On August 2, 2023 Teva Pharmaceutical Industries Ltd. (NYSE and TASE: TEVA) reported results for the quarter ended June 30, 2023 (Press release, Teva, AUG 2, 2023, View Source [SID1234633663]).

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Mr. Richard Francis, Teva’s President and CEO, said, "Teva continued to deliver solid performance this quarter, with revenues coming in at $3.9 billion, up 4% vs. the second quarter of 2022 in local currency terms and non-GAAP gross margin up 3.1 percentage points vs. the first quarter of 2023. Our growth drivers continue to provide confidence in our Pivot to Growth strategy, highlighted by strong growth from AUSTEDO, a successful new innovative product launch of UZEDYTM and growth of our generics business in local currency terms. With this solid performance, we are slightly increasing the midpoint of our revenue guidance for the year and reaffirming all other guidance items."

Mr. Francis continued, "As we remain determined to execute on our growth strategy, we are continuing to focus on our late-stage innovative pipeline delivery and early-stage pipeline development, both organically and through collaborations."

Pivot to Growth Strategy

In May 2023, we introduced our new "Pivot to Growth" strategy, which is based on four key pillars: (I) delivering on our growth engines, mainly AUSTEDO, UZEDYTM and our late-stage pipeline of biosimilars; (ii) stepping up innovation through delivering on our late-stage innovative pipeline assets as well as building up our early-stage pipeline organically and potentially through business development activities; (iii) sustaining our generics medicines powerhouse with a global commercial footprint, focused portfolio, pipeline and manufacturing footprint; and (iv) focusing our business by optimizing our portfolio and global manufacturing footprint to enable strategic capital deployment to accelerate our near and long-term growth engines and reorganizing certain of our business units to a more optimal structure, while also reorganizing key business units to enhance operational efficiency.

Second Quarter 2023 Consolidated Results

Revenues in the second quarter of 2023 were $3,878 million, an increase of 2% compared to the second quarter of 2022. In local currency terms, revenues increased by 4%, mainly due to higher revenues from AUSTEDO and Anda in our North America segment and from generic products in our International Markets segment, partially offset by lower revenues from generic products and from COPAXONE in our North America segment as well as from API sales to third parties.

Exchange rate movements during the second quarter of 2023, including hedging effects, negatively impacted our revenues by $51 million compared to the second quarter of 2022. Exchange rate movements during the second quarter of 2023, including hedging effects, negatively impacted our operating income and non-GAAP operating income by $38 million and $37 million, respectively, compared to the second quarter of 2022.

Gross profit was $1,796 million in the second quarter of 2023, flat compared to the second quarter of 2022. Gross profit margin was 46.3% in the second quarter of 2023, compared to 47.4% in the second quarter of 2022. Non-GAAP gross profit was $2,023 million in the second quarter of 2023, a decrease of 2% compared to the second quarter of 2022. Non-GAAP gross profit margin was 52.2% in the second quarter of 2023, compared to 54.4% in the second quarter of 2022. This decrease in both gross profit margin and non-GAAP gross profit margin was mainly driven by rising costs due to inflationary and other macroeconomic pressures, an increase in revenues with lower profitability from Anda in our North America segment and lower revenues from COPAXONE, partially offset by higher revenues from AUSTEDO.

Research and Development (R&D) expenses in the second quarter of 2023 were $240 million, an increase of 5% compared to $228 million in the second quarter of 2022. Our higher R&D expenses in the second quarter of 2023, compared to the second quarter of 2022, were mainly due to an increase in neuroscience (mainly neuropsychiatry), in immunology and immuno-oncology, as well as in various generics and biosimilar products.

Selling and Marketing (S&M) expenses in the second quarter of 2023 were $603 million, an increase of 2% compared to the second quarter of 2022.

General and Administrative (G&A) expenses in the second quarter of 2023 were $307 million, a decrease of 2% compared to the second quarter of 2022.

Other income in the second quarter of 2023 was $33 million, compared to $34 million in the second quarter of 2022. Other income in the second quarter of 2023 included a capital gain from the sale of assets related to our International Markets segment. Other income in the second quarter of 2022 was mainly related to a capital gain related to the sale of an R&D site.

Operating loss in the second quarter of 2023 was $646 million, compared to an operating loss of $949 million in the second quarter of 2022. Operating loss as a percentage of revenues was 16.7% in the second quarter of 2023, compared to an operating loss as a percentage of revenues of 25.1% in the second quarter of 2022. The lower operating loss and operating loss margin in the second quarter of 2023 were mainly due to higher legal settlements and loss contingencies in the second quarter of 2022. Non-GAAP operating income in the second quarter of 2023 was $1,011 million representing a non-GAAP operating margin of 26.1% compared to non-GAAP operating income of $1,019 million representing a non-GAAP operating margin of 26.9% in the second quarter of 2022. The decrease in non-GAAP operating margin in the second quarter of 2023 was mainly impacted by lower non-GAAP gross profit margin, as discussed above, partially offset by a decrease in operating expenses.

Adjusted EBITDA was $1,125 million in the second quarter of 2023, flat compared to $1,134 million in the second quarter of 2022.

Financial expenses, net in the second quarter of 2023 were $268, mainly comprised of net-interest expenses of $240 million. In the second quarter of 2022, financial expenses were $211 million, mainly comprised of net-interest expenses of $229 million, partially offset by a positive exchange rate impact driven mainly from currencies which we were unable to hedge, such as the Russian ruble.

In the second quarter of 2023, we recognized a tax benefit of $16 million on a pre-tax loss of $914 million. Teva’s tax rate for the second quarter of 2023 was mainly affected by impairments, legal settlements, amortization, and interest expense disallowances. In the second quarter of 2022, we recognized a tax benefit of $900 million on a pre-tax loss of $1,160 million, mainly due to the realization of losses related to an investment in one of our U.S. subsidiaries.

Non-GAAP tax rate in the second quarter of 2023 was 15.2%, compared to 7.7% in the second quarter of 2022. Our non-GAAP tax rate in the second quarter of 2023 was mainly affected by the generation of profits in various jurisdictions with different tax rates, interest expense disallowances, tax benefits in Israel and other countries, as well as infrequent or non-recurring items. Our non-GAAP tax rate in the second quarter of 2022 was mainly affected by a portion of the realization of losses related to an investment in one of our U.S. subsidiaries, as well as the mix of products we sold and interest expense disallowances.

