On August 4, 2016 AMRI (NASDAQ: AMRI) reported financial and operating results for the second quarter ended June 30, 2016 and provided an update to its outlook for 2016 (Press release, Albany Molecular Research, AUG 4, 2016, View Source [SID:1234514230]).

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Highlights:

Contract revenue of $116.5 million, up 37% from the second quarter 2015
Recurring royalty revenue of $4.4 million
Reported contract margins of 29%; non-GAAP contract margins of 33%
Reported net loss of ($21.3) million; non-GAAP net income of $12.7 million
Reported diluted EPS $(0.61); non-GAAP diluted EPS of $0.36
Adjusted EBITDA of $26.8 million, up 62% from the second quarter 2015
Updates 2016 outlook to reflect addition of Euticals
Non-GAAP contract margins, non-GAAP net income, non-GAAP diluted EPS and adjusted EBITDA are non-GAAP financial measures. For a discussion of these measures and reconciliations to U.S. GAAP measures, see "Non-GAAP Financial Measures" and Tables 1, 2 and 3.
"Solid execution of our strategy resulted in a successful quarter with strong revenue driven largely by the contributions of our acquisitions and strong performances in our commercial operations," said William S. Marth, AMRI’s president and chief executive officer. Higher margin businesses such as Whitehouse Labs and Gadea, as well as strong results in our DDS and Drug Product businesses significantly enhanced our performance this quarter.

We are confident that our plan will enable us to meet our outlook for the full year 2016, especially with the addition of Euticals, which brings us compelling strategic benefits and adds to our ability to generate meaningful value for our customers and shareholders longer term."

Second Quarter 2016 Results

Total revenue for the second quarter of 2016 was $120.8 million, an increase of 35%, compared to total revenue of $89.5 million reported in the second quarter of 2015.

Total contract revenue for the second quarter of 2016 was $116.5 million, an increase of 37%, compared to $85.2 million reported in the second quarter of 2015. Contract margins were 29% in the second quarter of 2016, compared with 24% for the second quarter of 2015. Non-GAAP contract margins were 33% for the second quarter of 2016, compared with 26% for the second quarter of 2015. The improvement in contract margins was driven largely by the addition of Gadea Pharmaceuticals.

Recurring royalty revenue in the second quarter of 2016 was $4.4 million, consistent with the second quarter of 2015, and reflects an increase in net sales of amphetamine salts as reported by Allergan, offset by the elimination of royalties on Allegra (fexofenadine) products which ended in the second quarter 2015. Recurring royalty revenue for the second quarter of 2016 includes $3.8 million from the net sales of certain amphetamine salts sold by Allergan and royalties from an API sourced from our business in Spain.

Research and development expense in the second quarter of 2016 was $3.5 million, up from $0.4 million in the second quarter 2015, reflecting increased investment in collaboration agreements and our API portfolio, and the addition of Gadea Pharmaceuticals.

Net loss under U.S. GAAP was $(21.3) million, or $(0.61) per basic and diluted share, in the second quarter of 2016, compared to U.S. GAAP net income of $2.3 million, or $0.07 per basic and diluted share in the second quarter of 2015. Non-GAAP net income in the second quarter of 2016 was $12.7 million or non-GAAP earnings per diluted share of $0.36, compared to non-GAAP net income of $7.4 million or non-GAAP earnings per diluted share of $0.22 for the second quarter of 2015.

Adjusted EBITDA in the second quarter of 2016 was $26.8 million, an increase of $10.3 million or 62% compared to the second quarter 2015.

For a reconciliation of non-GAAP financial measures to U.S. GAAP financial measures for the 2016 and 2015 reporting periods, please see Tables 1, 2 and 3 at the end of this press release.

Year-to-Date Results

Total revenue for the six-month period ended June 30, 2016 was $226.4 million, an increase of 32% compared to total revenue of $171.4 million reported for the six-month period ended 2015.

Contract revenue for the six-month period ended June 30, 2016 was $219.3 million, an increase of 37% compared to $160.4 million reported for the six-month period ended June 30, 2015. Contract margins reported under GAAP were 26% for the six-month period ended June 30, 2016, compared with 23% for the six-month period ended June 30, 2015. Non-GAAP contract margins were 30% for the six-month period ended June 30, 2016, compared with 25% for the six-month period ended June 30, 2015.

