On July 27, 2016 DNAtrix, a clinical stage biotechnology company developing virus-driven immunotherapies for cancer, reported that the European Medicines Agency (EMA) has granted PRIority MEdicines (PRIME) designation for DNX-2401 as a promising new treatment for recurrent glioblastoma (Press release, DNAtrix, JUL 27, 2016, View Source [SID1234525538]).

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The PRIME initiative was launched by the EMA in March of 2016 to accelerate the regulatory approval of breakthrough therapies that target an unmet medical need. By offering prompt interaction with Sponsors developing innovative therapies, the objective is to provide patients who have few treatment options with early access to priority medicines that could provide significant benefit.

DNX-2401 is a potent oncolytic adenovirus that targets and kills cancer cells, while leaving normal cells intact. Multiple clinical studies in patients with recurrent glioblastoma and gynecologic cancer have shown that DNX-2401 has a favorable safety profile, strong tumor-killing potential and can trigger an antitumor immune response.

"We are pleased and honored that the European Medicines Agency has recognized the potential of our oncolytic immunotherapy DNX-2401 to make a positive impact on glioblastoma," said Joanna Peterkin, M.D., M.S., Chief Medical Officer of DNAtrix. "We look forward to working with the EMA on this important development program for DNX-2401, with the goal of improving the quality of life of patients with brain tumors."

DNAtrix has multiple ongoing studies, including a multicenter Phase 2 clinical study evaluating DNX-2401 with the checkpoint inhibitor pembrolizumab in patients with recurrent glioblastoma. For more information about this study, refer to Clinicaltrials.gov (NCT02798406).
About DNX-2401 in Glioblastoma

DNX-2401 is an investigational oncolytic immunotherapy designed to treat cancer, with glioblastoma as the initial indication. Glioblastoma is the most aggressive form of brain cancer, which has a median survival of 15 months following a patient’s initial diagnosis. DNX-2401 sets off a chain reaction of tumor cell killing by selectively replicating within glioblastoma cells (but not normal cells), causing tumor destruction and further spread of the oncolytic virus to adjacent tumor cells. This process can also trigger an anti-tumor immune response. DNX-2401 is currently being investigated in several clinical studies and has been well tolerated in all settings. Compelling results from Phase 1 clinical studies in recurrent glioblastoma indicate that DNX-2401 can (1) replicate in human brain tumors for a period of weeks to months, (2) trigger immune cell infiltration into the tumor, (3) cause ongoing tumor destruction detectable by MRI and (4) induce durable responses to therapy. In these studies, patient survival has been prolonged in a subset of patients, including in those achieving a complete response.

On Jul. 27, 2016– Teva Pharmaceutical Industries Ltd., (NYSE:TEVA)(TASE:TEVA) and Allergan plc (NYSE:AGN) reported that the U.S. Federal Trade Commission (FTC) has accepted the proposed consent order in connection with the pending acquisition of Allergan’s generics business ("Actavis Generics") by Teva Pharmaceutical Industries Ltd (Press release, Teva, JUL 27, 2016, View Source;p=RssLanding&cat=news&id=2188969 [SID:1234514078]).

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With the acceptance of the proposed consent order, Teva has satisfied the regulatory approval requirements under the purchase agreement to complete the acquisition of Actavis Generics.

"We are pleased to have received all of the requisite regulatory approvals for our acquisition of Actavis Generics," said Erez Vigodman, President and CEO, Teva. "This acquisition is a transformative step for Teva as we continue to claim a differentiated space in the global pharmaceutical industry. The generics industry is one of the most attractive industries in the world in terms of growth rates, profitability, return to investors and contribution to healthcare systems and societies around the world."

Mr. Vigodman continued, "The new Teva will be ideally positioned to realize the opportunities the global and U.S. generic markets offer. Through our best-in-class R&D capabilities and product pipeline, the world’s largest medicine cabinet and product portfolio, one of the most competitive fully integrated operational networks in the industry, extensive global commercial deployment and go-to-market platforms, we will be able to achieve greater efficiencies for the benefit of patients, healthcare systems and investors around the world. The transaction strongly reinforces our strategy and yields very compelling economics. As a result, it opens a new set of possibilities for us in generics and specialty medicines."

Once the transaction is completed, Teva will have approximately 338 product registrations pending FDA approval and will hold the leading position in first-to-file opportunities with approximately 115 pending ANDAs in the U.S. Additionally, Teva will have a commercial presence across 80 markets, including a top-three leadership position in over 40 markets.