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

Net loss attributable to Teva and loss per share in the second quarter of 2023 were $863 million and $0.77, respectively, compared to $232 million and $0.21, respectively, in the second quarter of 2022. The higher net loss in the second quarter of 2023 was mainly due to lower tax benefit, partially offset by lower operating loss, as discussed above. Non-GAAP net income attributable to Teva and non-GAAP diluted earnings per share in the second quarter of 2023 were $629 million and $0.56, respectively, compared to $754 million and $0.68, respectively, in the second quarter of 2022.

As of June 30, 2023 and 2022, the fully diluted share count for purposes of calculating our market capitalization was approximately 1,157 million and 1,144 million, respectively.

Non-GAAP information: net non-GAAP adjustments in the second quarter of 2023 were $1,492 million. Non-GAAP net income attributable to Teva and non-GAAP diluted EPS for the second quarter of 2023 were adjusted to exclude the following items:

Amortization of purchased intangible assets of $162 million, of which $145 million is included in cost of sales and the remaining $16 million in S&M expenses;
Impairment of long-lived assets of $74 million;
Goodwill impairment of $700 million;
Legal settlements and loss contingencies of $462 million;
Contingent consideration expenses of $70 million;
Equity compensation expenses of $30 million;
Restructuring expenses of $10 million;
Accelerated depreciation of $24 million;
Financial expenses of $16 million;
Costs related to regulatory actions taken in facilities of $1 million;
Other non-GAAP items of $123 million;
Items attributable to non-controlling interests of $49 million; and
Corresponding tax effects and unusual tax items of $131 million.
We believe that excluding such items facilitates investors’ understanding of our business including underlying performance trends, thereby improving the comparability of our business performance results between reporting periods.

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

Cash flow generated from operating activities during the second quarter of 2023 was $324 million, compared to $123 million in the second quarter of 2022. The higher cash flow generated in the second quarter of 2023 resulted mainly from changes in working capital items, including a positive impact from accounts receivables, net of SR&A, and from inventory levels, partially offset by a negative impact from accounts payables.

During the second quarter of 2023, we generated free cash flow of $632 million, which we define as comprising $324 million in cash flow generated from operating activities, $371 million in beneficial interest collected in exchange for securitized accounts receivables (under our EU securitization program) and $56 million in proceeds from divestitures of businesses and other assets, partially offset by $119 million in cash used for capital investment. During the second quarter of 2022, we generated free cash flow of $301 million, which we define as comprising $123 million in cash flow generated from operating activities, $287 million in beneficial interest collected in exchange for securitized accounts receivables and $18 million in proceeds from divestitures of businesses and other assets, partially offset by $127 million in cash used for capital investment. The increase in the second quarter of 2023, resulted mainly from higher cash flow generated from operating activities, as well as higher proceeds from sale of business and long-lived assets.

As of June 30, 2023, our debt was $20,678 million, compared to $21,212 million as of December 31, 2022. This decrease was mainly due to $646 million senior notes repaid at maturity, partially offset by $156 million of exchange rate fluctuations. Additionally, during the first quarter of 2023, we repurchased $2,506 million aggregate principal amount of notes upon consummation of a cash tender offer, and issued $2,445 million of sustainability-linked senior notes, net of issuance costs. In July 2023, a total amount of $700 million was withdrawn under the RCF and is outstanding as of the date of this Press Release. In addition, in July 2023, we repaid $1,000 million of our 2.8% senior notes at maturity. The portion of total debt classified as short-term as of June 30, 2023 and as of December 31, 2022 was 10%. Our average debt maturity was approximately 6.2 years as of June 30, 2023, compared to 5.8 years as of December 31, 2022.

Segment Results for the Second Quarter of 2023

North America Segment

Our North America segment includes the United States and Canada.

The following table presents revenues, expenses and profit for our North America segment for the three months ended June 30, 2023 and 2022:

Three months ended June 30,

2023

2022

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

Revenues

$

1,991

100%

$

1,904

100%

Gross profit

1,046

52.5%

1,010

53.0%

R&D expenses

159

8.0%

147

7.7%

S&M expenses

264

13.3%

256

13.4%

G&A expenses

106

5.3%

127

6.7%

Other income

(4)

§

(1)

§

Segment profit*

$

520

26.1%

$

481

25.3%

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

§ Represents an amount less than 0.5%.

Revenues from our North America segment in the second quarter of 2023 were $1,991 million, an increase of $87 million, or 5%, compared to the second quarter of 2022. This increase was mainly due to higher revenues from certain innovative products, primarily AUSTEDO and AJOVY, as well as Anda, partially offset by lower revenues from generic products, COPAXONE and BENDEKA and TREANDA.

Revenues in the United States, our largest market, were $1,891 million in the second quarter of 2023, an increase of $118 million or 7% compared to the second quarter of 2022.

Revenues by Major Products and Activities

The following table presents revenues for our North America segment by major products and activities for the three months ended June 30, 2023 and 2022:

Three months ended

June 30,

Percentage

Change

2023

2022

2023-2022

(U.S. $ in millions)

Generic products

$

969

$

1,026

(6%)

AJOVY

57

49

16%

AUSTEDO

308

204

51%

BENDEKA and TREANDA

69

83

(17%)

COPAXONE

64

94

(33%)

Anda

392

308

27%

Other

133

139

(4%)

Total

$

1,991

$

1,904

5%

Generic products revenues in our North America segment (including biosimilars) in the second quarter of 2023 were $969 million, a decrease of 6% compared to the second quarter of 2022, mainly due to increased competition to parts of our portfolio.

In the second quarter of 2023, our total prescriptions were approximately 319 million (based on trailing twelve months), representing 8.4% of total U.S. generic prescriptions, compared to approximately 302 million (based on trailing twelve months), representing 8.2% of total U.S. generic prescriptions in the second quarter of 2022, all according to IQVIA data.

AJOVY revenues in our North America segment in the second quarter of 2023 increased by 16% to $57 million, compared to the second quarter of 2022, mainly due to growth in volume. In the second quarter of 2023, AJOVY’s exit market share in the United States in terms of total number of prescriptions was 25.1% compared to 24.4% in the second quarter of 2022.

AUSTEDO revenues in our North America segment in the second quarter of 2023 increased by 51%, to $308 million, compared to $204 million in the second quarter of 2022, mainly due to growth in volume and the launch of AUSTEDO XR in May 2023.

