 per diluted share in 2015. Non-GAAP net income, which excludes amounts related to acquisition-related, up-front collaboration, stock-based compensation and other expenses, was $3.7 billion or $2.75 per diluted share in 2016 compared to $4.8 billion or $3.22 per diluted share in 2015.


Three Months Ended Nine Months Ended
September 30, September 30,
(In millions, except per share amounts) 2016 2015 2016 2015
Product sales $ 7,405 $ 8,211 $ 22,737 $ 23,742
Royalty, contract and other revenues 95 84 333 391
Total revenues $ 7,500 $ 8,295 $ 23,070 $ 24,133

Net income attributable to Gilead $ 3,330 $ 4,600 $ 10,393 $ 13,425
Non-GAAP net income* $ 3,677 $ 4,836 $ 12,128 $ 14,285

Diluted earnings per share $ 2.49 $ 3.06 $ 7.59 $ 8.73
Non-GAAP diluted earnings per share* $ 2.75 $ 3.22 $ 8.87 $ 9.29

* Non-GAAP net income and non-GAAP diluted earnings per share exclude acquisition-related, up-front collaboration, stock-based compensation and other expenses. A reconciliation between GAAP and non-GAAP financial information is provided in the tables on pages 7 and 8.

Product Sales

Total product sales for the third quarter of 2016 were $7.4 billion compared to $8.2 billion for the same period in 2015. Product sales for the third quarter of 2016 were $5.1 billion in the United States, $1.4 billion in Europe, $452 million in Japan and $479 million in other locations. Product sales for the third quarter of 2015 were $5.6 billion in the United States, $1.7 billion in Europe, $454 million in Japan and $504 million in other locations.

Antiviral Product Sales

Antiviral product sales, which include primarily products in Gilead’s HIV and liver disease areas, were $6.8 billion for the third quarter of 2016 compared to $7.7 billion for the same period in 2015.

HIV and other antiviral product sales were $3.5 billion compared to $2.9 billion for the same period in 2015. The increase was primarily due to the continued uptake of our tenofovir alafenamide (TAF) based products, Genvoya (elvitegravir 150 mg/cobicistat 150 mg/emtricitabine 200 mg/tenofovir alafenamide 10 mg), Descovy (emtricitabine 200 mg/tenofovir alafenamide 25 mg) and Odefsey (emtricitabine 200 mg/rilpivirine 25 mg/tenofovir alafenamide 25 mg).
HCV product sales, which consist of Harvoni (ledipasvir 90 mg/sofosbuvir 400 mg), Sovaldi (sofosbuvir 400 mg) and Epclusa (sofosbuvir 400 mg/velpatasvir 100 mg), were $3.3 billion compared to $4.8 billion for the same period in 2015. The decline was due to lower sales of Harvoni and Sovaldi, partially offset by sales of Epclusa, which was launched in the United States and Europe in June and July 2016, respectively.
Other Product Sales

Other product sales, which include Letairis (ambrisentan), Ranexa (ranolazine) and AmBisome (amphotericin B liposome for injection), were $564 million for the third quarter of 2016 compared to $509 million for the same period in 2015.

Operating Expenses


Three Months Ended Nine Months Ended
September 30, September 30,
(In millions) 2016 2015 2016 2015
Research and development expenses (R&D) $ 1,141 $ 743 $ 3,890 $ 2,257
Non-GAAP research and development expenses*
$ 981 $ 713 $ 2,790 $ 2,066

Selling, general and administrative expenses (SG&A) $ 831 $ 903 $ 2,406 $ 2,360
Non-GAAP selling, general and administrative expenses* $ 780 $ 850 $ 2,256 $ 2,211

* Non-GAAP R&D and SG&A expenses exclude acquisition-related, up-front collaboration, stock-based compensation and other expenses. A reconciliation between GAAP and non-GAAP financial information is provided in the tables on pages 7 and 8.

During the third quarter of 2016, compared to the same period in 2015:

Research and development expenses and non-GAAP research and development expenses* increased primarily due to the overall progression of Gilead’s clinical studies, including a $200 million milestone expense associated with Gilead’s purchase of Nimbus Apollo, Inc.
Selling, general and administrative expenses and non-GAAP selling, general and administrative expenses* decreased primarily due to lower branded prescription drug fee expense.
Cash, Cash Equivalents and Marketable Securities

As of September 30, 2016, Gilead had $31.6 billion of cash, cash equivalents and marketable securities compared to $24.6 billion as of June 30, 2016. This increase was primarily due to the issuance of $5.0 billion aggregate principal amount of senior unsecured notes in September 2016. Cash flow from operating activities was $4.3 billion for the quarter. During the third quarter and the first nine months of 2016, Gilead utilized $1.0 billion and $10.0 billion on stock repurchases, respectively.