The transaction is expected to achieve $1.4 billion in operational and tax synergies achievable by the end of 2019. It is significantly accretive to non-GAAP EPS, with approximately 14% accretion in 2017 and 19% accretion in 2019, and is expected to generate 9.3% ROIC by the end of 2019. The combined company is expected to generate more than $25 billion of free cash flow from deal close to the end of 2019, which will allow for rapid deleveraging and give Teva the ability to pursue acquisitions of attractive branded and pipeline assets as well as deals that further expand the company’s footprint in key growth markets.
The transaction is expected to close next week.

On July 27, 2016 Varian Medical Systems (NYSE: VAR) reported GAAP net earnings of $1.04 per diluted share and non-GAAP net earnings of $1.22 per diluted share for the third quarter of fiscal year 2016 (Press release, Varian Medical Systems, JUL 27, 2016, View Source [SID:1234514075]). Varian’s revenues totaled $789 million for the third quarter, up 1 percent from the year-ago quarter in dollars and even with the year-ago quarter in constant currency. The company ended the quarter with a $3.3 billion backlog, up 5 percent from the end of the third quarter of fiscal year 2015.

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Varian Medical Systems Logo
"We generated strong gross order and revenue growth for the third quarter with substantial improvements in gross and operating margins in both our Oncology and Imaging Components businesses," said Dow Wilson, CEO of Varian Medical Systems. "The quarter also included the booking of an order to equip a new proton therapy center in China."

The company finished the third quarter of fiscal year 2016 with $836 million in cash and cash equivalents and $701 million of debt. Cash flow from operations was $95 million for the third quarter, bringing the year-to-date total to $204 million. The company’s GAAP results for the quarter included about $24 million of unusual expenses principally for ongoing patent litigation and the recently announced initiative to separate the Imaging Components business into a new publicly traded company. During the quarter, the company spent $126 million to repurchase about 1.5 million shares of common stock.

Oncology Systems

Oncology Systems’ third quarter revenues totaled $605 million, up 8 percent from the year-ago quarter in dollars and in constant currency. Third-quarter Oncology gross orders were $676 million, up 6 percent from the year-ago quarter in dollars and in constant currency. In the Americas, Oncology gross orders increased by 8 percent in dollars and in constant currency, with 15 percent growth in North America offsetting a sharp decline in Latin America. In EMEA, gross orders were down 3 percent in dollars and 4 percent in constant currency. In APAC, gross orders rose 19 percent in dollars and 17 percent in constant currency, driven by strong growth in China and Australia.

"Oncology generated strong gross order growth in North America, Asia, Australia and Africa that offset weakness in developed European markets and Latin America," Wilson said. "A positive mix of hardware products and higher software revenues drove a healthy improvement in margins. We were particularly pleased to see strong demand for our TrueBeam platform as well as our new software products including RapidPlan and InSightive Analytics for improving both the quality and speed of treatments."

Imaging Components

Imaging Components revenues were $147 million for the third quarter, up 9 percent from the year-ago period. Gross orders were $138 million for the third quarter, up 13 percent from the year-ago period.

"As expected, we’re seeing a recovery in the Imaging Components business," said Wilson. "We generated strong gross order growth in tubes as well as software and accessories from our recently-acquired businesses. Favorable product mix and productivity gains contributed to significant improvements in margins for this business in the quarter. We feel good about the progress we’re making towards separation." The new company will be named Varex Imaging Corporation.

Other

The company’s Other category, including the Varian Particle Therapy business and the Ginzton Technology Center, recorded third quarter revenues of $37 million, down $53 million from the year-ago quarter when Varian booked significant revenues from its proton installation in Maryland. During the quarter, the company booked an order for a multi-room ProBeam installation at the new Hefei Ion Medical Center in China, with installation expected to begin in 2017.

Outlook

"We believe that total company non-GAAP net earnings will be in the range of $4.62 to $4.66 per diluted share for fiscal year 2016," said Wilson. "We believe revenues for fiscal year 2016 will increase by about 3 percent over fiscal year 2015."

Please refer to "Discussion of Non-GAAP Financial Measures" below for a description of items excluded from expected non-GAAP earnings.

On July 27, 2016 Laboratory Corporation of America Holdings (LabCorp) (NYSE: LH) reported results for the quarter ended June 30, 2016 (Press release, LabCorp, JUL 27, 2016, View Source;p=RssLanding&cat=news&id=2188731 [SID:1234514065]).

