On November 8, 2022 Sutro Biopharma, Inc. (Sutro or the Company) (NASDAQ: STRO), a clinical-stage oncology company pioneering site-specific and novel-format antibody drug conjugates (ADCs), reported its financial results for the quarter ended September 30, 2022, its recent business highlights, and a preview of select anticipated milestones (Press release, Sutro Biopharma, NOV 8, 2022, View Source [SID1234623418]).

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"We are pleased with the productivity and potential of our cell-free platform, as demonstrated most recently by Vaxcyte’s positive topline data readout for its 24-valent pneumococcal conjugate vaccine, VAX-24," said Bill Newell, Sutro’s Chief Executive Officer. "We feel confident in the ability of our platform to generate additional value and capital, as exemplified by the iADC collaboration with Astellas. As we look towards the end of the year, we are on track to present the STRO-002 Phase 1 dose-expansion data and expect to be disclosing the study design on a registration-enabling Phase 2 study for patients with advanced ovarian cancer."

Recent Business Highlights and Select Anticipated Milestones
STRO-002, FolRα-Targeting ADC: STRO-002 is being studied in the clinic, in both the U.S. and Europe, for patients with ovarian and endometrial cancers.

Data demonstrating the anti-leukemic activity of STRO-002 for pediatric patients with relapsed/refractory CBF2AT3-GLIS2 acute myeloid leukemia (AML) treated under ongoing compassionate use will be presented on December 10, 2022 at the 64th American Society of Hematology (ASH) (Free ASH Whitepaper) Annual Meeting and Exposition (ASH 2022) as an oral presentation. CBF2AT3-GLIS2 (CBF/GLIS) is a highly refractory and uniformly fatal oncogenic fusion and the underlying genomic cause of "RAM" phenotype AML, a megakaryoblastic leukemia subtype seen exclusively in infants and young children.
Abstract Title: Anti-Leukemic Activity of STRO-002 a Novel Folate Receptor-α (FR-α)-Targeting ADC in Relapsed/Refractory CBF2AT3-GLIS2 AML

Session: Acute Myeloid Leukemias: Investigational Therapies, Excluding Transplantation and Cellular Immunotherapies: Relapsed/Refractory AML

Date: Saturday, December 10, 2022

Session Time: 9:30 a.m. – 11:00 a.m. CST

Presentation Time: 10:45 a.m. CST

The accepted ASH (Free ASH Whitepaper) abstract is available at (View Source), and a Sutro-authored whitepaper with details about this rare indication and Sutro’s compassionate use program is available at (View Source).

Sutro expects to report additional data on efficacy, safety, and durability from the Phase 1 dose-expansion cohort in patients with advanced ovarian cancer, together with the design of a registration-enabling Phase 2 study, by the end of 2022.
Discussions with the FDA on a registrational study for patients with advanced ovarian cancer were held mid-year 2022, in which the agency signaled that an accelerated approval pathway could be available for STRO-002 in a platinum-resistant ovarian cancer patient population.
Additional ongoing clinical studies for STRO-002 include a combination study with bevacizumab for patients with advanced ovarian cancer and a dose-expansion study for patients with endometrial cancer.
STRO-001, CD74-Targeting ADC: The Phase 1 study for patients with B‑cell malignancies, including patients withnon-Hodgkin’s lymphoma (NHL) and multiple myeloma (MM), continues in dose escalation.

Dose escalation is ongoing to achieve a recommended Phase 2 dose (RP2D), with the last reported doses of 5.0 mg/kg in the MM cohort and 5.0 mg/kg in the NHL cohort.
Sutro’s partner BioNova Pharma (BioNova) is advancing clinical development of BN301 (STRO-001) for patients with hematological malignancies in Greater China. In September 2022, BioNova announced that the Center of Drug Evaluation of the National Medical Products Administration of China had approved its investigational new drug (IND) application for BN301 (STRO-001) to conduct clinical trials in patients with hematologic malignancies in China.
Additional Pipeline Programs: A Sutro Research Forum highlighted STRO-003 and Sutro’s emerging research portfolio.