AUSTEDO XR (deutetrabenazine) extended-release tablets was approved by the FDA on February 17, 2023, and became commercially available in the U.S. in May 2023. AUSTEDO XR is a new once-daily formulation indicated in adults for tardive dyskinesia and chorea associated with Huntington’s disease, additional to the currently marketed twice-daily AUSTEDO. AUSTEDO XR is protected by eight Orange Book patents expiring between 2031 and 2041.

UZEDY (risperidone) extended-release injectable suspension was approved by the FDA on April 28, 2023 for the treatment of schizophrenia in adults, and was launched in the U.S. in May 2023. UZEDY is the first subcutaneous, long-acting formulation of risperidone that controls the steady release of risperidone. UZEDY is protected by nine Orange Book patents expiring between 2025 and 2033.

BENDEKA and TREANDA combined revenues in our North America segment in the second quarter of 2023 decreased by 17% to $69 million, compared to the second quarter of 2022, mainly due to generic bendamustine product entry into the market. The orphan drug exclusivity that had attached to bendamustine products expired in December 2022.

COPAXONE revenues in our North America segment in the second quarter of 2023 decreased by 33% to $64 million, compared to the second quarter of 2022, mainly due to generic competition in the United States and a decrease in glatiramer acetate market share due to availability of alternative therapies.

Anda revenues from third-party products in our North America segment in the second quarter of 2023 increased by 27% to $392 million, compared to $308 million in the second quarter of 2022, mainly due to higher demand.

North America Gross Profit

Gross profit from our North America segment in the second quarter of 2023 was $1,046 million, an increase of 4%, compared to $1,010 million in the second quarter of 2022.

Gross profit margin for our North America segment in the second quarter of 2023 decreased to 52.5%, compared to 53.0% in the second quarter of 2022. This decrease was mainly due to higher cost of goods sold, mainly driven by rising costs due to inflationary and other macroeconomic pressures, as well as an increase in revenues with lower profitability from Anda, partially offset by an increase in revenues with higher profitability from AUSTEDO.

North America Profit

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

Profit from our North America segment in the second quarter of 2023 was $520 million, an increase of 8% compared to $481 million in the second quarter of 2022. This increase was mainly due to higher revenues from certain innovative products, primarily AUSTEDO.

Europe Segment

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

The following table presents revenues, expenses and profit for our Europe segment for the three months ended June 30, 2023 and 2022:

Three months ended June 30,

2023

2022

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

Revenues

$

1,163

100%

$

1,171

100%

Gross profit

640

55.0%

703

60.0%

R&D expenses

53

4.6%

56

4.7%

S&M expenses

194

16.7%

196

16.8%

G&A expenses

61

5.2%

63

5.4%

Other income

(1)

§

(1)

§

Segment profit*

$

334

28.7%

$

389

33.2%

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

§ Represents an amount less than 0.5%.

Revenues from our Europe segment in the second quarter of 2023 were $1,163 million, a decrease of 1%, or $8 million, compared to the second quarter of 2022. In local currency terms, revenues were flat compared to second quarter of 2022. Revenues in the second quarter of 2023 included $1 million from a negative hedging impact, which is included in "Other" in the table below. Revenues in the second quarter of 2022 included $31 million from a positive hedging impact, which is included in "Other" in the table below.

Revenues by Major Products and Activities

The following table presents revenues for our Europe segment by major products and activities for the three months ended June 30, 2023 and 2022:

Three months ended

June 30,

Percentage

Change

2023

2022

2023-2022

(U.S. $ in millions)

Generic products

$

909

$

873

4%

AJOVY

39

29

32%

COPAXONE

60

72

(17%)

Respiratory products

66

65

2%

Other

89

131

(32%)

Total

$

1,163

$

1,171

(1%)

Generic products revenues (including OTC and biosimilar products) in our Europe segment in the second quarter of 2023, increased by 4% to $909 million, compared to the second quarter of 2022. In local currency terms, revenues increased by 2%, mainly due to higher demand and price increases as well as from generic product launches.

AJOVY revenues in our Europe segment in the second quarter of 2023 increased by 32% in both U.S. dollars and local currency terms to $39 million, compared to $29 million in the second quarter of 2022. This increase was mainly due to growth in the European countries in which AJOVY had previously been launched.

COPAXONE revenues in our Europe segment in the second quarter of 2023 decreased by 17% to $60 million, compared to the second quarter of 2022. In local currency terms, revenues decreased by 21%, due to price reductions and a decline in volume resulting from competing glatiramer acetate products.

Respiratory products revenues in our Europe segment in the second quarter of 2023 increased by 2% to $66 million compared to the second quarter of 2022. In local currency terms, revenues were flat compared to the second quarter of 2022.

Europe Gross Profit

Gross profit from our Europe segment in the second quarter of 2023 was $640 million, a decrease of 9% compared to $703 million in the second quarter of 2022.

Gross profit margin for our Europe segment in the second quarter of 2023 decreased to 55.0%, compared to 60.0% in the second quarter of 2022. This decrease was mainly due to higher cost of goods sold, mainly driven by rising costs due to inflationary and other macroeconomic pressures, as well as a favorable impact of hedging activities in the second quarter of 2022.

Europe Profit

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

Profit from our Europe segment in the second quarter of 2023 was $334 million, a decrease of 14%, compared to $389 million in the second quarter of 2022. This decrease was mainly due to lower gross profit as described above.

International Markets Segment

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

The following table presents revenues, expenses and profit for our International Markets segment for the three months ended June 30, 2023 and 2022:

Three months ended June 30,

2023

2022

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

Revenues

$

479

100%

$

454

100%

Gross profit

254

53.2%

242

53.3%

R&D expenses

21

4.3%

19

4.2%

S&M expenses

110

23.0%

99

21.7%

G&A expenses

29

6.0%

30

6.7%

Other income

(28)

(5.9%)

(1)

§

Segment profit*

$

124

25.8%

$

95

20.9%

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

§ Represents an amount less than 0.5%.

Revenues from our International Markets segment in the second quarter of 2023 were $479 million, an increase of 5% compared to the second quarter of 2022. In local currency terms, revenues increased by 13% compared to the second quarter of 2022, mainly due to higher revenues from generic products in most markets, partially offset by regulatory price reductions and generic competition to off-patented products in Japan.