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"Continued strong revenue growth and double-digit adjusted EPS growth demonstrate the soundness of our strategy," said David P. King, chairman and chief executive officer. "Our results reflect our customers’ growing enthusiasm for our differentiated offering as we improve health and improve lives around the globe by delivering world class diagnostics, bringing innovative medicines to patients faster and changing the way care is provided."

Consolidated Results

Second Quarter Results

Net revenue for the quarter was $2.38 billion, an increase of 7.4% over last year’s $2.22 billion. The increase in net revenue was primarily due to solid organic growth in both segments and tuck-in acquisitions, partially offset by the negative impact of foreign currency translation. Organic revenue growth in the quarter, excluding currency, was 6.4%.

Operating income for the quarter was $366.9 million, compared to $323.3 million in the second quarter of 2015. The Company recorded restructuring charges and special items of $14.5 million in the quarter, compared to $23.1 million during the same period in 2015. Adjusted operating income (excluding amortization of $45.3 million, restructuring and special items) for the quarter was $426.7 million, or 17.9% of net revenue, compared to $391.0 million, or 17.6%, in the second quarter of 2015. The increase in adjusted operating income and margin was primarily due to strong revenue growth, partially offset by personnel costs.

Net earnings in the quarter were $198.2 million, or $1.91 per diluted share, compared to $169.8 million, or $1.66 per diluted share, last year. Adjusted EPS (excluding amortization, restructuring and special items) were $2.31 in the quarter, an increase of 10.5% compared to $2.09 in the second quarter of 2015.

Operating cash flow for the quarter was $343.6 million, compared to $396.7 million last year. The decrease in operating cash flow was primarily due to greater working capital requirements, partially offset by increased earnings. Capital expenditures totaled $67.0 million, compared to $69.1 million in the second quarter of 2015. As a result, free cash flow (operating cash flow less capital expenditures) was $276.6 million, compared to $327.6 million in the second quarter of 2015.

At the end of the quarter, the Company’s cash balance and total debt were $639.6 million and $6.1 billion, respectively. During the quarter, the Company invested $50.8 million in tuck-in acquisitions and paid down $338.7 million of debt.

Year-To-Date Results

The following year-to-date consolidated results of the Company include Covance as of February 19, 2015; prior to February 19, 2015, these consolidated results exclude Covance.

Net revenue was $4.68 billion, an increase of 17.2% over last year’s $3.99 billion. The increase was primarily due to the inclusion of Covance’s financial results for the entire first half of the year as well as solid organic growth in both segments and tuck-in acquisitions.

Operating income was $668.8 million, compared to $455.7 million in the first half of 2015. The Company recorded restructuring charges and special items of $43.8 million in the first half of the year, compared to $161.8 million during the same period in 2015. Adjusted operating income (excluding amortization of $89.6 million, restructuring and special items) was $802.2 million, or 17.2% of net revenue, compared to $693.2 million, or 17.4%, in the first half of 2015. The increase in adjusted operating income was primarily due to strong revenue growth, partially offset by personnel costs. The decline in margin was due to the mix impact from the inclusion of Covance’s financial results for the entire first half of the year.

Net earnings in the first half of 2016 were $358.4 million, or $3.46 per diluted share, compared to $172.9 million, or $1.76 per diluted share, last year. Adjusted EPS (excluding amortization, restructuring and special items) were $4.33, compared to $3.85 in the first half of 2015.

Operating cash flow was $466.6 million, compared to $309.8 million in the first half of 2015. The Company’s operating cash flow was negatively impacted by $153.5 million last year due to non-recurring items relating to the acquisition of Covance. Excluding these items, operating cash flow was $463.3 million last year. Capital expenditures totaled $138.4 million, compared to $102.9 million in the first half of 2015. As a result, free cash flow (operating cash flow less capital expenditures) was $328.2 million, compared to $206.9 million in the first half of 2015. Excluding non-recurring items, free cash flow was $360.4 million last year.

***

The following segment results exclude amortization, restructuring, special items and unallocated corporate expenses. Reconciliations of segment results to historically reported results are included in the Condensed Pro Forma Segment Information tables and notes.