STRO-003 is an optimally designed ADC targeting ROR1, with eight precisely positioned β-Glucuronidase-cleavable linkers attached to next-generation exatecan warheads, which inhibit topoisomerase-1 resulting in DNA disruption.
Patient-derived xenograft models (PDX) have shown potent cell killing by STRO-003 in low antigen expressing tumors; and STRO-003 has shown encouraging tolerability in preclinical rodent and non-human primate studies.
Sutro provided details on its product and process design, which enables its emerging portfolio including novel therapeutic modalities—for example, a single antibody which can be conjugated site-specifically with two different payloads with synergistic mechanisms.
Collaboration Updates: Sutro continues to seek to maximize the value of its proprietary cell-free platform by working with partners on programs in multiple disease spaces and geographies and has generated from collaborators an aggregate of approximately $600 million in cash through September 30, 2022, which includes payments and equity investments.

In October 2022, Vaxcyte reported positive topline data from the Phase 1/2 proof-of-concept study of its 24-valent pneumococcal conjugate vaccine candidate (VAX-24) under investigation for the prevention of invasive pneumococcal disease in adults aged 18-64. Under an existing license agreement with Vaxcyte, Sutro is eligible to receive four percent (4%) royalties on worldwide net sales of VAX-24 and any licensed vaccine candidates.
In June 2022, Sutro entered into a collaboration with Astellas on the discovery and development of immunostimulatory antibody-drug conjugates (iADCs) for three targets, including an upfront payment to Sutro of $90 million received in July 2022, and $422.5 million in potential milestones per product candidate. Sutro will also receive financial support for its research efforts and has an option to co-develop and co-commercialize product candidates in the U.S.
A $10 million milestone payment from Merck was triggered in July 2022 upon the first patient dosed in a Phase 1 study of MK-1484, a selective IL-2 agonist, under the 2018 cytokine derivative collaboration.
Sutro is manufacturing initial drug supply for the clinical development of Merck’s MK-1484, currently in a Phase 1; clinical trial materials for Bristol Myers Squibb’s (BMS) CC-99712, a BCMA‑targeting ADC for treatment of multiple myeloma, currently in Phase 1; and clinical trial materials for M1231, a MUC1-EGFR-targeting bispecific ADC, for Merck KgaA, Darmstadt, Germany, known as EMD Serono in the U.S. and Canada (EMD Serono), also currently in Phase 1.
Sutro is providing clinical drug supply to BioNova for clinical studies for BN301 (STRO-001) in Greater China. Sutro is currently supporting Tasly Biopharmaceuticals (Tasly) for initiation of clinical development activities and an IND filing in Greater China for STRO-002 and will provide initial clinical drug supply.
Third Quarter 2022 Financial Highlights
Cash, Cash Equivalents and Marketable Securities
As of September 30, 2022, Sutro had cash, cash equivalents and marketable securities of $287.3 million, ascompared to $191.6 million as of June 30, 2022, providing a projected cash runway into the first half of 2024, based on current business plans and assumptions. The above balances do not include the value associated with Sutro’s holdings of Vaxcyte common stock.

Unrealized Gain from Increase in Value of Vaxcyte Common Stock
As of September 30, 2022, Sutro held approximately 1.5 million shares of Vaxcyte common stock, with a fair value of $36.9 million. The non-operating, unrealized gain of $3.5 million in the third quarter of 2022 was due to the increase since June 30, 2022 in the estimated fair value of Sutro’s holdings of Vaxcyte common stock. Vaxcyte common stock held by Sutro will be remeasured at fair value based on the closing price of Vaxcyte’s common stock on the last trading day of each reporting period, with any non-operating, unrealized gains and losses recorded in Sutro’sstatements of operations. Sutro sold approximately 1 million shares of Vaxcyte common stock at fair market value during the period from October 1, 2022 through November 7, 2022.

Revenue
Revenue was $25.1 million for the quarter ended September 30, 2022, as compared to $8.5 million for the same period in 2021, related principally to recognition of the milestone payment from Merck and the Astellas, BMS, and EMD Serono collaborations in 2022 and the Merck, BMS, and EMD Serono collaborations in 2021. Future collaboration and license revenue from Astellas, Merck, BMS, EMD Serono, Tasly, and BioNova, and from anyadditional collaboration and license partners, will fluctuate as a result of the amount and timing of revenue recognitionof upfront, milestones, and other agreement payments.

