On July 20, 2016 Abbott (NYSE: ABT) reported financial results for the second quarter ended June 30, 2016 (Press release, Abbott, JUL 20, 2016, View Source [SID:1234513964]).

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Second-quarter worldwide sales of $5.3 billion increased 3.2 percent on a reported basis and 6.4 percent on an operational basis.
Reported diluted EPS from continuing operations under GAAP was $0.40 in the second quarter. Excluding specified items, adjusted diluted EPS from continuing operations was $0.55 in the second quarter, above the previous guidance range.
Abbott’s full-year 2016 EPS for continuing operations under GAAP is projected to be $1.26 to $1.36. Projected full-year 2016 adjusted EPS for continuing operations remains unchanged at $2.14 to $2.24.
In July, Abbott received U.S. FDA approval for AbsorbTM, the only fully dissolving heart stent, as well as U.S. FDA approval for TECNIS Symfony intraocular lenses for the treatment of cataracts, the first and only extended depth of focus lenses for people with cataracts.
In the second quarter, Abbott announced the global launch of AlinIQ, the first-of-its-kind informatics solution with enhanced capabilities to help diagnostics laboratories increase productivity and flexibility in managing data throughout hospital networks.
On April 28, 2016, Abbott announced an agreement to acquire St. Jude Medical, Inc. The transaction will create a premier medical device leader with a highly competitive portfolio that will include an industry-leading pipeline across cardiovascular, neuromodulation, diabetes and vision care.
"It was a good quarter," said Miles D. White, chairman and chief executive officer, Abbott. "We’re particularly pleased with the steady cadence of new product approvals and recent launches that are contributing to growth, including FreeStyle Libre, MitraClip, Absorb and Symfony."

SECOND-QUARTER BUSINESS OVERVIEW

Following are sales by business segment and commentary for the second quarter and first half of the year:

Total Company
($ in millions)

% Change vs. 2Q15

Sales 2Q16

Int’l

Total

U.S.

Int’l

Total

U.S.

Reported

Operational

Reported

Operational
Total *

1,655

3,678

5,333

4.0

2.8

7.5

3.2

6.4
Nutrition

750

990

1,740

3.0

0.2

5.3

1.4

4.3
Diagnostics

361

865

1,226

3.0

4.5

7.3

4.1

6.0
Established Pharmaceuticals
—

980

980

n/a

0.4

9.5

0.4

9.5
Medical Devices

535

837

1,372

6.1

6.6

7.3

6.4

6.8

* Total Abbott Sales from continuing operations include Other Sales of $15 million.

% Change vs. 1H15

Sales 1H16

Int’l

Total

U.S.

Int’l

Total

U.S.

Reported

Operational

Reported

Operational
Total *

3,186

7,032

10,218

3.0

0.8

7.0

1.5

5.8
Nutrition

1,469

1,942

3,411

3.9

(1.5)

4.6

0.8

4.3
Diagnostics

700

1,644

2,344

3.3

3.2

7.7

3.2

6.4
Established Pharmaceuticals
—

1,868

1,868

n/a

(0.3)

10.2

(0.3)

10.2
Medical Devices

1,001

1,568

2,569

1.2

2.8

5.4

2.1

3.7

* Total Abbott Sales from continuing operations include Other Sales of $26 million.
n/a = Not Applicable.
Note: Operational growth reflects percentage change over the prior year excluding the impact of exchange rates. In order to compute results excluding the impact of exchange rates, current year U.S. dollar sales are multiplied or divided, as appropriate, by the current year average foreign exchange rates and then those amounts are multiplied or divided, as appropriate, by the prior year average foreign exchange rates.

Second-quarter 2016 worldwide sales of $5.3 billion increased 3.2 percent on a reported basis, including an unfavorable 3.2 percent effect of foreign exchange, and increased 6.4 percent on an operational basis.

International sales increased 2.8 percent on a reported basis and 7.5 percent on an operational basis in the second quarter. International operational growth was led by strong performance across all of Abbott’s business segments.

Emerging market sales increased 1.1 percent on a reported basis and 8.5 percent on an operational basis in the second quarter. Excluding the impact of Venezuelan operations, emerging market sales would have increased 4.8 percent on a reported basis and 12.4 percent on an operational basis.

Nutrition
($ in millions)

% Change vs. 2Q15

Sales 2Q16

Int’l

Total

U.S.

Int’l

Total

U.S.

Reported

Operational

Reported

Operational
Total

750

990

1,740

3.0

0.2

5.3

1.4

4.3
Pediatric

425

547

972

5.8

(3.4)

1.6

0.4

3.4
Adult

325

443

768

(0.6)

5.1

10.3

2.6

5.5




% Change vs. 1H15

Sales 1H16

Int’l

Total

U.S.

Int’l

Total

U.S.

Reported

Operational

Reported

Operational
Total

1,469

1,942

3,411

3.9

(1.5)

4.6

0.8

4.3
Pediatric

828

1,111

1,939

5.3

(2.8)

2.9

0.5

3.9
Adult

641

831

1,472

2.2

0.3

7.0

1.1

4.9

Worldwide Nutrition sales increased 1.4 percent on a reported basis in the second quarter, including an unfavorable 2.9 percent effect of foreign exchange, and increased 4.3 percent on an operational basis. Excluding the impact of Venezuelan operations, worldwide Nutrition sales would have increased 3.3 percent on a reported basis and 6.2 percent on an operational basis.

Worldwide Pediatric Nutrition sales increased 0.4 percent on a reported basis in the second quarter, including an unfavorable 3.0 percent effect of foreign exchange, and increased 3.4 percent on an operational basis. Sales growth in the quarter was led by above-market growth in the U.S. with continued uptake of recently launched products, including infant and toddler non-GMO products, as well as strong performance across several countries in Latin America and Asia.

Worldwide Adult Nutrition sales increased 2.6 percent on a reported basis in the second quarter, including an unfavorable 2.9 percent effect of foreign exchange, and increased 5.5 percent on an operational basis. Operational sales growth in the quarter was led by strong growth of Abbott’s complete and balanced nutrition brand, Ensure, and double-digit growth internationally.

Diagnostics
($ in millions)

% Change vs. 2Q15

Sales 2Q16

Int’l

Total

U.S.

Int’l

Total

U.S.

Reported

Operational

Reported

Operational
Total

361

865

1,226

3.0

4.5

7.3

4.1

6.0
Core Laboratory

206

772

978

0.1

4.3

7.1

3.4

5.6
Molecular

51

68

119

1.1

3.6

5.9

2.5

3.8
Point of Care

104

25

129

10.2

17.2

17.4

11.5

11.5




% Change vs. 1H15

Sales 1H16

Int’l

Total

U.S.

Int’l

Total

U.S.