Segment Results

LabCorp Diagnostics

Net revenue for the quarter was $1.66 billion, an increase of 5.4% over last year’s $1.58 billion. The increase in net revenue was the result of organic volume growth (measured by requisitions), price, mix and tuck-in acquisitions, partially offset by the negative impact of foreign currency translation of 0.3%. Total volume (measured by requisitions) increased by 2.1% (organic volume of 1.2% and acquisition volume of 0.9%). Revenue per requisition increased by 3.5%.

Adjusted operating income (excluding amortization, restructuring and special items) for the quarter was $356.5 million, or 21.5% of net revenue, compared to $337.0 million, or 21.4%, in the second quarter of 2015. The increase was primarily due to price, mix, organic volume, tuck-in acquisitions and the Company’s LaunchPad business process improvement initiative, partially offset by personnel costs. LaunchPad remains on track to deliver net savings of $150 million through the three-year period ending in 2017.

Covance Drug Development

Net revenue for the quarter was $722.4 million, an increase of 12.2% over last year’s $643.7 million. The increase in net revenue was primarily due to broad-based demand, partially offset by the negative impact of foreign currency translation of approximately 70 basis points. Excluding the impact from currency and the expiration of the Sanofi site support agreement, net revenue increased 16.4% year over year.

Adjusted operating income (excluding amortization, restructuring and special items) was $107.7 million, or 14.9% of net revenue, compared to $89.9 million, or 14.0%, in the second quarter of 2015. The increase was primarily due to strong revenue growth and cost synergies, partially offset by the expiration of the Sanofi site support agreement and personnel costs. The Company remains on track to deliver cost synergies of $100 million related to the acquisition of Covance through the three-year period ending in 2017.

During the quarter, net orders (gross orders less cancellations and reductions) were $818 million, representing a net book-to-bill of 1.13, and a trailing twelve month net book-to-bill of 1.17.

Outlook for 2016

The following updated guidance assumes foreign exchange rates effective as of June 30, 2016 for the remainder of the year:

Net revenue growth of 9.5% to 10.5% over 2015 net revenue of $8.51 billion, which includes the impact from approximately 50 basis points of negative currency. This is an increase from prior guidance of 8.5% to 10.5%, which included approximately 40 basis points of negative currency.
Net revenue growth in LabCorp Diagnostics of 4.5% to 5.5% over 2015 pro forma revenue of $6.21 billion, which includes the impact from approximately 10 basis points of negative currency. This is an increase from prior guidance of 4.0% to 5.5%, which included approximately 20 basis points of negative currency.
Net revenue growth in Covance Drug Development of 7.0% to 9.0% over 2015 pro forma revenue of $2.63 billion, which includes the impact from approximately 110 basis points of negative currency. This is an increase from prior guidance of 6.0% to 9.0%, which included approximately 50 basis points of negative currency. Excluding the impact from currency and the expiration of the Sanofi site support agreement, net revenue is expected to increase approximately 11% to 13%.
Adjusted EPS of $8.60 to $8.95, versus prior guidance of $8.55 to $8.95, and as compared to $7.91 last year.
Free cash flow (operating cash flow less capital expenditures) of $900 million to $950 million, an increase of approximately 24% to 31% over the prior year, unchanged from prior guidance.
Use of Adjusted Measures

The Company has provided in this press release and accompanying tables "adjusted" financial information that has not been prepared in accordance with GAAP, including Adjusted EPS, Adjusted Operating Income, and Free Cash Flow. The Company believes these adjusted measures are useful to investors as a supplement to, but not as a substitute for, GAAP measures, in evaluating the Company’s operational performance. The Company further believes that the use of these non-GAAP financial measures provides an additional tool for investors in evaluating operating results and trends, and growth and shareholder returns, as well as in comparing the Company’s financial results with the financial results of other companies. However, the Company notes that these adjusted measures may be different from and not directly comparable to the measures presented by other companies. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in the tables accompanying this press release.

The Company today is furnishing its Current Report on Form 8-K that will include additional information on its business and operations. This information will also be available on the Company’s website at www.labcorp.com. Analysts and investors are directed to the Current Report on Form 8-K and the website to review this supplemental information.

A conference call discussing LabCorp’s quarterly results will be held today at 9:00 a.m. Eastern Time and is available by dialing 844-634-1444 (615-247-0253 for international callers). The access code is 43356831. A telephone replay of the call will be available through August 3, 2016 and can be heard by dialing 855-859-2056 (404-537-3406 for international callers). The access code for the replay is 43356831.