Recurring royalty revenue for the six-month period ended June 30, 2016 was $7.1 million, a decrease of 36% from $11.0 million for the six-month period ended June 30, 2015 due to the expiration of Allegra (fexofenadine) royalties in the second quarter of 2015. Recurring royalty revenue for the six-month period ended June 30, 2016 includes $6.0 million from the net sales of certain amphetamine salts sold by Allergan and royalties from an API sourced from our business in Spain.

Research and development expense for the six month period ended June 30, 2016 was $6.6 million, up from $0.9 million for the six-month period ended June 30, 2015, due to increased investment in collaboration agreements and our API portfolio, and the addition of Gadea.

Net loss under U.S. GAAP was $(31.3) million, or $(0.90) per basic and diluted share for the six-month period ended June 30, 2016, compared to U.S. GAAP net income of $0.1 million, or $0.00 per basic and diluted share for the six-month period ended June 30, 2015. Non-GAAP net income for the six-month period ended June 30, 2016 was $15.0 million or non-GAAP earnings per diluted share of $0.42, compared to non-GAAP net income of $13.8 million or non-GAAP earnings per diluted share of $0.42 for the six-month period ended June 30, 2015.

Adjusted EBITDA for the six-month period ended June 30, 2016 was $39.8 million, an increase of $7.8 million or 24% compared to the six-month period ended June 30, 2015.

Segment Results

Active Pharmaceutical Ingredients (API)

Three Months Ended

Six Months Ended

June 30,

June 30,
(Unaudited; $ in thousands)

2016

2015

2016

2015

API Contract Revenue

65,447

39,997

120,149

77,845
API Royalty Revenue

4,353

2,535

7,094

5,403
API Total Revenue

$ 69,800

$ 42,532

$ 127,243

$ 83,248

Cost of Contract Revenue

46,279

28,434

87,200

57,017

Gross Profit, excluding royalties

19,168

11,563

32,949

20,828
Gross Profit, including royalties

23,521

14,098

40,043

26,231

Gross Margin, excluding royalties

29.3%

28.9%

27.4%

26.8%
Gross Margin, including royalties

33.7%

33.1%

31.5%

31.5%

Non-GAAP Gross Profit, excluding royalties (1)

22,719

11,776

39,963

21,218
Non-GAAP Gross Margin, excluding royalties (1)

34.7%

29.4%

33.3%

27.3%

Non-GAAP Gross Profit, including royalties (1)

27,072

14,311

47,057

26,621
Non-GAAP Gross Margin, including royalties (1)

38.8%

33.6%

37.0%

32.0%

(1) Refer to Table 1 included in this release for the reconciliation of U.S. GAAP contract gross profit and contract gross margin to non-GAAP contract gross profit and non-GAAP contract gross margin as a percentage of contract revenue.

API contract revenue for the second quarter of 2016 increased 64% compared to the second quarter of 2015, primarily due to $28.1 million of incremental revenue from the acquisition of Gadea Pharmaceuticals, partially offset by lower revenue associated with the Holywell, UK site closure. API contract margin excluding royalties, determined under GAAP for the second quarter of 2016 was consistent with the second quarter of 2015. API non-GAAP contract margin excluding royalties for the second quarter of 2016 increased 5 percentage points from 2015, driven by the margins realized on Gadea Pharmaceutical’s revenues.

API royalty revenue in the second quarter of 2016 increased $1.8 million over the second quarter of 2015 and includes $3.8 million from the net sales of certain amphetamine salts sold by Allergan. The increase reflects an increase in net sales of amphetamine salts as reported by Allergan and royalties from an API sourced from our business in Spain.

For the six-month period ended June 30, 2016, API contract revenue increased $42.3 million or 54%, due primarily to $48.1 million of incremental revenue from the acquisition of Gadea Pharmaceuticals, partially offset by lower revenue associated with the Holywell, UK site closure.

API contract margin excluding royalties determined under GAAP for the six-month period ended June 30, 2016 was consistent with the six-month period ended June 30, 2015. API non-GAAP contract margin excluding royalties for the six-month period ended June 30, 2016 increased 6 percentage points compared to the six-month period ended June 30, 2015, driven by the margins realized on Gadea Pharmaceuticals’ revenues.