Reported

Operational

Reported

Operational
Total

700

1,644

2,344

3.3

3.2

7.7

3.2

6.4
Core Laboratory

396

1,467

1,863

1.2

3.2

7.8

2.8

6.4
Molecular

98

129

227

(0.5)

0.2

4.6

(0.1)

2.4
Point of Care

206

48

254

9.7

12.1

13.4

10.1

10.4

Worldwide Diagnostics sales increased 4.1 percent on a reported basis in the second quarter, including an unfavorable 1.9 percent effect of foreign exchange, and increased 6.0 percent on an operational basis.

Core Laboratory Diagnostics sales increased 3.4 percent on a reported basis in the second quarter, including an unfavorable 2.2 percent effect of foreign exchange, and increased 5.6 percent on an operational basis. Operational sales growth in the quarter was led by double-digit growth in emerging markets. During the quarter, Abbott launched AlinIQ, a first-of-its-kind professional services and informatics solution that enhances diagnostic laboratory productivity and flexibility in managing data throughout hospital networks.

Molecular Diagnostics sales increased 2.5 percent on a reported basis in the second quarter, including an unfavorable 1.3 percent effect of foreign exchange, and increased 3.8 percent on an operational basis. As expected, continued strong growth in Abbott’s infectious disease testing business was partially offset by the planned scale down of its genetics business.

Point of Care Diagnostics sales increased 11.5 percent on a reported and operational basis. Double-digit sales growth was led by continued adoption of Abbott’s i-STAT handheld system in the U.S. and international markets.

Established Pharmaceuticals
($ in millions)

% Change vs. 2Q15

Sales 2Q16

Int’l

Total

U.S.

Int’l

Total

U.S.

Reported

Operational

Reported

Operational
Total

—

980

980

n/a

0.4

9.5

0.4

9.5
Key Emerging Markets

—

754

754

n/a

3.9

15.9

3.9

15.9
Other

—

226

226

n/a

(9.9)

(9.1)

(9.9)

(9.1)




% Change vs. 1H15

Sales 1H16

Int’l

Total

U.S.

Int’l

Total

U.S.

Reported

Operational

Reported

Operational
Total

—

1,868

1,868

n/a

(0.3)

10.2

(0.3)

10.2
Key Emerging Markets

—

1,388

1,388

n/a

0.5

14.0

0.5

14.0
Other

—

480

480

n/a

(2.6)

(0.4)

(2.6)

(0.4)

Established Pharmaceuticals sales increased 0.4 percent on a reported basis in the second quarter, including an unfavorable 9.1 percent effect of foreign exchange, and increased 9.5 percent on an operational basis. Excluding the impact of Venezuelan operations, Established Pharmaceuticals sales would have increased 4.6 percent on a reported basis and 14.1 percent on an operational basis.

Key Emerging Markets include India, Russia, Brazil and China, along with several additional emerging markets that represent the most attractive long-term growth opportunities for Abbott’s branded generics product portfolio. Sales in these key geographies increased 3.9 percent on a reported basis and 15.9 percent on an operational basis. Operational sales growth was led by continued strong growth in India, which comprises more than 20 percent of Abbott’s Established Pharmaceuticals sales, as well as Russia, China and several countries throughout Latin America.

Medical Devices
($ in millions)

% Change vs. 2Q15

Sales 2Q16

Int’l

Total

U.S.

Int’l

Total

U.S.

Reported

Operational

Reported

Operational
Total

535

837

1,372

6.1

6.6

7.3

6.4

6.8
Vascular

346

436

782

16.4

2.7

3.6

8.3

8.9
Diabetes Care

73

210

283

(21.6)

13.4

15.2

1.7

2.8
Medical Optics

116

191

307

1.9

9.1

7.7

6.2

5.4

Vascular Product Lines:

Coronary Devicesa)

202

367

569

3.9

1.2

2.0

2.1

2.6
Endovascularb)

77

68

145

8.5

10.5

12.3

9.4

10.2

a) Includes DES / BVS product portfolio, structural heart, guidewires, balloon catheters and other coronary products.
b) Includes vessel closure, carotid stents and other peripheral products.

% Change vs. 1H15

Sales 1H16

Int’l

Total

U.S.

Int’l

Total

U.S.

Reported

Operational

Reported

Operational
Total

1,001

1,568

2,569

1.2

2.8

5.4

2.1

3.7
Vascular

635

832

1,467

9.3

(0.8)

1.9

3.3

5.0
Diabetes Care

142

384

526

(26.8)

9.3

13.2

(3.6)

(1.1)
Medical Optics

224

352

576

4.5

5.0

6.0

4.8

5.4

Vascular Product Lines:

Coronary Devicesa)

396

703

1,099

4.4

(2.2)

0.4

0.1

1.8
Endovascularb)

150

128

278

9.0

6.8

10.5

7.9

9.7

a) Includes DES / BVS product portfolio, structural heart, guidewires, balloon catheters and other coronary products.
b) Includes vessel closure, carotid stents and other peripheral products.

Worldwide Medical Devices sales increased 6.4 percent on a reported basis in the second quarter, including an unfavorable 0.4 percent effect of foreign exchange, and increased 6.8 percent on an operational basis.

Worldwide sales of Vascular products increased 8.3 percent on a reported basis in the second quarter, including an unfavorable 0.6 percent effect of foreign exchange, and increased 8.9 percent on an operational basis. Sales were favorably impacted by the resolution of previously disputed third-party royalty revenue related to the prior year. Excluding this impact, worldwide sales of Vascular products would have increased 4.1 percent on a reported basis and 4.7 percent on an operational basis, and U.S. sales would have increased 6.2 percent on a reported and operational basis.

Sales growth in Vascular products was led by double-digit growth of MitraClip, Abbott’s device for the treatment of mitral regurgitation, as Abbott continues to build the market for this first-in-class device. Double-digit operational sales growth in Abbott’s Endovascular business was driven by vessel closure products and Supera, Abbott’s unique peripheral stent for the treatment of blockages in the leg. In July, the U.S. FDA approved Abbott’s Absorb bioresorbable stent, the only fully dissolving heart stent. Absorb offers a unique benefit to patients, as it is designed to treat coronary artery disease like a metallic stent, but then disappears after the artery is healed, leaving no metal behind to restrict natural vessel motion.

Worldwide Diabetes Care sales increased 1.7 percent on a reported basis in the second quarter, including an unfavorable 1.1 percent effect of foreign exchange, and increased 2.8 percent on an operational basis. International sales growth was driven by continued consumer uptake of FreeStyle Libre, Abbott’s revolutionary Flash Glucose Monitoring System that eliminates routine finger sticks and finger-stick calibration. In the U.S., sales were impacted by competitive and market dynamics.

Worldwide Medical Optics sales increased 6.2 percent on a reported basis in the second quarter, including a favorable 0.8 percent effect of foreign exchange, and increased 5.4 percent on an operational basis. Operational sales growth was driven by continued market uptake of cataract products in the premium intraocular lens segment. In July, Abbott received U.S. FDA approval for the TECNIS Symfony intraocular lenses, the first and only lenses in the U.S. that provide a full range of continuous high-quality vision following cataract surgery.