Full Year 2016 Guidance Reiterated

Gilead reiterates its full year 2016 guidance, as revised on July 25, 2016:


(In millions, except percentages and per share amounts) Updated July 25, 2016
Reiterated November 1, 2016
Net Product Sales $29,500 – $30,500
Non-GAAP*
Product Gross Margin 88% – 90%
R&D Expenses $3,600 – $3,800
SG&A Expenses $3,100 – $3,300
Effective Tax Rate 18.0% – 20.0%
Diluted EPS Impact of Acquisition-related, Up-front Collaboration, Stock-based Compensation and Other Expenses $1.47 – $1.53

* Non-GAAP Product Gross Margin, R&D and SG&A expenses and effective tax rate exclude acquisition-related, up-front collaboration, stock-based compensation and other expenses. A reconciliation between GAAP and non-GAAP full year 2016 guidance is provided in the tables on page 9.

Corporate Highlights

Announced that Kelly A. Kramer was appointed to the company’s Board of Directors and Audit Committee. Ms. Kramer is currently Executive Vice President and Chief Financial Officer of Cisco Systems, Inc.
Announced that Gilead entered into a partnership with the World Health Organization (WHO) to provide $20 million in funding and drug donations over five years to expand access to diagnostic services and treatment for visceral leishmaniasis (VL). As part of this collaboration, Gilead will donate 380,000 vials of AmBisome to meet the needs of WHO to treat VL in key endemic countries, including Bangladesh, Ethiopia, India, Nepal, South Sudan and Sudan.
Product and Pipeline Updates announced by Gilead during the Third Quarter of 2016 include:

Announced that the European Commission granted marketing authorization for once-daily Truvada (emtricitabine 200 mg/tenofovir disoproxil 245 mg) in combination with safer-sex practices to reduce the risk of sexually acquired HIV-1 infection among uninfected adults at high risk, a strategy known as pre-exposure prophylaxis, or PrEP. Truvada was approved by the European Medicines Agency in 2005 for use in combination with other antiretroviral agents for the treatment of HIV-1 infection in adults aged 18 years and over, and is currently the most prescribed antiretroviral medicine in Europe as part of combination therapy.
Announced that the European Commission granted marketing authorization for Epclusa, the first pan-genotypic, single tablet regimen for the treatment of adults with genotype 1-6 chronic hepatitis C virus (HCV) infection. Epclusa for 12 weeks was authorized for use in patients without cirrhosis or with compensated cirrhosis (Child-Pugh A), and in combination with ribavirin (RBV) for patients with decompensated cirrhosis (Child-Pugh B or C). Epclusa is also the first single tablet regimen approved for the treatment of patients with HCV genotype 2 and 3, without the need for RBV. Physicians also have the flexibility to consider the addition of RBV for genotype 3 infected patients with compensated cirrhosis. The marketing authorization followed an accelerated review procedure by the European Medicines Agency, reserved for medicinal products expected to be of major public health interest.
Non-GAAP Financial Information

The information presented in this document has been prepared by Gilead in accordance with U.S. generally accepted accounting principles (GAAP), unless otherwise noted as non-GAAP. Management believes non-GAAP information is useful for investors, when considered in conjunction with Gilead’s GAAP financial information, because management uses such information internally for its operating, budgeting and financial planning purposes. Non-GAAP information is not prepared under a comprehensive set of accounting rules and should only be used to supplement an understanding of Gilead’s operating results as reported under GAAP. Non-GAAP measures may be defined and calculated differently by other companies in the same industry. A reconciliation between GAAP and non-GAAP financial information is provided in the tables on pages 7, 8 and 9.

On November 1, 2016 Medivir AB (Nasdaq Stockholm: MVIR) reported that MIV-818 has been selected as a candidate drug (CD) from its nucleotide DNA polymerase inhibitor project for the treatment of hepatocellular carcinoma (HCC), and has now entered non-clinical development.

Liver cancers are orphan indications in North American and Western European markets. However they are the second leading cause of cancer-related death worldwide, and one of the fastest growing forms of cancer in the US, based on incidence and mortality. Hepatocellular carcinoma (HCC) is the most common cancer of the liver. Despite improvements in the detection and management of the disease, the 5-year survival rate for patients in the USA who are diagnosed with liver cancer remains below 20%. While curative surgical treatments are available to HCC patients who are diagnosed early in their disease, the prognosis for all inoperable HCC cases remains poor. There is consequently an urgent need for improved treatments, particularly for patients with advanced stages of HCC and other forms of liver cancer.