Drug Discovery Services (DDS)

Three Months Ended

Six Months Ended

June 30,

June 30,
(Unaudited; $ in thousands)

2016

2015

2016

2015

DDS Contract Revenue (1)

$ 25,820

$ 21,399

$ 49,023

$ 39,273
Cost of Contract Revenue (1)

18,363

16,003

35,533

29,708
Contract Gross Profit

7,457

5,396

13,490

9,565
Contract Gross Margin

28.9%

25.2%

27.5%

24.4%

Non-GAAP Contract Gross Profit (2)

8,042

5,964

14,590

10,289
Non-GAAP Contract Gross Margin (2)

31.1%

27.9%

29.8%

26.2%

(1) A portion of the 2015 amounts were reclassified from DDS to DPM to better align business activities within our reporting segments.

(2) Refer to Table 1 included in this release for the reconciliation of U.S. GAAP contract gross profit and contract gross margin to non-GAAP contract gross profit and non-GAAP contract gross margin as a percentage of contract revenue.

Discovery and Development Services ("DDS") contract revenue for the second quarter of 2016 increased 21% compared to the second quarter of 2015, primarily due to $3.1 million of incremental revenue from the acquisition of Whitehouse Laboratories and organic growth, partially offset by lower revenue associated with our Singapore operations.

DDS contract margin determined under GAAP increased 4 percentage points in the second quarter of 2016 as compared to the second quarter of 2015. DDS non-GAAP contract margin increased 3 percentage points for the second quarter of 2016 as compared to the second quarter of 2015, driven by the margins realized on Whitehouse Laboratories’ revenue.

For the first half of 2016, DDS contract revenue increased $9.8 million or 25%, due primarily to $5.8 million of incremental revenue from the acquisition of Whitehouse Laboratories and strong organic growth, partially offset by lower revenue associated with our Singapore operations.

DDS contract margin determined under GAAP for the six-month period ended June 30, 2016 increased 3 percentage points compared with the six-month period ended June 30, 2015. DDS non-GAAP contract margin for the six-month period ended June 30, 2016 increased 4 percentage points from the six-month period ended June 30, 2015, driven by the margins realized on Whitehouse Laboratories’ revenues.

Drug Product Manufacturing (DPM)

Three Months Ended

Six Months Ended

June 30,

June 30,
(Unaudited; $ in thousands)

2016

2015

2016

2015

DPM Contract Revenue (1)

$ 25,190

$ 23,830

$ 50,123

$ 43,240
Cost of Contract Revenue (1)

17,572

20,231

38,844

36,082
Contract Gross Profit

7,618

3,599

11,279

7,158
Contract Gross Margin

30.2%

15.1%

22.5%

16.6%

Non-GAAP Contract Gross Profit (2)

7,864

4,253

11,836

7,983
Non-GAAP Contract Gross Margin (2)

31.2%

17.8%

23.6%

18.5%

(1) A portion of the 2015 amounts were reclassified from DDS to DPM to better align business activities within our reporting segments.

(2) Refer to Table 1 included in this release for the reconciliation of U.S. GAAP contract gross profit and contract gross margin to non-GAAP contract gross profit and non-GAAP contract gross margin as a percentage of contract revenue.

DPM contract revenue determined under GAAP for the second quarter of 2016 increased 6% compared to the second quarter 2015, due to strong demand at our development and commercial manufacturing facilities, and $2.5 million of contract termination revenue related to the early termination of one of our collaboration arrangements.

DPM contract margin for the second quarter 2016 increased 15 percentage points compared to the second quarter of 2015. DPM non-GAAP contract margin for the second quarter of 2016 increased 13 percentage points compared to the second quarter of 2015, due to $2.5 million of contract termination revenue and enhanced operational efficiencies at our Albuquerque manufacturing facility.

DPM contract revenue for the six-month period ended June 30, 2016 increased 16% compared to the six-month period ended June 30, 2015, due primarily to $2.5 million of contract termination revenue.

DPM contract margin determined under GAAP for the six-month period ended June 30, 2016 increased 6 percentage points compared to the six-month period ended June 30, 2015. Drug Product Manufacturing non-GAAP contract margin for the six-month period ended June 30, 2016 increased 5 percentage points compared to the six-month period ended June 30, 2015, driven by contract termination revenue.

Liquidity and Capital Resources

At June 30, 2016, AMRI had cash, cash equivalents and restricted cash of $31.4 million, compared to $47.2 million at March 31, 2016. The decrease in cash and cash equivalents for the quarter ended June 30, 2016 was primarily due to the use of $13.3 million for capital expenditures and $5 million of debt paydown, partially offset by cash generated by operating activities of $3.5 million. At December 31, 2015, AMRI had cash, cash equivalents and restricted cash of $52.3 million. The decrease in cash and cash equivalents for the six months ended June 30, 2016 was primarily due to the use of $25 million for capital expenditures and $10.8 million of debt paydown, partially offset by cash generated by operating activities of $15.2 million.