In the second quarter of 2023, revenues were negatively impacted by exchange rate fluctuations of $35 million, net of hedging effects, compared to the second quarter of 2022. Revenues in the second quarter of 2023 included a positive hedging impact of $6 million, compared to a negative hedging impact of $17 million in the second quarter of 2022, which are included in "Other" in the table below.

Revenues by Major Products and Activities

The following table presents revenues for our International Markets segment by major products and activities for the three months ended June 30, 2023 and 2022:

Three months ended

June 30,

Percentage

Change

2023

2022

2023-2022

(U.S. $ in millions)

Generic products

$

394

$

394

§

AJOVY

9

10

(18%)

COPAXONE

10

9

1%

Other

67

40

68%

Total

$

479

$

454

5%

§ Represents an amount less than 0.5%.

Generic products revenues in our International Markets segment in the second quarter of 2023, which include OTC products, were flat compared to the second quarter of 2022. In local currency terms, revenues increased by 13% compared to the second quarter of 2022, mainly due to higher revenues in most markets, driven by price increases largely as a result of rising costs due to inflationary pressure, partially offset by regulatory price reductions and generic competition to off-patented products in Japan.

AJOVY was launched in certain markets in our International Markets segment, including in Japan in August 2021. We are moving forward with plans to launch AJOVY in other markets. AJOVY revenues in our International Markets segment in the second quarter of 2023 were $9 million, compared to $10 million in the second quarter of 2022.

COPAXONE revenues in our International Markets segment in the second quarter of 2023 were $10 million compared to $9 million in the second quarter of 2022.

AUSTEDO was launched in China and Israel during 2021 and in Brazil in 2022, for the treatment of chorea associated with Huntington’s disease and for the treatment of tardive dyskinesia. We continue with additional submissions in various other markets.

International Markets Gross Profit

Gross profit from our International Markets segment in the second quarter of 2023 was $254 million, an increase of 5% compared to $242 million in the second quarter of 2022.

Gross profit margin for our International Markets segment in the second quarter of 2023 decreased to 53.2%, compared to 53.3% in the second quarter of 2022. This decrease was mainly due to regulatory price reductions and generic competition to off-patented products in Japan, as well as rising costs due to inflationary and other macroeconomic pressures, partially offset by price increases largely as a result of such inflationary pressures, and the negative hedging impact in the second quarter of 2022.

International Markets Profit

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

Profit from our International Markets segment in the second quarter of 2023 was $124 million, an increase of 30%, compared to $95 million in the second quarter of 2022. This increase was mainly due to higher other income and higher gross profit in the second quarter of 2023, partially offset by higher S&M expenses in the second quarter of 2023.

Other Activities

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

Revenues from other activities in the second quarter of 2023 were $245 million, a decrease of 5% in both U.S. dollars and in local currency terms compared to the second quarter of 2022.

API sales to third parties in the second quarter of 2023 were $152 million, a decrease of 14% in both U.S. dollars and local currency terms, compared to the second quarter of 2022.

On August 2, 2023 Surface Oncology (Nasdaq: SURF), a clinical-stage immuno-oncology company developing next-generation immunotherapies that target the tumor microenvironment, reported financial results and corporate highlights for the second quarter 2023 (Press release, Surface Oncology, AUG 2, 2023, View Source [SID1234633662]).

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"We are pleased with the progress we have made over the past several months which includes the advancement of the SRF388 and SRF114 clinical trials and the significant efforts we have undertaken towards completing our planned merger with Coherus BioSciences," said Rob Ross, M.D., chief executive officer of Surface. "To truly realize the potential of SRF388 and SRF114, it is essential that these molecules are developed with both the resources and companion drugs needed to successfully advance them through the clinic and bring them to the market. We firmly believe that with Coherus, our programs will have the best possible opportunity to benefit patients and realize value for our shareholders."

Proposed Merger of Surface Oncology and Coherus BioSciences
As announced on June 16, 2023, the proposed merger will strengthen Coherus’ pipeline with global rights to two innovative, competitively positioned, clinical-stage assets: SRF388, the only IL-27 targeted antibody in clinical development which has demonstrated activity as a monotherapy and in combination with checkpoint inhibitors; and SRF114, a high affinity, fully human antibody demonstrated to specifically bind to CCR8. SRF388 and SRF114 have potential as monotherapy and as combination treatments with other immuno-oncology agents, including Coherus’ toripalimab.

In conjunction with the merger announcement, Surface conducted a reduction in force that affected approximately 30 employees or 50 percent of the workforce. Surface anticipates it will have net cash of $20 million to $25 million at the closing of the proposed merger.

If the merger is not approved by shareholders, Surface anticipates its remaining cash and cash equivalents will provide runway through 2023, compared to its previous guidance of cash runway into the second half of 2024. This reduced cash runway is a result of expenditures related to the merger including repayment of a $25 million loan and costs associated with the termination of the lease at 50 Hampshire Street. If the merger does not close, Surface’s board of directors intends to evaluate all viable strategic alternatives including bankruptcy or dissolution proceedings.

Near-term Corporate Milestones
Surface Oncology will hold a Special Meeting of Stockholders on September 7, 2023, to approve the merger with Coherus. A definitive proxy statement was filed with the Securities and Exchange Commission and mailed to all registered stockholders as of July 21, 2023, the record date. The Surface Oncology board of directors unanimously recommends that stockholders vote in favor of all proposals.

Financial Results
As of June 30, 2023, cash, cash equivalents and marketable securities were $56.3 million, compared to $124.8 million as of December 31, 2022.

General and administrative (G&A) expenses were $8.6 million for the second quarter ended June 30, 2023, compared to $6.4 million for the same period in 2022. The increase primarily relates to an increase in legal and other professional fees related to the proposed merger with Coherus. G&A expenses included $0.8 million in stock-based compensation expense for the second quarter ended June 30, 2023.

Research and development (R&D) expenses were $13.8 million for the second quarter ended June 30, 2023, compared to $18.2 million for the same period in 2022. This decrease was primarily driven by a reduction in manufacturing costs for our SRF388 program and the strategic decision to pause the SRF617 program as part of our corporate restructuring in November 2022. R&D expenses included $0.4 million in stock-based compensation expense for the second quarter ended June 30, 2023.

Restructuring expenses were $3.2 million for the second quarter ended June 30, 2023. The company did not record a restructuring expense for the second quarter ended June 30, 2022. The increase relates to $2.3 million of severance and related costs and $0.9 million of impairment charges related to laboratory equipment that have been classified as held for sale.