Operating Expenses
Total operating expenses for the quarter ended September 30, 2022 were $46.4 million, as compared to $43.2 million for the same period in 2021. The third quarter of 2022 includes non-cash expenses for stock-based compensation of $6.8 million and depreciation and amortization of $1.4 million, as compared to $6.5 million and $1.1 million, respectively, in the comparable 2021 period. Total operating expenses for the quarter ended September 30, 2022 were comprised of research and development expenses of $31.7 million and general and administrative expenses of $14.6 million, which are expected to increase in 2022 as Sutro’s internal product candidates advance in clinical development and additional general and administrative expenses are incurred as a public company.

On November 8, 2022 Recursion (Nasdaq: RXRX), the clinical-stage biotechnology company industrializing drug discovery by decoding biology, reported business updates and financial results for its third quarter ending September 30, 2022 (Press release, Recursion Pharmaceuticals, NOV 8, 2022, View Source [SID1234623417]).

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"We are excited to have initiated four clinical trials in the past three quarters," said Chris Gibson, Ph.D., Co-Founder & CEO at Recursion. "In addition, our first clinical stage program discovered using our mapping and navigating approach to biology was nominated as a clinical stage program, with a Phase 2 clinical trial being planned now. We believe that our consistency in advancing our internal pipeline and transformational partnerships coupled with our willingness to continuously evolve our platform to more completely map and navigate biology and chemistry highlight Recursion as a leader within technology-enabled drug discovery."

Summary of Business Highlights

Internal Pipeline
Cerebral Cavernous Malformation (CCM) (REC-994): In March 2022, we announced the initiation of our Phase 2 SYCAMORE clinical trial, which is a double-blind, placebo-controlled safety, tolerability and exploratory efficacy study of this drug candidate in 60 participants with CCM. At this time, we continue to actively enroll participants.
Neurofibromatosis Type 2 (NF2) (REC-2282): In June 2022, we announced the initiation of our Phase 2/3 POPLAR clinical trial, which is a parallel group, two stage, randomized, multicenter study of this drug candidate in approximately 90 participants with progressive NF2-mutated meningiomas. At this time, we continue to actively enroll participants.
Familial Adenomatous Polyposis (FAP) (REC-4881): In September 2022, we announced the initiation of our Phase 2 TUPELO clinical trial, which is a multicenter, randomized, double-blind, placebo-controlled two-part clinical trial to evaluate efficacy, safety, and pharmacokinetics of REC-4881 in patients with FAP.
AXIN1/APC Mutant Cancers (REC-4881): In October 2022, we announced the nomination of REC-4881 for the potential treatment of AXIN1/APC mutant cancers with an initial focus on hepatocellular carcinoma and ovarian cancer. We have prioritized resources to accelerate planning to initiate a Phase 2 trial. The advancement of this program highlights our intent to focus our internal pipeline on oncology and oncology-like opportunities.
Clostridium difficile Colitis (REC-3964): In September 2022, we announced the initiation of our Phase 1 clinical trial, which is a first-in-human protocol evaluating single and multiple doses of REC-3964 in healthy volunteers and will assess the safety, tolerability and pharmacokinetic profile of REC-3964.
GM2 Gangliosidosis (REC-3599): Due to the advancement of our program in AXIN1/APC mutant cancers and the increasing number of oncology programs moving towards the clinic, we deprioritized our GM2 gangliosidosis program and redirected resources. We will make efforts to work with patient foundations to transfer relevant scientific knowledge.
Transformational Collaborations
We continue to advance efforts to potentially discover new therapeutics with our strategic partners in the areas of fibrotic disease (Bayer) as well as neuroscience and a single indication in gastrointestinal oncology (Roche and Genentech).
Recursion OS
Transcriptomics and Industrialized Validation: We continue to build out our scaled transcriptomics platform which has now been adopted into the research operating plans of the majority of Recursion’s active programs in order to drive validation, lead selection, and optimization. We are developing an end-to-end industrialized validation process in order to translate phenomic and transcriptomic insights from our maps of biology and chemistry.
InVivomics and Digital Tolerability: Digital tolerability is a novel in vivo method for analytical dose selection and interpretation prior to initiating efficacy studies. By the end of the year, we are planning to have 100% of new chemical entities evaluated using digital tolerability before starting any long-term efficacy studies in animals. Furthermore, we continue to increase the dimensionality of digital biomarker signals measured in our preclinical in vivo studies.
Chemical Technology and Machine Learning: We have completed the design of the remaining core component modules of our automated chemical microsynthesis platform. We envision advanced machine learning approaches as guiding experiment design and drug candidate selection while exploring new ways of building maps of biology and chemistry in order to improve our ability to predict treatments and understand causal mechanisms. Likewise, in the third quarter, we began an initiative in molecular modeling to use predictive and generative methods to drive chemistry optimization.
Additional Corporate Updates
Private Placement Offering: On October 27, 2022, we completed a private placement of common stock, raising gross proceeds of approximately $150.3 million, before deducting placement agent fees and other expenses.
ESG Reporting: In August 2022, we announced receiving a Prime Rating for ESG performance from the industry-renowned Institutional Shareholder Services (ISS). A Prime Rating is awarded to companies with ESG performance above a sector-specific threshold and is assessed by ISS using an "absolute best in class" methodology.
Third Quarter 2022 Financial Results