ABBOTT’S FULL-YEAR EARNINGS-PER-SHARE GUIDANCE

Abbott projects earnings per share from continuing operations under Generally Accepted Accounting Principles (GAAP) of $1.26 to $1.36 for the full year 2016.

Abbott forecasts net specified items for the full year 2016 of approximately $0.88 per share. Specified items include intangible amortization expense, the impact of the Venezuelan currency devaluation in the first quarter, expenses associated with acquisitions, including bridge facility fees, and charges related to cost reduction initiatives and other expenses, partially offset by the favorable resolution of various tax positions from prior years.

Excluding specified items, projected earnings per share from continuing operations remains unchanged at $2.14 to $2.24 for the full year 2016.

ABBOTT DECLARES 370TH QUARTERLY DIVIDEND

On June 10, 2016, the board of directors of Abbott declared the company’s quarterly dividend of $0.26 per share. Abbott’s cash dividend is payable Aug. 15, 2016, to shareholders of record at the close of business on July 15, 2016.

Abbott is a member of the S&P 500 Dividend Aristocrats Index, which tracks companies that have annually increased their dividend for 25 consecutive years.

Q2 net sales were flat (0% cc[1]) as Growth Products[2] offset Gleevec generic impact
Gilenya (USD 811 million, +17% cc) continued to grow double-digit mainly due to volume growth
Cosentyx (USD 260 million) grew strongly driven by its three approved indications

Core[1] operating income declined (-4% cc) due to generic erosion and growth investments
Core M&S expenses up 0.8 percentage points (cc) to 24.6% of sales, mainly driven by Cosentyx, Entresto and Alcon investments
Core operating income margin declined 1.1 percentage points (cc) behind investments
Core EPS was USD 1.23 (-1% cc)
Free cash flow[1] was USD 2.5 billion (+22% USD)

Significant positive innovation news in Q2
Entresto given strong Class I recommendation in US and EU heart failure treatment guidelines
JAMA Cardiology analysis found Entresto could prevent or postpone 28,000 US deaths per year
Cosentyx data showed durability of response in AS[2] and PsA[2] patients after two years; head-to-head trials vs. Humira planned
Phase III trial of CDK4/6 inhibitor LEE011 in HR+/HER2- advanced breast cancer stopped early due to positive efficacy results at interim analysis
Full results from FLAME study reinforce superiority of Ultibro Breezhaler to Seretide in COPD
Positive FDA AdCom[2] for biosimilar etanercept; biosimilar rituximab submitted in EU

Entresto (USD 32 million) continued to grow steadily in Q2
Based on positive treatment guidelines, decision was taken to increase spending significantly in H2 2016 to build a US primary care field force and add incremental medical support
Entresto sales expected to be approximately USD 200 million for full year 2016

Alcon growth plan progressing
Operations: Improved supply stability and reinforcing customer relationships
Innovation: CE Mark in Europe for Dailies Total1 Multifocal and PanOptix with UltraSert

2016 Outlook:
Net sales expected to be broadly in line with prior year (cc)
Based on the increased spending for Entresto, and depending on Gleevec erosion curve, core operating income expected to be broadly in line or decline low single digit (cc)

Key figures[1] Continuing operations[3]
Q2 2016 Q2 2015 % change H1 2016 H1 2015 % change
USD m USD m USD cc USD m USD m USD cc
Net sales 12 470 12 694 -2 0 24 070 24 629 -2 1
Operating income 2 093 2 281 -8 -4 4 544 5 066 -10 -4
Net income 1 806 1 856 -3 0 3 817 4 162 -8 -2
EPS (USD) 0.76 0.77 -1 2 1.60 1.72 -7 -1
Free cash flow 2 526 2 064 22 3 888 3 529 10
Core
Operating income 3 332 3 593 -7 -4 6 593 7 244 -9 -4
Net income 2 930 3 074 -5 -2 5 718 6 273 -9 -4
EPS (USD) 1.23 1.27 -3 -1 2.40 2.60 -8 -3
[1] Constant currencies (cc), core results and free cash flow are non-IFRS measures. An explanation of non-IFRS measures can be found on page 48 of the Condensed Interim Financial Report. Unless otherwise noted, all growth rates in this Release refer to same period in prior year.
[2] Growth Products are defined on page 2. AS = ankylosing spondylists; PsA = psoriatic arthritis; AdCom = advisory committee.
[3] Refers to continuing operations, defined on page 40 of the Condensed Interim Financial Report.

On July 19, 2016 Novartis reported that they had a solid Q2 despite a full quarter of US Gleevec generic impact (Press release, Novartis, JUL 19, 2016, View Source [SID:1234513957]).

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Commenting on the results, Joseph Jimenez, CEO of Novartis, said:
"Performance in Q2 was solid despite a full quarter of Gleevec loss of exclusivity impact in the US. We have strong innovation momentum from earlier-than-anticipated Class I Entresto guidelines, positive Cosentyx data showing durability of response in AS and PsA, the early stop of the LEE011 trial, and positive FLAME results for Ultibro. We will increase investments behind these growth opportunities, particularly Entresto, in the second half of 2016 for long-term growth."

GROUP REVIEW

Novartis laid out five priorities for 2016: deliver strong financial results; strengthen innovation; improve Alcon performance; capture cross-divisional synergies; and build a higher-performing organization. We made progress in each of these areas in the second quarter.

Financial results

On January 27, 2016, Novartis announced plans to further focus its divisions, integrating businesses that share therapeutic areas to better leverage our development and marketing capabilities. These plans included a new divisional structure. In compliance with International Financial Reporting Standards (IFRS), Novartis updated its segment financials to reflect the new structure, both for the current and prior year, to aid comparability of year-on-year results. As a result, all comparisons of divisional results from 2016 to 2015 reflect the new structure.

In addition, as a result of the portfolio transformation transactions completed in 2015, Novartis reported the Group’s financial results in 2015 as "continuing operations" and "discontinued operations." All comparisons from 2016 to 2015 are versus continuing operations, unless otherwise noted. See page 40 of the Condensed Interim Financial Report for a full explanation.

Second quarter

Continuing operations

Net sales were USD 12.5 billion (-2%, 0% cc) in the second quarter, as volume growth of 5 percentage points offset the negative impact of generic competition (-4 percentage points) and pricing (-1 percentage points). Growth Products[1] contributed USD 4.4 billion or 35% of net sales, up 19% (USD) over the prior-year quarter.

Operating income was USD 2.1 billion (-8%, -4% cc). Core adjustments amounted to USD 1.2 billion (2015: USD 1.3 billion), broadly in line with the prior-year quarter.