For the second quarter ended June 30, 2023, net loss was $28.2 million, or basic and diluted net loss per share of $0.46. Net loss was $25.2 million for the same period in 2022, or basic and diluted net loss per share of $0.46.

Surface projects that current cash and cash equivalents are sufficient to fund the company through 2023.

About SRF388
SRF388 is a fully human anti-IL-27 antibody designed to inhibit the activity of this immunosuppressive cytokine. Surface has identified particular tumor types, including liver and lung cancer, where IL-27 appears to play an important role in the immunosuppressive tumor microenvironment and may contribute to resistance to treatment with checkpoint inhibitors. SRF388 targets the rate-limiting p28 subunit of IL-27, and preclinical studies have shown that treatment with SRF388 blocks the immunosuppressive biologic effects of IL-27, resulting in immune cell activation in combination with other cancer therapies including anti-PD-1 therapy, as well as potent anti-tumor effects as a monotherapy. Furthermore, Surface has identified a potential biomarker associated with IL-27 that may be useful in helping to identify patients most likely to respond to SRF388. In November 2020, Surface announced that SRF388 was granted Orphan Drug designation and Fast Track designation for the treatment of refractory hepatocellular carcinoma from the United States Food and Drug Administration.

About SRF114
SRF114 is a fully human, afucosylated anti-CCR8 antibody designed to preferentially deplete CCR8+ Treg cells within the tumor microenvironment. In preclinical studies, Surface has shown that SRF114 induces antibody-dependent cellular cytotoxicity (ADCC) and/or antibody-dependent cellular phagocytosis (ADCP) pathways to deplete intratumoral Treg cells. In addition, SRF114 reduced tumor growth in murine models. These findings support the advancement of SRF114 as a therapeutic candidate that holds the potential to drive anti-tumor immunity in patients.

On August 2, 2023 SpringWorks Therapeutics, Inc. (Nasdaq: SWTX), a clinical-stage biopharmaceutical company focused on developing life-changing medicines for patients with severe rare diseases and cancer, reported second quarter financial results for the period ended June 30, 2023 and provided an update on recent company developments (Press release, SpringWorks Therapeutics, AUG 2, 2023, View Source [SID1234633661]).

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"Our team continues to work with urgency and is ready to serve patients with desmoid tumors following the anticipated FDA approval of nirogacestat later this year," said Saqib Islam, Chief Executive Officer of SpringWorks. "We also believe that mirdametinib has the potential to be a best-in-class therapy for patients with NF1-PN and look forward to reporting topline data from our ReNeu trial in the fourth quarter while simultaneously advancing our portfolio of opportunities across our rare oncology, BCMA combinations in multiple myeloma, and biomarker-defined metastatic solid tumors programs."

Recent Business Highlights and Upcoming Milestones

Rare Oncology

In June 2023, SpringWorks announced that the U.S. Food and Drug Administration (FDA) has updated the Prescription Drug User Fee Act (PDUFA) action date for the New Drug Application (NDA) for nirogacestat for the treatment of adults with desmoid tumors to allow more time to review additional analyses of previously submitted data that had been provided by SpringWorks in response to the FDA’s information requests. No additional data or studies have been requested by the FDA at this time. The new PDUFA action date is November 27, 2023.
In June 2023, additional data from the Phase 3 DeFi trial assessing the impact of nirogacestat on pain, tumor volume, and T2 hypersensitivity in adults with desmoid tumors were presented at the 2023 American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) Annual Meeting. Statistically significant and clinically meaningful reductions in pain were observed with nirogacestat compared with placebo at Cycle 10 across three prespecified pain assessment tools evaluated in DeFi. Reductions in pain were rapid, becoming evident as early as Cycle 2 (the first post-treatment timepoint evaluated), and these reductions were sustained through to the end of the double-blind phase of the trial. In addition, researchers presented data from the DeFi trial demonstrating that treatment with nirogacestat led to significantly improved median best change from baseline in MRI-assessed tumor volume of the largest target tumor compared with placebo. In addition, significant improvement in the median best percent change in T2 hyperintensity signal ratio of the largest target tumor compared with placebo was also observed with nirogacestat treatment.
In May 2023, SpringWorks announced full enrollment of the Phase 2 trial evaluating nirogacestat as a monotherapy in patients with recurrent ovarian granulosa cell tumors. SpringWorks expects to report initial data from the trial in 2024.
SpringWorks expects to present topline data from the pediatric and adult cohorts of the Phase 2b ReNeu trial evaluating mirdametinib, an investigational MEK inhibitor, in NF1-associated plexiform neurofibromas (NF1-PN) in the fourth quarter of 2023. If these data are positive, SpringWorks plans to submit an NDA to the FDA for mirdametinib for the treatment of NF1-PN in the first half of 2024.
B-cell Maturation Antigen (BCMA) Combinations in Multiple Myeloma

SpringWorks continues to evaluate nirogacestat as part of several BCMA combination therapy regimens across treatment lines in collaboration with industry leaders.
In June 2023, updated clinical data from the Phase 1/2 study sponsored by GSK plc evaluating nirogacestat in combination with low-dose belamaf (belantamab mafodotin-blmf, GSK’s antibody-drug conjugate) in patients with relapsed or refractory multiple myeloma (RRMM) were presented at the European Hematology Association (EHA) (Free EHA Whitepaper) 2023 Congress. These clinical data continue to support that combining nirogacestat with a low dose of belamaf may result in comparable efficacy to a higher monotherapy belamaf dose while simultaneously substantially reducing the frequency of high-grade ocular adverse events.
In June 2023, new data from the Phase 1b clinical trial sponsored by Janssen Research & Development, LLC (Janssen) evaluating nirogacestat in combination with teclistamab, Janssen’s bispecific antibody targeting BCMA and CD3, were presented at EHA (Free EHA Whitepaper), representing the first clinical data set of nirogacestat in combination with a BCMA bispecific agent. The results demonstrated that high and deep response rates were observed with the nirogacestat plus teclistamab combination across all dose levels assessed and the safety profile was optimized with delayed administration of lower-dose nirogacestat.
Biomarker-Defined Metastatic Solid Tumors