Cash Position: Cash and cash equivalents were $454.6 million as of September 30, 2022, which excludes proceeds from the above private placement offering.
Revenue: Total revenue, consisting primarily of revenue from collaborative agreements, was $13.2 million for the third quarter of 2022, compared to $2.5 million for the third quarter of 2021. The increase was due to revenue recognized from our Roche-Genentech collaboration.
Research and Development Expenses: Research and development expenses were $40.8 million for the third quarter of 2022, compared to $33.2 million for the third quarter of 2021. The increase in research and development expenses was due to increased clinical costs as studies progressed.
General and Administrative Expenses: General and administrative expenses were $19.5 million for the third quarter of 2022, compared to $15.7 million for the third quarter of 2021. The increase in general and administrative expenses was due to the growth in size of the company’s operations, including an increase in salaries and wages of $4.0 million and other administrative costs associated with operating a public company.
Net Loss: Net loss was $60.4 million for the third quarter of 2022, compared to a net loss of $47.4 million for the third quarter of 2021.

On November 8, 2022 Avidity Biosciences, Inc. (Nasdaq: RNA), a biopharmaceutical company committed to delivering a new class of RNA therapeutics called Antibody Oligonucleotide Conjugates (AOCs), reported financial results for the third quarter ended September 30, 2022 and highlighted recent corporate progress (Press release, Avidity Biosciences, NOV 8, 2022, View Source [SID1234623416]).

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"Consistent with our guidance for 2022, we have progressed three programs addressing three distinct rare diseases into clinical development, and we remain on track for our preliminary assessment of the MARINA trial this quarter," said Sarah Boyce, president and chief executive officer. "Our team continues to execute on our plan as we advance AOC 1020 for FSHD in the FORTITUDE trial and AOC 1044 for DMD in the EXPLORE44 trial. With close to 40 participants enrolled in the MARINA trial, we continue to gather data on AOC 1001 as we work to resolve the recent partial clinical hold on new participant enrollment as swiftly as possible."

"With approximately $425 million, inclusive of additional funds raised subsequent to September 30th, we have cash runway through 2024 allowing us to invest in the expansion of our AOC platform and our three clinical stage programs addressing rare skeletal muscle diseases," said Mike MacLean, chief financial and chief business officer.

Recent Highlights

U.S. Food and Drug Administration (FDA) placed a partial clinical hold on new participant enrollment in the Phase 1/2 MARINA clinical trial of AOC 1001 in adults with DM1. The partial hold is in response to a serious adverse event reported in a single participant in the 4mg/kg cohort of the MARINA study. All current participants, whether they are on AOC 1001 or placebo, may continue in their current dosing cohort and roll over into the MARINA open label extension (MARINA-OLE) where they will receive AOC 1001.
The Company remains on track to report a preliminary assessment from the MARINA trial in the fourth quarter of 2022.
The FDA cleared Avidity to proceed with Phase 1/2 trials for AOC 1020 for adults with FSHD and AOC 1044 for participants with DMD mutations amenable to exon 44 skipping (DMD44).
The FORTITUDE trial is a randomized, placebo-controlled, double-blind, Phase 1/2 clinical trial designed to evaluate AOC 1020 in 68 adult participants with FSHD. Click here for additional details on the FORTITUDE trial.
The EXPLORE44 trial is a randomized, placebo-controlled, double-blind, Phase 1/2 clinical trial to evaluate AOC 1044 in approximately 40 healthy volunteers and 24 participants with DMD44, ages seven to 27 years old. AOC 1044 is the first AOC PMO to enter the clinic and the first of multiple DMD programs in development at Avidity. Click here for additional details on the EXPLORE44 trial.
Avidity also announced that it presented five poster presentations at the 27th International Hybrid Annual Congress of the World Muscle Society (WMS) in Halifax, Nova Scotia, Canada. To view those presentations, please visit the publications page on the Avidity website.
Third Quarter 2022 Financial Results

Cash, Cash Equivalents and Marketable Securities: Cash, cash equivalents and marketable securities remained constant at $405.5 million as of September 30, 2022, and December 31, 2021, respectively. In addition, subsequent to September 30th, we have raised $19.4 million through our "at the market" program.