Core operating income was USD 3.3 billion (-7%, -4% cc). Core operating income margin in constant currencies decreased 1.1 percentage points, mainly due to loss of exclusivity on Gleevec, investments behind new launches and the Alcon growth plan. Currency had a negative impact of 0.5 percentage points, resulting in a net decrease of 1.6 percentage points in US dollar terms to 26.7% of net sales.

Net income was USD 1.8 billion (-3%, 0% cc), down less than operating income mainly due to higher income from associated companies.

EPS was USD 0.76 (-1%, +2% cc), benefitting from a reduction in the number of shares outstanding.

Core net income was USD 2.9 billion (-5%, -2% cc), down less than core operating income mainly due to higher income from associated companies.

Core EPS was USD 1.23 (-3%, -1% cc), benefitting from a reduction in the number of shares outstanding.

Free cash flow was USD 2.5 billion (+22% USD), an increase of USD 0.5 billion compared to the prior-year quarter. The increase was driven by lower investments in property, plant, equipment and intangible assets and higher cash flows from operating activities from continuing operations, which includes lower operating income and dividends received from GSK Consumer Healthcare Holdings Ltd.

[1] "Growth Products" are an indicator of the rejuvenation of the portfolio, and comprise products launched in a key market (EU, US, Japan) in 2011 or later, or products with exclusivity in key markets until at least 2020 (except Sandoz, which includes only products launched in the last 24 months). They include the acquisition effect of the GSK oncology assets.

Innovative Medicines (formerly named the Pharmaceuticals Division) net sales were USD 8.4 billion (-3%, -1% cc) in the second quarter, with volume growth of 6 percentage points. Generic competition had a negative impact of 6 percentage points and pricing had a negative impact of 1 percentage point, both largely due to Gleevec/Glivec genericization in the US, which impacted a full quarter for the first time. Growth Products grew 23% (cc) to USD 3.8 billion, or 45% of division net sales.

Operating income was USD 1.9 billion (-6%, -3% cc). Core operating income was USD 2.7 billion (-7%, -4% cc), reflecting generic erosion and launch investments. Core operating income margin in constant currencies decreased by 1.0 percentage points; currency had a negative impact of 0.5 percentage points, resulting in a net decrease of 1.5 percentage points to 31.8% of net sales.

Sandoz net sales were USD 2.6 billion (+2%, +3% cc) in the second quarter, as volume growth of 8 percentage points more than offset 5 percentage points of price erosion. Global sales of Biopharmaceuticals, which include biosimilars, biopharmaceutical contract manufacturing and Glatopa, grew 11% (cc) to USD 249 million, despite lapping the Glatopa launch in the prior-year quarter. Anti-Infectives franchise sales were USD 324 million (-3% cc), reflecting the discontinuation of low-margin products.

Operating income was USD 380 million (+35%, +43% cc), driven by lower restructuring charges for site exits compared to the prior-year quarter. Core operating income was USD 535 million (0%, +4% cc). Core operating income margin in constant currencies increased 0.2 percentage points; currency had a negative impact of 0.6 percentage points, resulting in a net decrease of 0.4 percentage points to 20.8% of net sales.

Alcon net sales were USD 1.5 billion (-2%, -1% cc) in the second quarter. Surgical sales (-1% cc) were down slightly, as strong performance of cataract consumables was more than offset by weaker sales of intraocular lenses (IOLs). Vision Care sales were flat (0% cc), with growth in contact lenses offsetting a decline in contact lens care.

Operating income was USD 7 million (-87%, -77% cc). Core operating income was USD 238 million (-17%, -15% cc), primarily impacted by higher investment spending in M&S and R&D behind the growth plan. Core operating income margin in constant currencies decreased by 2.6 percentage points; currency had a negative impact of 0.3 percentage points, resulting in a net decrease of 2.9 percentage points to 15.8% of net sales.

Total Group

For the total Group, net income amounted to USD 1.8 billion, broadly in line with the prior-year quarter, and basic earnings per share was USD 0.76.

Total Group free cash flow amounted to USD 2.5 billion, compared to USD 2.0 billion in the prior-year quarter.

First half

Continuing operations

Net sales were USD 24.1 billion (-2%, +1% cc) in the first half. Growth Products contributed USD 8.2 billion or 34% of net sales, up 21% (USD) over the prior-year period.

Operating income was USD 4.5 billion (-10%, -4% cc). Core adjustments amounted to USD 2.0 billion (2015: USD 2.2 billion), slightly below prior year mainly due to higher divestment gains in the first half of 2016.

Core operating income was USD 6.6 billion (-9%, -4% cc). Core operating income margin in constant currencies decreased 1.5 percentage points, mainly due to loss of exclusivity on Gleevec, investments behind new launches and the Alcon growth plan. Currency had a negative impact of 0.5 percentage points, resulting in a net decrease of 2.0 percentage points to 27.4% of net sales.

Net income was USD 3.8 billion (-8%, -2% cc), down less than operating income mainly due to higher income from associated companies.

EPS was USD 1.60 (-7%, -1% cc), broadly in line with net income.

Core net income was USD 5.7 billion (-9%, -4% cc), in line with core operating income.

Core EPS was USD 2.40 (-8%, -3% cc), broadly in line with core net income.

Free cash flow was USD 3.9 billion (+10% USD), an increase of USD 0.4 billion compared to the prior-year period. The increase was driven by lower net investments in property, plant, equipment and intangible assets, partially offset by lower cash flows from operating activities from continuing operations.

Innovative Medicines net sales were USD 16.1 billion (-3%, 0% cc) in the first half, as volume growth (+7 percentage points) was fully offset by the impact of generic competition (-6 percentage points) and pricing (-1 percentage point).

Operating income was USD 4.0 billion (-9%, -4% cc). Core operating income was USD 5.3 billion (-8%, -3% cc). Core operating income margin in constant currencies decreased by 1.2 percentage points; currency had a negative impact of 0.6 percentage points, resulting in a net decrease of 1.8 percentage points to 32.7% of net sales.

Sandoz net sales were USD 5.0 billion (+1%, +4% cc) in the first half, as volume growth of 10 percentage points more than offset 6 percentage points of price erosion. Global sales of Biopharmaceuticals grew 27% (cc) to USD 462 million, benefitting from the performance of prior-year launches in the US (Glatopa in June 2015 and Zarxio in September 2015). Anti-Infectives franchise sales were USD 684 million (-3% cc), reflecting discontinued low-margin products and the weak flu season in the first quarter.

Operating income was USD 726 million (+17%, +25% cc), driven by higher restructuring charges for site exits in the prior-year period. Core operating income was USD 1.0 billion (0%, +5% cc). Core operating income margin in constant currencies increased by 0.4 percentage points; currency had a negative impact of 0.6 percentage points, resulting in a net decrease of 0.2 percentage points to 20.3% of net sales.