In April 2023, updated clinical data from the Phase 1b trial evaluating mirdametinib in combination with BeiGene’s investigational RAF dimer inhibitor, lifirafenib, in patients with advanced or refractory solid tumors with RAS mutations, RAF mutations and other MAPK pathway aberrations were presented at the American Association for Cancer Research (AACR) (Free AACR Whitepaper) Annual Meeting 2023. The combination showed antitumor activity in patients with various mutations across several solid tumor types and support the advancement of this combination into the dose-expansion portion of the study, which will evaluate the combination in patients with NRAS-mutated solid tumors. The expansion is expected to start in the second half of 2023.
In April 2023, updated clinical data from the Phase 1a/1b study of brimarafenib (BGB-3245), an investigational, selective RAF dimer inhibitor, in adult patients with advanced or refractory solid tumors harboring MAPK pathway aberrations were presented at AACR (Free AACR Whitepaper). Objective responders included patients with tumors harboring BRAF V600E that had progressed on prior BRAF/MEK inhibitors with or without checkpoint inhibitor treatment, BRAF Class II mutation, BRAF fusion, NRAS and KRAS mutations. These data supported the advancement of brimarafenib into the Phase 1b dose expansion portion of the study, which has been enrolling patients since October 2022 in defined cohorts.
Patients continue to be enrolled in the SpringWorks-sponsored Phase 1/2a combination study of brimarafenib and mirdametinib.
In April 2023, SpringWorks presented new preclinical data for SW-682, the Company’s TEAD inhibitor development candidate, at AACR (Free AACR Whitepaper). The data provide promising evidence of SW-682’s anti-tumor activity, a favorable pharmacokinetics profile and good tolerability in mice, and further support SpringWorks’ thesis that TEAD palmitoylation represents a rational point of intervention for Hippo-driven cancers. SpringWorks expects to file an Investigational New Drug Application for SW-682 in the fourth quarter of 2023.
Second Quarter 2023 Financial Results

Research and Development (R&D) Expenses: R&D expenses were $35.9 million for the second quarter, compared to $38.0 million for the comparable period of 2022. The decrease in R&D expenses was primarily attributable to a decrease in external costs related to drug manufacturing, clinical trials and other research, partially offset by an increase in internal costs driven by the growth in employee costs associated with increases in the number of personnel, including an increase in stock-based compensation expense.
General and Administrative (G&A) Expenses: G&A expenses were $47.0 million for the second quarter, compared to $31.0 million for the comparable period of 2022. The increase in G&A expenses was largely attributable to commercial readiness activities to support the U.S. launch of nirogacestat, if approved, for the treatment of adults with desmoid tumors. The increase in internal costs was attributable to the growth in employee costs associated with increases in the number of personnel, including an increase in stock-based compensation expense, driven by the growth of our commercial organization, which included establishing certain sales, marketing, and commercialization functions. The increase in consulting and professional services was also primarily attributable to commercial readiness activities as we expand the capabilities of the organization.
Net Loss Attributable to Common Stockholders: SpringWorks reported net loss of $77.9 million, or $1.25 per share, for the second quarter of 2023. This compares to a net loss of $69.1 million, or $1.41 per share, for the comparable period of 2022.
Cash Position: Cash, cash equivalents and marketable securities were $476.7 million as of June 30, 2023.

On August 2, 2023 Sensei Biotherapeutics, Inc. (Nasdaq: SNSE), a clinical stage immuno-oncology company focused on the discovery and development of next generation therapeutics for cancer patients, reported that Company management will participate in a fireside chat at Canaccord Genuity’s 43rd Annual Growth Conference, being held in Boston, MA, on Wednesday, August 9, 2023 at 9:30 a.m. ET (Press release, Sensei Biotherapeutics, AUG 2, 2023, View Source [SID1234633658]).

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A webcast of Sensei’s presentation will be available in the Investors section of the Sensei website. A replay of the webcast will be on the website for approximately 90 days following the event. Registration for the webcast is available here.

On August 2, 2023 Seagen Inc. (Nasdaq:SGEN) (Seagen or the Company) reported financial results for the second quarter ended June 30, 2023, highlighting record net product sales, with significant year-over-year growth of 26 percent (Press release, Seagen, AUG 2, 2023, View Source [SID1234633657]).

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Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

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David Epstein, Chief Executive Officer of Seagen said, "I am pleased to report an exceptional quarter with strong performance and growth seen across our commercial portfolio. We remain focused on optimizing the potential of our commercial portfolio, advancing our innovative pipeline of targeted therapies with ADCs at our core and innovating through next-generation technologies." Highlights include:

PADCEV (enfortumab vedotin-ejfv) in combination with Keytruda (pembrolizumab) received accelerated approval for first-line treatment of locally advanced or metastatic urothelial cancer in the U.S. and was added as a preferred regimen to NCCN treatment guidelines. The robust launch helped drive 36% net product sales growth for PADCEV over the first quarter of 2023;
ADCETRIS (brentuximab vedotin) net product sales grew sequentially for the last six quarters. The overall survival benefit demonstrated in the ECHELON-1 trial has now been included in the U.S. ADCETRIS label. Importantly, a phase 3 study of ADCETRIS with a modified chemotherapy regimen conducted by German Hodgkin Study Group demonstrated non-inferiority with an unprecedented 3-year progression-free survival of 94.9% compared to a more chemo-intensive international standard of care in advanced classical Hodgkin lymphoma, reinforcing the powerful impact this therapy has on patients’ lives;
TUKYSA (tucatinib) performed well in the quarter, demonstrating the critical role it has in the treatment of HER2-positive metastatic breast and colorectal cancer.
"I am particularly proud of our team’s execution, demonstrating our focus on our strategic priorities as we continue to deliver transformative therapies. In May, Seagen’s shareholders overwhelmingly supported the acquisition by Pfizer, which we believe will accelerate our ability to deliver transformative cancer medicines to more patients in need around the world," concluded Epstein.

Roger Dansey, President of Research and Development and Chief Medical Officer, added, "For our marketed therapies we expect several important data readouts with congress presentations this year, potentially broadening their utility. We are prioritizing development of our most transformative pipeline assets, as demonstrated by the recently initiated phase 3 trial for disitamab vedotin in combination with pembrolizumab in previously untreated metastatic HER2-positive urothelial cancer and soon to be initiated phase 3 trial of SGN-B6A in previously treated, metastatic non-small cell lung cancer. We also expect to file at least three INDs for new medicines by the end of this year, including for multiple ADCs that utilize next-generation drug linkers and payloads, as we seek to develop future transformational medicines."