Effective therapies for patients with inoperable intermediate HCC include the delivery of drugs directly to the cancer tumour through the liver’s blood supply, which is technically challenging and for which many patients are ineligible. In contrast, most anticancer drugs that are widely distributed throughout the body are ineffective. Sorafenib is the only orally administered drug used to treat liver cancer. It is approved for use in patients with advanced HCC but confers only modest survival benefits. Despite these limitations, sorafenib has achieved over $1B in annual worldwide sales across several cancer indications, with the majority of sales from treatment of HCC.

Medivir has developed substantial capabilities to selectively deliver the active metabolites of nucleoside and nucleotide analogues to the liver, based on its long-standing interests in discovering improved treatments for chronic hepatitis B virus and hepatitis C virus infections. MIV-818 is a potent and selective inhibitor of the proliferation of liver cancer cell lines that has been designed to deliver high levels of the active drug selectively to the liver. MIV-818 has the potential to become the first liver-targeted orally administered drug to address HCC and other liver cancers. Medivir expects to communicate the preclinical antitumour and pharmacokinetic profile of MIV-818 at major scientific meetings in 2017.

"MIV-818 is unique in that it is an orally administered chemotherapeutic that will be developed exclusively for liver cancers. Many treatments that were successful in other cancers have failed to provide benefits to liver cancer patients, often because systemic toxicity prevents effective drug concentrations from being reached at the tumour site. We have designed MIV-818 to be liver-directed in order to overcome these limitations, and we look forward to advancing it into clinical trials as rapidly as possible." said Richard Bethell, Chief Scientific Officer, Medivir AB. "We are delighted to have delivered the first CD from our internal portfolio of early-stage anti-cancer and immuno-oncology projects since it represents an important milestone in our transition to being an exclusively oncology-focused pharmaceutical company."

On November 1, 2016 Astex Pharmaceuticals, a pharmaceutical company dedicated to the discovery and development of novel small molecule therapeutics for oncology and diseases of the central nervous system, reported that it has received a milestone payment from Novartis in relation to the US FDA NDA filing by Novartis for LEE011 (ribociclib) plus letrozole as a first-line treatment for HR+/HER2- advanced breast cancer (Press release, Astex Pharmaceuticals, NOV 1, 2016, View Source [SID1234516166]).

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Novartis also announced that it had received FDA Priority Review for the NDA application of LEE011 as first-line treatment of postmenopausal women with hormone-receptor positive, human epidermal growth factor receptor-2 negative (HR+/HER2-) advanced or metastatic breast cancer in combination with letrozole.

LEE011 (ribociclib) was developed by the Novartis Institutes for BioMedical Research (NIBR) under a research collaboration with Astex. Under the collaboration, which commenced in 2005, NIBR scientists worked with Astex on a programme of early drug discovery research resulting in the discovery of LEE011. Novartis then led LEE011 into preclinical and later clinical development. Under terms of the agreement, Astex is eligible to receive further milestone payments in respect of additional regulatory filing and approvals in Europe and Japan, as well as royalty payment on annual sales of ribociclib should the drug be approved.

Harren Jhoti, President and CEO of Astex, said, "We are absolutely delighted that Novartis has reached such a significant stage in the development of LEE011. If the product is approved, it will provide an important treatment option for many patients with advanced disease. We congratulate Novartis for an excellent job in developing LEE011 and on the achievement of US FDA Priority Review of the NDA filing."

About LEE011 (ribociclib)

LEE011 (ribociclib) is a selective cyclin dependent kinase inhibitor, a class of drugs that help slow the progression of cancer by inhibiting two proteins called cyclin dependent kinase 4 and 6 (CDK4/6). These proteins, when over-activated in a cell, can enable cancer cells to grow and divide too quickly. Targeting CDK4/6 with enhanced precision may play a role in ensuring cancer cells do not grow uncontrollably.

On November 1, 2016 TapImmune, Inc. (OTCMKTS: TPIV), a clinical-stage immuno-oncology company specializing in the development of innovative peptide and gene-based immunotherapeutics and vaccines for the treatment of cancer and metastatic disease, reported an update on the progression of a HER2neu vaccine into clinical trials (Press release, TapImmune, NOV 1, 2016, View Source [SID1234516164]). The vaccine (TPIV 110) consists of 4 proprietary Class II antigens and 1 proprietary Class I antigen. Both technologies were developed in the laboratory of Keith Knutson, Ph.D. and licensed from the Mayo Clinic.