Alcon net sales were USD 2.9 billion (-4%, -2% cc) in the first half. Surgical sales (-2% cc) declined, driven by a slowdown in cataract equipment placements and weaker sales of IOLs, partially offset by continued growth in cataract consumables. Vision Care performance (-2% cc) was impacted by weaker contact lens sales in the US and a decline in contact lens care.

Operating income was USD 38 million (-81%, -59% cc). Core operating income was USD 481 million (-28%, -21% cc), primarily impacted by higher spending in M&S and R&D behind the growth plan. Core operating income margin in constant currencies decreased by 4.3 percentage points; currency had a negative impact of 1.1 percentage points, resulting in a net decrease of 5.4 percentage points to 16.4% of net sales.

Total Group

For the total Group, net income amounted to USD 3.8 billion compared to USD 14.8 billion in the prior-year period, and basic earnings per share decreased to USD 1.60 from USD 6.15. The decrease was due to the net income from discontinued operations, which in the prior-year period included USD 12.8 billion exceptional pre-tax divestment gains from the portfolio transformation transactions and USD 0.5 billion additional pre-tax transaction related expenses.

Free cash flow was USD 3.9 billion compared to USD 3.2 billion in the first half of 2015.

Key growth drivers

Underpinning our financial results in the second quarter is a continued focus on key growth drivers, including Gilenya, Tasigna, Cosentyx, Tafinlar + Mekinist, Jakavi, Promacta/Revolade and Entresto, as well as Biopharmaceuticals and Emerging Growth Markets.

Growth Products

Growth Products, an indicator of the ongoing rejuvenation of our portfolio, contributed 35% of Group net sales in the second quarter, and were up 19% (USD). In Innovative Medicines, Growth Products contributed 45% of division net sales in the quarter, and sales for these products were up 23% (cc).
Gilenya (USD 811 million, +17% cc) continued to grow double-digit, mainly due to volume growth.
Tasigna (USD 458 million, +15% cc) continued to show strong growth, including in the US, where a generic version of Gleevec launched on February 1, 2016.
Cosentyx (USD 260 million) continued its strong launch trajectory across all regions, driven by its three approved indications.
Tafinlar + Mekinist (USD 172 million, +31% cc) grew strongly as the first approved combination therapy for patients with BRAF V600 mutation-positive unresectable or metastatic melanoma.
Promacta/Revolade (USD 158 million, +36% cc) was mainly driven by continued uptake in the chronic immune (idiopathic) thrombocytopenic purpura indication worldwide.
Jakavi (USD 146 million, +49% cc), growth was driven by patient gains in the myelofibrosis indication across regions and the launch of the polycythemia vera indication in key markets.
Entresto (USD 32 million) continued to grow steadily. The decision was taken to build a US primary care field force following the earlier-than-expected publication of strong heart failure treatment guidelines, and increase medical investments to ensure disease awareness and up-to-date medical education. Ongoing launch experience in Europe continues to show a more rapid uptake than in the US. Entresto sales are expected to be approximately USD 200 million for full year 2016.
Biopharmaceuticals (USD 249 million, +11% cc) showed solid growth, despite lapping the launch of Glatopa in the prior-year quarter.
Emerging Growth Markets

Net sales in Emerging Growth Markets – which comprise all markets except the US, Canada, Western Europe, Japan, Australia and New Zealand – grew 2% (cc) in the second quarter, led by Russia (+20% cc) and Brazil (+11% cc). China grew 2% (cc), while some countries including India (-16% cc) and Venezuela (-14% cc) declined.
Strengthen innovation

The second quarter saw pipeline progress with positive regulatory decisions and significant clinical trial data released. Key developments are included below.

New approvals and regulatory opinions

The EC approved Afinitor (everolimus) for the treatment of unresectable or metastatic, well-differentiated nonfunctional neuroendocrine tumors of gastrointestinal or lung origin in adults with progressive disease.
The FDA approved an expanded age range for Xolair (omalizumab) to include children six to 11 years of age with moderate to severe persistent asthma.
Alcon achieved CE Mark in Europe for AcrySof IQ PanOptix IOL with UltraSert and Dailies Total1 Multifocal.
Regulatory submissions and filings

In July, the FDA’s Arthritis Advisory Committee voted unanimously to support approval of Sandoz proposed biosimilar etanercept for all five indications of the reference product (Enbrel).
The FDA granted three separate Breakthrough Therapy designations, as well as Priority Reviews, for Ilaris (canakinumab) to treat three rare types of Periodic Fever Syndromes.
Sandoz biosimilar rituximab candidate (for Roche’s EU-licensed MabThera) was accepted by the EMA for regulatory review.
Results from important clinical trials and other highlights

Entresto (sacubitril/valsartan) was given a strong Class I recommendation in both US and European heart failure treatment guidelines. The US guidelines position Entresto as the standard of care for symptomatic patients with heart failure with reduced ejection fraction (HFrEF).
According to an analysis in JAMA Cardiology, more than 28,000 deaths in the US alone could be prevented or postponed by optimal use of Entresto. The analysis supports the need for rapid and broad uptake in patients with HFrEF.
Novartis announced FortiHFy, a global clinical umbrella program comprising more than 40 active or planned trials, which will generate additional data on symptom reduction, efficacy, safety, quality of life benefits and real world evidence with Entresto and increase understanding of heart failure.
An independent Data Monitoring Committee recommended stopping the pivotal Phase III trial of CDK 4/6 inhibitor LEE011 (ribociclib) early, as a pre-planned interim analysis showed that it met the primary endpoint of a clinically meaningful improvement in progression free survival (PFS) in postmenopausal women who had received no prior therapy for their HR+/HER2- advanced breast cancer.
Data presented at EULAR showed that up to 80% of ankylosing spondylitis and 84% of psoriatic arthritis patients treated with Cosentyx (secukinumab) at two years had no radiographic progression in the spine or joints, respectively. New head-to-head clinical trials are planned to compare Cosentyx versus Humira.
Three-year follow-up data from a Phase III study of Tafinlar + Mekinist (dabrafenib + trametinib) showed a significant survival benefit for patients with BRAF V600E/K+ advanced melanoma on combination therapy versus Tafinlar monotherapy.
A Phase II study of Tafinlar + Mekinist in patients with BRAF V600E+ non-small cell lung cancer demonstrated a 63% confirmed overall response rate for the combination therapy.
Data from the investigational ENESTfreedom and ENESTop treatment-free remission (TFR) trials of Tasigna (nilotinib) showed that more than 50% of eligible Ph+ CML patients were able to maintain TFR after stopping Tasigna both in the first-line setting and after switching from Glivec (imatinib). ENESTop met its primary endpoint, though ENESTfreedom did not.
Full study results from the head-to-head FLAME trial demonstrated superiority of Ultibro Breezhaler (indacaterol/glycopyrronium) to Seretide across exacerbation outcomes, lung function and health-related quality of life in COPD patients with a prior history of exacerbations.
A Phase II study of AMG 334 (erenumab) in chronic migraine prevention met its primary endpoint of a statistically significant reduction in the number of monthly migraine days versus placebo.
Phase III RESPONSE-2 data showed that Jakavi (ruxolitinib) helped patients with less advanced polycythemia vera achieve superior hematocrit control compared to best available therapy.
The New England Journal of Medicine published pivotal data for PKC412 (midostaurin) showing an overall response rate of 60% in patients with advanced systemic mastocytosis.
Novartis entered into a collaboration and licensing agreement with Xencor, adding bispecific antibodies to its growing immuno-oncology portfolio.
In two key studies, Sandoz biosimilar etanercept and rituximab candidates showed pharmacokinetic bioequivalence to their originator products (Enbrel and MabThera, respectively).
A confirmatory clinical study comparing Sandoz biosimilar etanercept candidate to Enbrel met its primary endpoint of achieving equivalence in PASI75 response rates at week 12.
Sandoz received a complete response letter from the FDA for biosimilar pegfilgrastim candidate (Neulasta). We are working with the agency to address remaining questions.
Improve Alcon performance