Collaboration Revenue: Collaboration revenue, including reimbursable expenses, which primarily relates to Avidity’s partnership with Eli Lilly and Company (Lilly), increased to $2.5 million for the third quarter of 2022 from $2.2 million for the third quarter of 2021 primarily due to an increase of reimbursable internal costs driven by the increase in labor rates.

Collaboration revenue was $6.5 million for the first nine months of 2022 compared with $7.5 million for the first nine months of 2021. The decrease was primarily due to timing of reimbursable collaboration-related research and development expenses resulting in the recognition of lower corresponding revenue under the collaboration with Lilly.

Research and Development (R&D) Expenses: R&D expenses include external and internal costs associated with research and development activities. These expenses were $37.3 million for the third quarter of 2022 compared with $24.8 million for the third quarter of 2021, and $104.8 million for the first nine months of 2022 compared with $68.2 million for the first nine months of 2021. The increase was primarily driven by the advancement of AOC 1001, AOC 1020, and AOC 1044, as well as internal and external costs related to the expansion of the company’s overall research capabilities.

General and Administrative (G&A) Expenses: G&A expenses primarily consist of employee-related expenses, professional fees, insurance costs, and patent filing and maintenance fees. These expenses were $10.1 million for the third quarter of 2022 compared with $6.6 million for the third quarter of 2021, and $27.3 million for the first nine months of 2022 compared with $18.8 million for the first nine months of 2021. The increase was primarily due to higher personnel costs and professional fees to support the company’s expanded operations.

On November 8, 2022 Emergent BioSolutions Inc. (NYSE: EBS) reported financial results for the third quarter ended September 30, 2022 (Press release, Emergent BioSolutions, NOV 8, 2022, View Source [SID1234623415]).

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"For more than 20 years, Emergent has been a dependable partner to customers, including the U.S. and allied governments, in helping prepare for public health threats through our products, services, and development programs," said Robert G. Kramer, president and CEO. "As we continue to strengthen our operations, be guided by financial discipline, and evaluate opportunities for growth, we remain confident in our ability to deliver results for our patients, customers, and shareholders."

SELECT Q3 2022 AND OTHER RECENT BUSINESS UPDATES

Completed the acquisition from Chimerix of its worldwide rights to TEMBEXA(R) (brincidofovir), the first U.S. Food and Drug Administration (FDA) approved smallpox oral antiviral for all ages, following the award by the Biomedical Advanced Research and Development Authority (BARDA) of a 10-year procurement contract valued at up to $680 million to deliver 1.7 million doses of TEMBEXA to the U.S. government.
Initiated a Phase 1 study to evaluate the safety and immunogenicity of EBS-LASV, a recombinant VSV-vectored Lassa virus vaccine candidate being developed for prevention of disease caused by Lassa virus infection.
Completed enrollment of participants in the pivotal Phase 3 study evaluating safety and immunogenicity of the Company’s single-dose CHIKV VLP vaccine candidate in adults aged 12 to 64; recruitment continues for the second Phase 3 study focused on adults 65 and older.
Announced data from a Phase 2 study evaluating the CHIKV VLP vaccine candidate in prior recipients of other investigational alphavirus vaccines. The study demonstrated that CHIKV VLP was well-tolerated and immunogenic in both alphavirus vaccine-naïve participants and participants previously vaccinated against the Venezuelan equine encephalitis virus.
Published in early October the 2021 ESG Report (available at View Source).
Q3 2022 FINANCIAL PERFORMANCE (1)

Product Sales, net
Anthrax vaccines
For Q3 2022, revenues from Anthrax vaccines increased $8.6 million as compared to Q3 2021. The increase is largely driven by timing of deliveries to the U.S. government (USG), specifically the Strategic National Stockpile (SNS). The Company received an AV7909 (Anthrax Vaccine Adsorbed, Adjuvanted) contract modification in September 2021 valued at approximately $399.0 million to deliver additional AV7909 doses through March 2023.