PRODUCTS HIGHLIGHTS

PADCEV

Launched PADCEV with Keytruda for First-Line Treatment of Locally Advanced or Metastatic Urothelial Cancer (la/mUC) in the U.S.: In April 2023, Seagen, Astellas and Merck announced the FDA granted PADCEV (enfortumab vedotin-ejfv) with Keytruda (pembrolizumab) accelerated approval in the U.S. as a combination therapy for the treatment of adult patients with la/mUC who are not eligible to receive cisplatin-containing chemotherapy. It is the first treatment option combining an ADC with a PD-1 inhibitor in this patient population. Continued approval for this indication is contingent upon verification and description of clinical benefit in the EV-302 confirmatory trial.
The EV-302 Trial has Completed Patient Enrollment and Topline Results are Expected by the End of 2023: The trial enrolled patients regardless of their cisplatin-eligibility or PD-L1 expression and offers a platinum-free combination regimen. An extension study in China continues to enroll patients.
NCCN Clinical Practice Guidelines in Oncology (NCCN Guidelines) for Bladder Cancer Updated to Include PADCEV and Keytruda Combination as Preferred Regimen: In April 2023, based on the results of the EV-103 trial, the NCCN Guidelines were updated to include PADCEV with Keytruda as a Preferred Regimen (Category 2A) for first-line therapy for patients with la/mUC who are not eligible to receive cisplatin-containing chemotherapy.
Data Presented in Earlier Stages of Disease for Muscle-Invasive and Non-Muscle Invasive Forms of Bladder Cancer and in First-Line la/mUC at the American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) Annual Meeting: In June 2023, presentations included long-term follow-up data from the EV-103 trial dose-escalation/Cohort A, which is evaluating PADCEV in combination with pembrolizumab as first-line treatment in patients with locally advanced or metastatic urothelial carcinoma who are ineligible to receive cisplatin-based chemotherapy, demonstrated a manageable safety profile after approximately 4 years of follow-up and clinically meaningful efficacy with a median survival exceeding 2 years.
ADCETRIS

Label Updated with Overall Survival Benefit Demonstrated in the Phase 3 ECHELON-1 Trial: In June 2023, the U.S. Prescribing Information for ADCETRIS was updated to include six-year overall survival results from the phase 3 ECHELON-1 clinical trial of ADCETRIS plus combination chemotherapy in patients with previously untreated Stage III or IV classical Hodgkin lymphoma compared to chemotherapy alone. The update was based on statistically significant 41% reduction in risk of death versus the previous standard of care in patients with frontline advanced classical Hodgkin lymphoma.
Combination Regimen Data from Multiple Clinical Trials Presented at the International Conference on Malignant Lymphoma: In June 2023, updated results from Part C of a phase 2 single-arm trial (SGN35-027) evaluating the ADCETRIS in combination with the PD-1 inhibitor nivolumab and standard chemotherapy agents doxorubicin and dacarbazine (AN+AD) for the frontline treatment of patients with early-stage classical Hodgkin lymphoma showed a high overall response rate of 98% and a 93% complete response rate. The regimen was well tolerated, with the most frequently reported treatment-related adverse events of any grade occurring in more than 30 percent of patients being nausea (65%), peripheral sensory neuropathy (47%) and fatigue (44%). Separately, a phase 3 trial, called HD21, from the clinical research cooperative German Hodgkin Study Group was presented. The results demonstrated that ADCETRIS with a modified chemotherapy regimen showed non-inferiority with unprecedented 3-year progression free survival of 94.9% versus a less tolerable international standard of care in advanced classical Hodgkin lymphoma. The 12-month post-treatment safety data were consistent with previously presented HD21 data results at the American Society of Hematology (ASH) (Free ASH Whitepaper) 2022 Annual Meeting.
TUKYSA

Data Presented in HER2-positive Biliary Tract Cancer at the ASCO (Free ASCO Whitepaper) Annual Meeting: In June 2023, data were presented from a phase 2 basket study of TUKYSA and trastuzumab in previously treated HER2-positive metastatic biliary tract cancer. The combination had clinically meaningful antitumor activity with a confirmed objective response rate of 46.7% and a median duration of response of 6.0 months. The combination was well tolerated, with the most common treatment-emergent adverse events being pyrexia (43.3%) and diarrhea (40.0%).
Topline Results for Phase 3 HER2CLIMB-02 Clinical Trial Expected in 3Q23: The Company expects to report topline results of the phase 3 HER2CLIMB-02 clinical trial evaluating TUKYSA versus placebo, in combination with Kadcyla (ado-trastuzumab emtansine), for patients with locally advanced or metastatic HER2-positive breast cancer, including those with brain metastases.
TIVDAK

Data Presented from innovaTV 207 Trial in Solid Tumors at the American Association for Cancer Research (AACR) (Free AACR Whitepaper) Annual Meeting: In April 2023, data were presented from an interim analysis of Part C from the innovaTV 207 phase 2 study of TIVDAK (tisotumab vedotin-tftv) given every 2 weeks in patients with recurrent or metastatic squamous cell carcinoma of the head and neck who have progressed on or after prior platinum combination, immunotherapy and targeted therapy, if eligible. Preliminary data based on the first 15 patients demonstrated encouraging antitumor activity with a confirmed overall response rate of 40% and a manageable safety profile.
Topline Results for Phase 3 innovaTV 301 Clinical Trial Anticipated As Early As YE23: The Company expects to report topline results of the phase 3 innovaTV 301 clinical trial evaluating TIVDAK monotherapy versus investigator choice chemotherapy for patients with second- or third-line recurrent or metastatic cervical cancer.
PIPELINE PROGRAMS