Alcon continued to make investments in the second quarter to accelerate innovation and sales, strengthen customer relationships and improve basic operations.

In operations, Alcon upgraded order and inventory management, which has resulted in improved supply stability. To further reinforce customer relationships, Alcon has redefined and launched new customer experience standards, and created a global organization focused on delivering customer excellence. At the same time, Alcon has increased M&S investment behind key products in both Surgical and Vision Care to accelerate sales. These investments have depressed margins in Q2, but are expected to accelerate sales and result in higher margins longer term. The division is expected to return to top-line growth later in the year.

Alcon also made significant progress on innovation in the second quarter, strengthening future growth prospects. Alcon received CE Mark in Europe for Dailies Total1 Multifocal as well as PanOptix with UltraSert. Pivotal data on CyPass, the minimally invasive glaucoma surgery device, was also presented at the American Society of Cataract and Refractive Surgery annual meeting in the second quarter.

Capture cross-divisional synergies

We continued to advance our productivity programs in the second quarter, helping to support margins for the Group.

As of July 1, 2016, the new centralized Technical Operations and integrated Drug Development organizations are operational.

Novartis Business Services (NBS) continued the selective offshoring of transactional services to our five Global Service Centers. The cost within the scope of NBS continues to be stable versus prior year.

In Procurement, we generated approximately USD 0.5 billion in savings by leveraging our scale.
In total, our productivity initiatives generated gross savings of approximately USD 0.7 billion in the second quarter.

Build a higher-performing organization

Novartis continues to proactively drive compliance, reliable product quality and sustainable efficiency as part of the quality strategy. The company’s focus on quality continued to yield results in the second quarter of 2016. A total of 74 global health authority inspections were completed and closed in the first half of the year (42 in Q2), 13 of which were conducted by the FDA (4 in Q2). All but one were deemed good or acceptable. The inspection of the UK country organization by the UK Medicines & Healthcare Products Regulatory Agency (MHRA), which was still pending as of Q1, resulted in an unsatisfactory outcome. The main finding of the MHRA related to ease of access for health authorities to trial data in the current systems, which is being addressed through an existing project.

Capital structure and net debt

Retaining a good balance between investment in the business, a strong capital structure and attractive shareholder returns will remain a priority. Strong cash flows and a sound capital structure have allowed Novartis to focus on driving innovation and growth across its diversified healthcare portfolio, while keeping its double-A credit rating as a reflection of financial strength and discipline.

During the first six months of 2016, 12.3 million treasury shares were delivered as a result of options exercised and share deliveries related to equity-based participation plans of associates. To partially offset the dilutive impact related to such transactions, 5.0 million Novartis shares were repurchased on the SIX Swiss Exchange second trading line and from employees. Despite these transactions, the total number of shares outstanding increased by 7.3 million versus December 31, 2015. Novartis aims to further offset the dilutive impact from equity-based participation plans of associates that occurred in the first quarter over the remainder of the year through additional share purchases.

As of June 30, 2016, the net debt increased by USD 4.1 billion to USD 20.6 billion, compared to USD 16.5 billion at December 31, 2015. The net debt increase was mainly driven by the USD 6.5 billion annual dividend payment, acquisition of businesses, and share repurchases, partly offset by USD 3.9 billion free cash flow generation in the first half of 2016.

The long-term credit rating for the company continues to be double-A (Moody’s Aa3; Standard & Poor’s AA-; Fitch AA).

2016 Outlook

Barring unforeseen events

Group net sales are expected to be broadly in line with the prior year (cc), with Growth Products offsetting the impact of generic competition.

Based on the positive treatment guidelines on Entresto, we have made the decision to increase spending significantly in the second half of 2016 to build a US primary care field force, and add incremental medical support. We expect this to accelerate the uptake of Entresto and maximize future peak sales.

As a consequence of this additional investment, and depending on the erosion curve of Gleevec, core operating income is expected to be broadly in line with the prior year or decline low-single digit (cc).

These comparisons are versus 2015 continuing operations.

If early July exchange rates prevail for the remainder of 2016, the currency impact for the year would be negative 1 percentage point on sales and negative 3 percentage points on core operating income.