Nasal naloxone products
For Q3 2022, revenues from nasal naloxone products decreased $45.4 million as compared to Q3 2021. The decrease was driven by a reduction in commercial retail sales following the launch of a generic in December 2021. This decrease was partially offset by strong growth in unit sales of branded NARCAN(naloxone HCl) Nasal Spray to public interest customers in the U.S., as well as from sales of the authorized generic product licensed to Sandoz, which launched in December 2021.

ACAM2000
For Q3 2022, revenues from ACAM2000 decreased $31.7 million as compared to Q3 2021. The decrease was due to a lower number of doses sold to the USG, partially offset by an increased number of doses sold to non-U.S. customers at a higher price per dose.

Other (4)
For Q3 2022, revenues from other product sales decreased $15.8 million as compared to Q3 2021. The decrease was primarily due to sales of two of the Company’s Government/Medical Countermeasure (MCM) products: i) VIGIV [Vaccinia Immune Globulin Intravenous (Human)], driven by timing of deliveries to the SNS; and ii) BAT [Botulism Antitoxin Heptavalent (A, B, C, D, E, F, G) – (Equine)], driven by timing of deliveries to international customers, partially offset by an increase in sales of Anthrasil [Anthrax Immune Globulin Intravenous (human)], RSDL (Reactive Skin Decontamination Lotion Kit) and Vivotif (Typhoid Vaccine Live Oral Ty21a).

Contract Development and Manufacturing (CDMO)
CDMO Services
For Q3 2022, revenues from CDMO services decreased $76.4 million as compared to Q3 2021. This decrease is largely due to lower combined revenues of $59.1 million from AstraZeneca and Janssen reflecting the impact of reduced production activities at the Bayview facility as a result of a cessation of manufacturing activities under the AstraZeneca contract which occurred in 2021, and a pause and eventual cessation of manufacturing activities under the Janssen contract which began in Q1 2022. The decrease also reflects reduced production at the Camden facility in the quarter driven by additional investments in strengthening quality and compliance that restricted the Company’s ability to optimally utilize the existing capacity at the site. These declines in revenues were partially offset by an increase in services revenues earned at the Company’s Winnipeg facility.

CDMO Leases
For Q3 2022, revenues from CDMO leases increased $71.2 million as compared to Q3 2021. The increase was primarily due to the reversal of $86.0 million of revenue in Q3 2021 related to the Company’s public-private COVID-19 development partnership with BARDA in November 2021, partially offset by a $15.1 million decrease in lease revenues related to the Janssen contract.

Contracts and Grants
For Q3 2022, revenues from contracts and grants were consistent with Q3 2021.

Cost of Product Sales
For Q3 2022, cost of product sales decreased $17.7 million as compared to Q3 2021. The decrease is primarily due to a change in volume of product sales.

Cost of CDMO
For Q3 2022, cost of CDMO decreased $51.2 million as compared to Q3 2021. The decrease is primarily due to reduced production activities across our CDMO network in Q3 2022 compared to Q3 2021 resulting in decreased raw materials consumption. These decreases were partially offset by increased costs at the Company’s Camden facility due to additional investments in quality enhancement and improvement initiatives.

Research and Development
For Q3 2022, research and development expenses decreased $10.4 million as compared to Q3 2021. The decrease is primarily due to a decline in costs for the Company’s COVID-19 therapeutic and other product candidates.

Selling, General and Administrative
For Q3 2022, selling, general and administrative expenses decreased $1.9 million due to reduced professional services and marketing costs partially offset by higher travel costs.

Additional Financial Information

Segment Information
During Q1 2022, the Company began assessing its operating performance by focusing on two reportable segments: 1) a products segment (Products) consisting of the MCM and Commercial products business lines; and 2) a services segment (Services) consisting of the CDMO business line. The Company evaluates the performance of these reportable segments based on revenue and adjusted gross margin. Segment revenue includes external customer sales but does not include inter-segment services. The Company does not allocate contracts and grants, R&D, SG&A, amortization of intangible assets, interest and other income (expense) or taxes to its evaluation of the performance of these segments.