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In a Phase I clinical trial on the 4 Class II antigens in HER2neu breast cancer patients performed at the Mayo Clinic, over 90 percent of patients developed a robust T-cell response against these antigens. Data on the novel Class I antigen, published in J. Immunol. (2013), 190, 479-488, showed that it was a naturally processed antigen which was at least four times more effective at killing human breast cancer cells than previously tested class 1 antigens. There is growing scientific evidence to suggest the mixture of Class 1 and Class 2 antigens is essential for obtaining a robust immune response with potential therapeutic effects.

As a result of this progress, and in accordance with the FDA, TapImmune plans to initiate clinical studies in 2017. The component peptides have been manufactured under GMP and a commercially viable formulation for the drug product has been developed. GMP manufacturing of the clinical supplies will begin toward the end of the year or early in Q1 2017. The Company expects to submit to the FDA an amended Investigational New Drug Application (IND) that includes the additional Type 1 antigen peptide at the end of 2016 or early in 2017. In addition to company-sponsored clinical trials, further studies on the treatment of ductal carcinoma in situ (DCIS) are being considered using non-dilutive capital.

"HER2neu is a well-known and important target in breast cancer treatments," said Dr. John Bonfiglio, President and CEO of TapImmune. "Our strategy is to highly leverage our HER2neu platform technology in treating this disease.".

On November 1, 2016 Propanc Health Group Corporation (OTCQB: PPCH) ("Propanc" or "the Company"), an emerging healthcare company focusing on development of new and proprietary treatments for cancer patients suffering from solid tumors such as pancreatic, ovarian and colorectal cancers, reported it has submitted an application for Orphan Medicinal Product Designation (OMPD) to the European Medicines Agency (EMA) for PRP, a solution for intravenous administration of pancreatic proenzymes trypsinogen and chymotrypsinogen (Press release, Propanc, NOV 1, 2016, View Source [SID1234516163]). The proposed orphan drug indication for PRP is for the treatment of ovarian cancer.

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"Obtaining orphan medicinal product designation from the EMA for our PRP therapy for ovarian cancer is a significant regulatory milestone that we are looking forward to, and will be a positive step forward in Propanc’s ongoing efforts to develop effective treatments for metastatic cancer," said James Nathanielsz, Propanc’s Chief Executive Officer. "This will reinforce our strategic investment in PRP, demonstrating progress in developing a potential best-in-class therapy that could transform treatment for patients with metastatic cancers, where there are limited treatment options. Once the OPMD is granted, we will work closely with the regulatory authorities and our clinical investigators to advance PRP promptly through the next stages of clinical research and development."

Ovarian cancer is a disease with the lowest survival rate of all gynecological cancers (Quaglia et al. 2009), making it the seventh most common cause of cancer death in women worldwide. More than 60% of women present with stage III or stage IV metastasized cancer at the time of first diagnosis and have a five-year survival of less than 20%. The therapy is very complex and presupposes expertise in both surgery and oncology (Roett and Evans, 2009). Thus, to date therapy of ovarian cancer is a challenge and prognosis is rather poor, creating a high unmet medical need for new efficacious and safe treatment options.

Orphan medicinal product designation is granted by the European Commission, following a positive opinion from the Committee for Orphan Medicinal Products (COMP), to a medicinal product that is intended for the diagnosis, prevention or treatment of a life-threatening or a chronically debilitating condition affecting not more than five in 10,000 persons in the European Community when the application for designation is submitted. An orphan designation allows a company to benefit from incentives from the European Union to develop a medicine for a rare disease, such as reduced fees and protection from competition once the medicine is placed on the market.

The rationale for developing PRP, a formulation of the pancreatic proenzymes trypsinogen and chymotrypsinogen for intravenous administration, in the proposed indication ovarian cancer is based on a set of in-vitro studies on cancer stem cells generated from ovarian cancer cell lines as well as xenograft and orthotopic mouse models of ovarian cancer. In summary, these data indicate that the dramatic reduction of cellular markers associated with the process of epithelial-mesenchymal transition (EMT) as a consequence of PRP treatment can not only reverse the EMT process with the implication to stop tumor progression and metastasis, but also seem to repress the development of cancer stem cells (CSCs). Consequently, these results are strong indicators of the therapeutic potential of PRP that could be categorized as an anti-CSC therapeutic drug.

Preliminary early clinical data on the treatment of six patients with ovarian cancer have been obtained with PRP in the context of a UK "Specials" License treatment. Together, these data support the medical plausibility of the proposed indication and a distinctive benefit-safety profile of PRP for the treatment of ovarian cancer.