Summary Financial Performance
Continuing operations[1] Q2 2016 Q2 2015 % change H1 2016 H1 2015 % change
USD m USD m USD cc USD m USD m USD cc
Net sales 12 470 12 694 -2 0 24 070 24 629 -2 1
Operating income 2 093 2 281 -8 -4 4 544 5 066 -10 -4
As a % of sales 16.8 18.0 18.9 20.6
Core operating income 3 332 3 593 -7 -4 6 593 7 244 -9 -4
As a % of sales 26.7 28.3 27.4 29.4
Net income 1 806 1 856 -3 0 3 817 4 162 -8 -2
EPS (USD) 0.76 0.77 -1 2 1.60 1.72 -7 -1
Free cash flow 2 526 2 064 22 3 888 3 529 10
Innovative Medicines Q2 2016 Q2 2015[2] % change H1 2016 H1 2015[2] % change
USD m USD m USD cc USD m USD m USD cc
Net sales 8 387 8 633 -3 -1 16 116 16 593 -3 0
Operating income 1 866 1 994 -6 -3 4 046 4 444 -9 -4
As a % of sales 22.2 23.1 25.1 26.8
Core operating income 2 669 2 872 -7 -4 5 271 5 727 -8 -3
As a % of sales 31.8 33.3 32.7 34.5
Sandoz Q2 2016 Q2 2015[2] % change H1 2016 H1 2015[2] % change
USD m USD m USD cc USD m USD m USD cc
Net sales 2 577 2 530 2 3 5 022 4 974 1 4
Operating income 380 281 35 43 726 621 17 25
As a % of sales 14.7 11.1 14.5 12.5
Core operating income 535 537 0 4 1 020 1 020 0 5
As a % of sales 20.8 21.2 20.3 20.5
Alcon Q2 2016 Q2 2015[2] % change H1 2016 H1 2015[2] % change
USD m USD m USD cc USD m USD m USD cc
Net sales 1 506 1 531 -2 -1 2 932 3 062 -4 -2
Operating income 7 54 -87 -77 38 195 -81 -59
As a % of sales 0.5 3.5 1.3 6.4
Core operating income 238 287 -17 -15 481 669 -28 -21
As a % of sales 15.8 18.7 16.4 21.8
Corporate Q2 2016 Q2 2015 % change H1 2016 H1 2015 % change
USD m USD m USD cc USD m USD m USD cc
Operating loss -160 -48 -233 -250 -266 -194 -37 -47
Core operating loss -110 -103 -7 -15 -179 -172 -4 -16
Discontinued operations Q2 2016 Q2 2015 % change H1 2016 H1 2015 % change
USD m USD m USD cc USD m USD m USD cc
Net sales 39 587
Operating loss/income -96 12 526
As a % of sales nm nm
Core operating loss -72 -174
As a % of sales nm -29.6
Total Group[3] Q2 2016 Q2 2015 % change H1 2016 H1 2015 % change
USD m USD m USD cc USD m USD m USD cc
Net income 1 806 1 838 -2 1 3 817 14 843 -74 -73
EPS (USD) 0.76 0.76 0 3 1.60 6.15 -74 -72
Free cash flow 2 526 2 013 25 3 888 3 239 20
nm= not meaningful

[1] Continuing operations include the businesses of Innovative Medicines (formerly named the Pharmaceuticals Division), Alcon, Sandoz and Corporate activities, and starting on March 2, 2015, the results from the new oncology assets acquired from GSK and the 36.5% interest in the GSK Consumer Healthcare Holdings Ltd. (the latter reported as part of income from associated companies). See page 40 of the Condensed Interim Financial Report for full explanation.
[2] In compliance with IFRS, Novartis updated its segment financials to reflect the new divisional structure announced on January 27, 2016, to aid comparability of year-on-year results.
[3] Total Group net income and EPS include in the prior year the impact of the exceptional divestment gains and the operating results of the discontinued operations. Total Group free cash flow comprises the free cash flow from continuing operations and discontinued operations.

On July 19, 2016 Incyte Corporation (Nasdaq:INCY) reported that updated data from the Phase 1 portion of the ECHO-202/KEYNOTE-037 trial has been accepted for a poster discussion at the European Society for Medical Oncology (ESMO) (Free ESMO Whitepaper) Annual Congress 2016, taking place in Copenhagen, Denmark from October 7-11, 2016 (Press release, Incyte, JUL 19, 2016, View Source;p=RssLanding&cat=news&id=2186358 [SID:1234513958]). The ECHO-202 study (NCT02178722) is evaluating the safety and efficacy of epacadostat, Incyte’s selective IDO1 inhibitor, in combination with Keytruda (pembrolizumab)*, Merck’s anti-PD-1 therapy.

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Poster details:
Epacadostat Plus Pembrolizumab in Patients With Advanced Melanoma and Select Solid Tumors: Updated Phase 1 Results From ECHO-202/KEYNOTE-037 (Abstract #1110PD)
Monday, 10 October 2016 from 11:00-12:00 CET
Full session details and data presentation listings for ESMO (Free ESMO Whitepaper) 2016 can be found at View Source

About Epacadostat (INCB024360)
Indoleamine 2,3-dioxygenase 1 (IDO1) is a key immunosuppressive enzyme that modulates the anti-tumor immune response by promoting regulatory T cell generation and blocking effector T cell activation, thereby facilitating tumor growth by allowing cancer cells to avoid immune surveillance. Epacadostat is a first-in-class, highly potent and selective oral inhibitor of the IDO1 enzyme that reverses tumor-associated immune suppression and restores effective anti-tumor immune responses. In single-arm studies, the combination of epacadostat and immune checkpoint inhibitors has shown proof-of-concept in patients with unresectable or metastatic melanoma. In these studies, epacadostat combined with the CTLA-4 inhibitor ipilimumab or the PD-1 inhibitor pembrolizumab improved response rates compared with studies of the immune checkpoint inhibitors alone. A Phase 3 study, ECHO-301, evaluating the combination of epacadostat with the anti-PD-1 antibody pembrolizumab for the first-line treatment of patients with advanced or metastatic melanoma has recently been initiated. Ongoing Phase 1 and Phase 2 studies are investigating epacadostat in combination with PD-1 and PD-L1 inhibitors in a variety of other cancer histologies

On July 19, 2016 Valeant Pharmaceuticals International, Inc. (NYSE & TSX: VRX) and Progenics Pharmaceuticals, Inc. (Nasdaq: PGNX) reported that the U.S. Food and Drug Administration has approved RELISTOR (methylnaltrexone bromide) Tablets for the treatment of opioid-induced constipation (OIC) in adults with chronic non-cancer pain(Press release, Progenics Pharmaceuticals, JUL 19, 2016, View Source [SID:1234513971]). Valeant expects to commence sales of RELISTOR Tablets in the U.S. in the third quarter of 2016.

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"Opioid-induced constipation represents a long-lasting and potentially debilitating side effect of opioid therapy for millions of patients suffering from chronic pain," commented Joseph C. Papa, Chief Executive Officer of Valeant. "We believe Oral RELISTOR represents a new alternative treatment for OIC, and we look forward to introducing the more convenient oral formulation as soon as practicable."

"We are delighted that this milestone for RELISTOR has been achieved, and that patients suffering from OIC will have this new treatment option," said Mark Baker, Chief Executive Officer of Progenics. "We expect the market to be receptive to a more convenient oral tablet formulation of RELISTOR’s well-established subcutaneous preparation. We would like to thank, in particular, Dr. Tage Ramakrishna and Dr. Robert Israel of Valeant for their work over many years in the clinical development of RELISTOR."

"RELISTOR has a unique mechanism of action that binds to mu-opioid receptors without impacting the opioid-mediated analgesic effects on the central nervous system," said Richard L. Rauck, MD, Medical Director, Center for Clinical Research, President, Carolinas Pain Institute, President of the Sceptor Pain Foundation of which he is a founding member, and Immediate Past President of the World Institute of Pain. "This represents a true breakthrough in the treatment of OIC, and addresses a large and growing need in the field of pain management."

Today, the FDA approved RELISTOR Tablets (450 mg once daily) for the treatment of OIC in adults with chronic non-cancer pain. Previously, RELISTOR Subcutaneous Injection (12 mg and 8 mg) was approved in 2008 for the treatment of OIC in adults with advanced illness who are receiving palliative care and in 2014 for the treatment of OIC in adults with chronic non-cancer pain.