For the three months ended September 30, 2022, Product gross margin and Product adjusted gross margin decreased $66.6 million and $66.9 million, respectively, as compared to the three months ended September 30, 2021. The decreases in Product gross margin and Product adjusted gross margin are primarily due to decreased volumes and changes in mix.

For the nine months ended September 30, 2022, Product gross margin and Product adjusted gross margin increased $51.1 million and $50.9 million, respectively as compared to the nine months ended September 30, 2021. The increases in Product gross margin and Product adjusted gross margin are primarily due to a favorable mix weighted more heavily to higher margin products.

For the three months ended September 30, 2022, Services gross margin and Services adjusted gross margin each increased $46.0 million, as compared to the three months ended September 30, 2021. The increases in Services gross margin and Services adjusted gross margin are primarily due to the impact of the Q3-21 lease revenue reversal for $86.0 million, as a result of the completion of the Company’s arrangement with BARDA in November 2021, partially offset by the cessation of manufacturing activities related to the AstraZeneca and Janssen contracts and a decrease in margins at the Camden facility due to additional investments in quality enhancement and improvement initiatives.

For the nine months ended September 30, 2022, Services gross margin and Services adjusted gross margin each decreased $230.8 million as compared to the nine months ended September 30, 2021. The decreases in 2022 are primarily due to the decline in revenue at the Bayview facility as a result of the completion of the Company’s arrangement with BARDA, the cessation of manufacturing activities related to the AstraZeneca and Janssen contracts, and the decrease in margins at the Camden facility due to additional investments in quality enhancement and improvement initiatives, including an increase in professional services costs.

For Q3 2022, capital expenditures decreased largely due to less spending associated with the expansion project at the Company’s Rockville facility, which has progressed to a less capital intensive phase. The Company anticipates completing this expansion project by year end 2022.

2022 FINANCIAL FORECAST(1)

The Company has updated its full year 2022 financial forecast to reflect management’s expectations based on the most current information available.

The following key assumptions are incorporated into the revised forecast.

Anthrax Vaccines: Reflects anticipated deliveries of AV7909 and BioThrax (Anthrax Vaccine Adsorbed) and the impact of the FDA Warning Letter on certain batches filled/finished at the Camden site.
ACAM2000: Reflects the removal of revenues associated with the next option exercise under the existing 10-year BARDA procurement contract, as the timing is now uncertain.
TEMBEXA: Reflects the initial revenues related to deliveries under the existing 10-year HHS procurement contract and following the September 2022 acquisition from Chimerix of its worldwide rights to this product.
Nasal Naloxone Products: Primarily reflects continued strong demand in the public interest (PIP) channel in the U.S. as well as continuing demand in Canada.
CDMO: Reflects the continued rebaselining of the services business overall and, specifically, the impact of reduced production output from the Camden facility following the FDA’s issuance of a Warning Letter for this site earlier in 2022.
FOOTNOTES

(1) All financial information incorporated within this release is unaudited.
(2) See "Reconciliation of Non-GAAP measures" and the reconciliation tables for reconciliations of these non-GAAP metrics to the most closely related GAAP metrics.
(3) Product sales, net are reported net of variable consideration including returns, rebates, wholesaler fees and prompt pay discounts in accordance with U.S. generally accepted accounting principles.
(4) Other can include a combination of sales of any of the following products: BAT, VIGIV, Anthrasil, raxibacumab, RSDL, Trobigard, Vivotif, and Vaxchora.
(5) Other income (expense), net item adjustments to reconcile Net Income (Loss) to Adjusted EBITDA are related to the expense of the release of an indemnified uncertain tax position, which was recorded to other income (expense), net during the three and nine months ended September 30, 2022.
(6) Includes the reversal of the impact of a $58 million inventory step up related to the TEMBEXA asset acquisition which closed during Q3 2022.

CONFERENCE CALL, PRESENTATION SUPPLEMENT AND WEBCAST INFORMATION

Company management will host a conference call at 5:00 pm (Eastern Time) today, November 8, 2022, to discuss these financial results. The conference call and presentation supplement can be accessed from the Company’s website or through the following

On November 8, 2022 Cardinal Health (NYSE: CAH) reported that its Board of Directors approved a quarterly dividend of $0.4957 per share out of the Company’s capital surplus (Press release, Cardinal Health, NOV 8, 2022, View Source [SID1234623414]). The dividend will be payable on January 15, 2023 to shareholders of record at the close of business on January 3, 2023.

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