Initiated a Phase 3 trial for Disitamab Vedotin for Patients with HER2-Positive, Metastatic Urothelial Cancer: We initiated a phase 3 trial evaluating disitamab vedotin in combination with pembrolizumab versus chemotherapy in patients with previously untreated locally advanced or metastatic HER2-positive urothelial cancer in the third quarter of 2023.
Planned Initiation of a Phase 3 trial for SGN-B6A for Patients with Metastatic Non-Small Cell Lung Cancer: We plan to initiate a phase 3 trial evaluating SGN-B6A monotherapy compared to standard of care, docetaxel, in patients with previously treated non-small cell lung cancer in the fourth quarter of 2023.
Multiple Abstracts on Early-Stage Pipeline Presented at the AACR (Free AACR Whitepaper) and ASCO (Free ASCO Whitepaper) Annual Meetings: Early-stage pipeline data presented at AACR (Free AACR Whitepaper) included clinical, preclinical and discovery research programs. The first clinical data was presented for SEA-TGT that demonstrated a manageable and tolerable safety profile with initial monotherapy antitumor activity in solid tumors and lymphomas. In addition, data on multiple new ADC technologies were presented. These included the first preclinical data from Seagen and Sanofi for a novel topoisomerase I inhibitor ADC targeting CEACAM5, which demonstrated potent antitumor activity in patient-derived colorectal cancer models. Early-stage pipeline data presented at ASCO (Free ASCO Whitepaper) included updated phase 1 data for SGN-B6A, a wholly-owned, first-in-class vedotin ADC directed to integrin beta-6, a novel target that is highly expressed in multiple solid tumors.
For additional information on Seagen’s pipeline, visit www.seagen.com/science/pipeline.

CORPORATE HIGHLIGHT

Seagen Stockholders Approve Acquisition by Pfizer: In May 2023, at a special meeting, Seagen stockholders voted to approve a proposal to adopt the previously announced merger agreement under which Pfizer will acquire Seagen for $229 per share in cash. More than 99% of the shares that were voted at the meeting, representing approximately 88% of the shares of Seagen common stock issued and outstanding as of the record date for the special meeting, were voted in favor of the proposal to adopt the merger agreement. Subject to the fulfillment of customary closing conditions, including receipt of required regulatory approvals, the acquisition is expected to close in late 2023 or early 2024.
SECOND QUARTER AND SIX-MONTHS 2023 FINANCIAL RESULTS

Revenues: Total revenues for the second quarter and six months ended June 30, 2023 were $604 million and $1.1 billion, respectively, compared to $498 million and $924 million for the same periods in 2022, primarily driven by growth in net product sales.

Revenues included the following components:

Three months ended June 30,

Six months ended June 30,

(dollars in millions)

2023

2022

% Change

2023

2022

% Change

Total Net Product Sales

$

544

$

432

26

%

$

1,013

$

815

24

%

ADCETRIS

$

262

$

202

30

%

$

505

$

383

32

%

PADCEV

$

161

$

124

30

%

$

280

$

224

25

%

TUKYSA

$

99

$

89

11

%

$

187

$

179

4

%

TIVDAK

$

22

$

17

26

%

$

41

$

29

44

%

Royalty Revenues

$

51

$

39

31

%

$

81

$

67

21

%

Collaboration and License Agreement Revenues

$

9

$

27

(68

)%

$

30

$

42

(29

)%

Note: Sum of product sales may not equal total net product sales due to rounding. Percent change reflects actual (unrounded) values.

Net Product Sales: The increases in net product sales for the second quarter and year-to-date of 2023 compared to the same periods in 2022 were driven by continued commercial execution. ADCETRIS performance was primarily attributed to volume growth, driven by greater use in frontline advanced Hodgkin lymphoma. PADCEV growth was driven by use as first-line treatment for locally advanced or metastatic urothelial cancer following its approval for this indication in April 2023. Of note, PADCEV sales in the second quarter of 2022 included $19 million in sales to another company for a clinical trial they are conducting, while no such sales were booked in the second quarter of 2023. TUKYSA performance reflects the important role it serves in the treatment of HER2-positivive metastatic breast cancer, competitive dynamics in this setting as well as early contributions from its colorectal cancer indication. TIVDAK growth reflects continued uptake in its current indication.
Royalty Revenues: Royalty revenues were primarily driven by sales of ADCETRIS outside the U.S. and Canada by Takeda as well as royalties from sales of Polivy (polatuzumab vedotin) by Roche, which is an ADC that uses Seagen technology.
Collaboration and License Agreement Revenues: The decrease in collaboration and license agreement revenues was primarily driven by a prior period milestone payment and decreased revenues from drug product supplied to collaborators.
Cost of Sales: Cost of sales for the second quarter and year-to-date in 2023 were $181 million and $293 million, respectively, compared to $106 million and $194 million for the same periods in 2022. The increases reflect higher sales of our medicines and the related gross profit share amounts owed to collaboration partners, which were $82 million and $146 million in the second quarter and year-to-date in 2023, respectively, compared to $66 million and $118 million for the same periods in 2022. Cost of sales also reflects amortization of TUKYSA acquired in-process technology costs, third-party royalties owed for PADCEV and TUKYSA net product sales, and cost of products sold. The second quarter of 2023 cost of sales included a $47 million inventory write-off related to in-process production of one of our products that did not meet a release specification that was updated in June 2023. This inventory adjustment and new release specification are not expected to impact availability of product supply required to meet current or future demand.

Research and Development (R&D) Expenses: R&D expenses for the second quarter and year-to-date in 2023 were $400 million and $756 million, respectively, compared to $304 million and $602 million for the same periods in 2022 reflecting continued investment in clinical development of the Company’s approved drugs and pipeline programs.

Selling, General and Administrative (SG&A) Expenses: SG&A expenses for the second quarter and year-to-date in 2023 were $244 million and $480 million, respectively, compared to $220 million and $394 million for the same periods in 2022. The increase 2023 were driven by ongoing commercialization efforts, as well as $36 million in expenses year-to-date associated with the pending acquisition by Pfizer and other corporate activities.

Non-cash, share-based compensation expense for the six months ended June 30, 2023 was $157 million, compared to $98 million for the same period in 2022.

Net Loss: Net loss for the second quarter of 2023 was $212 million, or $1.13 per diluted share, and net loss for the year-to-date of 2023 was $386 million, or $2.06 per diluted share.

Net loss for the second quarter of 2022 was $135 million, or $0.73 per diluted share, and net loss for the year-to-date of 2022 was $271 million, or $1.48 per diluted share.

Cash and Investments: As of June 30, 2023, Seagen had $1.3 billion in cash and investments.

CONFERENCE CALL

Given the pending acquisition of Seagen by Pfizer, Seagen is no longer providing financial guidance for 2023 and will not be hosting its quarterly conference call and does not expect to do so for future quarters. Earnings materials are available publicly on the Investor Relations page of our website at investor.seagen.com. Please direct any questions to Seagen Investor Relations at the contact information below.