About the Phase 3 Clinical Trial of Oral RELISTOR for OIC in Chronic Non-Cancer Pain (NCP)

A randomized, double-blind, Phase 3 trial was conducted to evaluate once-daily dosing of 450 mg (n=200) methylnaltrexone (MNTX) tablets compared to placebo (n=201) in adults with chronic NCP. In the 450 mg treatment arm, MNTX tablets demonstrated statistically significant improvements in rescue-free bowel movement (RFBM) within 4 hours of administration over 28 days of dosing when compared to placebo treatment, achieving the primary endpoint. The 450 mg treatment group also achieved statistical significance for the first key secondary efficacy endpoint where a higher percentage of responders (i.e., had ≥3 RFBMs/week, with an increase of ≥1 RFBM/week from baseline for at least 3 of the 4 weeks) was observed with MNTX treatment as compared to placebo. Overall, efficacy of oral methylnaltrexone in this study was comparable to that reported in clinical studies of subcutaneous methylnaltrexone in subjects with chronic, non-cancer pain. The overall observed safety profile seen in patients treated with oral methylnaltrexone was comparable to placebo in this study.

Important Safety Information about RELISTOR

RELISTOR (methylnaltrexone bromide) Tablets is contraindicated in patients with known or suspected gastrointestinal obstruction and patients at increased risk of recurrent obstruction, due to the potential for gastrointestinal perforation.

Cases of gastrointestinal perforation have been reported in adult patients with OIC and advanced illness with conditions that may be associated with localized or diffuse reduction of structural integrity in the wall of the gastrointestinal tract (e.g., peptic ulcer disease, Ogilvie’s syndrome, diverticular disease, infiltrative gastrointestinal tract malignancies or peritoneal metastases). Take into account the overall risk-benefit profile when using RELISTOR in patients with these conditions or other conditions which might result in impaired integrity of the gastrointestinal tract wall (e.g., Crohn’s disease). Monitor for the development of severe, persistent, or worsening abdominal pain; discontinue RELISTOR in patients who develop this symptom.

If severe or persistent diarrhea occurs during treatment, advise patients to discontinue therapy with RELISTOR and consult their healthcare provider.

Symptoms consistent with opioid withdrawal, including hyperhidrosis, chills, diarrhea, abdominal pain, anxiety, and yawning have occurred in patients treated with RELISTOR.

Patients having disruptions to the blood-brain barrier may be at increased risk for opioid withdrawal and/or reduced analgesia. Take into account the overall risk-benefit profile when using RELISTOR in such patients. Monitor for adequacy of analgesia and symptoms of opioid withdrawal in such patients.

Avoid concomitant use of RELISTOR with other opioid antagonists because of the potential for additive effects of opioid receptor antagonism and increased risk of opioid withdrawal.

The most common adverse reactions (≥ 12%) in adult patients with opioid-induced constipation and chronic non-cancer pain receiving RELISTOR tablets were abdominal pain, diarrhea, headaches, abdominal distention, hyperhidrosis, anxiety, muscle spasms, rhinorrhea, and chills. Adverse reactions of abdominal pain, diarrhea, hyperhidrosis, anxiety, rhinorrhea, and chills may reflect symptoms of opioid withdrawal.

Please see complete Prescribing Information for RELISTOR at valeant.com. For more information about RELISTOR, please visit www.relistor.com.

About RELISTOR

Progenics has exclusively licensed development and commercialization rights for its first commercial product, RELISTOR, to Valeant. RELISTOR Tablets (450 mg once daily) is approved in the United States for the treatment of OIC in patients with chronic non-cancer pain. RELISTOR Subcutaneous Injection (12 mg and 8 mg) is a treatment for opioid-induced constipation approved in the United States and worldwide for patients with advanced illness and chronic non-cancer pain.

On July 19, 2016 Jounce Therapeutics, Inc., a company focused on the discovery and development of novel cancer immunotherapies and predictive biomarkers for patient enrichment, reported a global strategic collaboration with Celgene Corporation (NASDAQ:CELG) focused on developing and commercializing innovative immuno-oncology treatments for patients with cancer (Press release, Jounce Therapeutics, JUL 19, 2016, View Source [SID:SID1234515271]). The collaboration includes options on Jounce’s lead product candidate, JTX-2011, targeting ICOS, and up to four early-stage programs to be selected from a defined pool of B cell, T regulatory cell and tumor-associated macrophage targets emerging from the Jounce Translational Science Platform and an additional option to equally share a checkpoint immuno-oncology program. Post option exercise, Jounce will lead global development and U.S. commercialization for JTX-2011 and one additional collaboration program.

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"Jounce has built a unique immuno-oncology platform and pipeline with a focus on the development of novel cancer therapies matched to patient populations most likely to respond," said Robert Hershberg, M.D., Ph.D., chief scientific officer, Celgene. "This collaboration allows both companies to leverage broad capabilities in immuno-oncology to bring forward a new generation of product candidates for cancer patients."

"Celgene is the ideal partner to collaborate with Jounce to bring potentially transformational treatments to patients with cancer," said Richard Murray, Ph.D., chief executive officer, Jounce Therapeutics. "This partnership is of significant strategic value for Jounce. With Celgene as our partner, we can broaden our platform, advance our discovery programs and execute comprehensive clinical strategies, all in the context of our approach to bring the right immunotherapies to the right patient populations."

Under the terms of the collaboration, Jounce will receive an upfront payment of $225 million and a $36 million equity investment from Celgene. Jounce will also receive regulatory, development, and net sales milestone payments and tiered royalties on ex-U.S. sales. Aggregate payments for development, regulatory and commercial milestones could potentially be $2.3 billion in total across all programs reaching commercialization.

Celgene has the option to opt-in at defined stages of development across the programs. Following any opt-in, Celgene and Jounce will share U.S. profits and losses on all programs, as follows:

Jounce will retain a 60 percent U.S. profit share of JTX-2011, with 40 percent allocated to Celgene;
Jounce will retain a 25 percent U.S. profit share on the first additional program, with 75 percent allocated to Celgene;
Jounce and Celgene will equally share U.S. profits on up to three additional programs;
After opt-in, all development costs will be shared in a manner that is commensurate with product rights; and
Celgene will also receive exclusive ex-U.S. commercialization rights for each of the above programs, and Jounce is eligible to receive a royalty on any resulting ex-U.S. sales. Celgene and Jounce will equally share profits globally for the checkpoint program.

About JTX-2011
Jounce’s lead product candidate, JTX-2011, is a monoclonal antibody that binds to and activates ICOS, the Inducible T cell CO-Stimulator, a protein on the surface of certain T cells that is believed to stimulate an immune response against a patient’s cancer. We are developing JTX-2011 to treat solid tumors as a single agent and in combination with other therapies. JTX-2011 is expected to enter the clinic in the second half of 2016.