Financial Outlook

AMRI’s guidance takes into account a number of factors, including expected financial results for 2016, anticipated tax rates and shares outstanding. The guidance includes the impact from the acquisition of Prime European Therapeuticals S.p.A., ("Euticals"), which closed on July 11, 2016.

AMRI’s estimates for full year 2016, including the addition of Euticals, are as follows:

Full Year 2016 revenue of $590 to $615 million, reflecting approximately $123 million of incremental revenue from Euticals, an increase of 50% at the midpoint, including:
DDS revenue growth of 27% to approximately $106 million
API revenue growth of 76% to approximately $362 million
DPM revenue growth of 10% to approximately $107 million
Fine Chemicals revenue of $16 million
Royalty revenue of $10 to $11 million
Non-GAAP contract margin of approximately 29%
Non-GAAP selling, general and administrative expenses of approximately 14% of revenue
R&D expense of between $12 and $13 million
Adjusted EBITDA between $108 and $114 million, an increase of 47% at the midpoint
Non-GAAP diluted EPS between $1.03 and $1.11, based on an average fully diluted share count of approximately 39 million shares
Non-GAAP effective tax rate of approximately 30-31%
Capital expenditures of approximately $48 million
Reflecting the recurring seasonality in AMRI’s business and greater contribution from Euticals in the fourth quarter, the Company currently expects the percentage of non-GAAP diluted EPS in the second half of 2016 to be approximately 20% in the third quarter and 80% in the fourth quarter.

On August 4, 2016 Emergent BioSolutions Inc. (NYSE:EBS) reported financial results for the quarter and six months ended June 30, 2016 (Press release, Emergent BioSolutions, AUG 4, 2016, View Source;p=RssLanding&cat=news&id=2193280 [SID:1234514252]).

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FINANCIAL HIGHLIGHTS
Total revenues: Q2 2016 of $101.5 million; six months 2016 of $212.5 million
GAAP net loss: Q2 2016 of $(10.9) million, or $(0.27) per diluted share; six months 2016 of $(7.0) million, or $(0.17) per diluted share
Adjusted net income/loss: Q2 2016 net loss of $(7.1) million, or $(0.18) per diluted share; six months 2016 net income of $0.3 million, or $0.01 per diluted share
EBITDA: Q2 2016 of $(4.8) million, or $(0.12) per diluted share; six months of $12.4 million, or $0.31 per diluted share
Adjusted EBITDA: Q2 2016 of $(2.2) million, or $(0.05) per diluted share; six months 2016 of $17.3 million, or $0.43 per diluted share

Q2 2016 & RECENT BUSINESS ACCOMPLISHMENTS
Spin-off of Aptevo Therapeutics completed
Repurchase program for up to $50 million of the Company’s common stock authorized
Building 55 milestones achieved towards Food and Drug Administration (FDA) licensure
Supplemental Biologics License Application accepted
Pre-approval inspection completed
PDUFA date of August 15, 2016 established
BioThrax (Anthrax Vaccine Adsorbed) granted Orphan Drug status by the FDA for post-exposure prophylaxis (PEP) of anthrax disease
Centers for Disease Control and Prevention (CDC) confirmed intent to award a follow-on procurement contract for BioThrax (Anthrax Vaccine Adsorbed) by September 23, 2016
U.S. Department of Health and Human Services (HHS) issued a request for proposal seeking a next generation anthrax vaccine; today the company submitted a response proposing its product candidate NuThrax (Anthrax Vaccine Adsorbed with CPG 7909 Adjuvant)
Task order for up to $21.9 million to develop and manufacture three cGMP lots of a Zika vaccine received from the Biomedical Advanced Research and Development Authority
2016 OUTLOOK
The Company will continue to temporarily postpone its financial guidance for 2016 until further clarity is reached on the following U.S. government contracts and solicitations:
Current BioThrax procurement contract: By letter dated April 26, 2016 the CDC indicated that it anticipated procuring less than the total remaining doses of BioThrax under the existing procurement contract and did not quantify the number of doses anticipated to be procured.
Follow-on BioThrax procurement contract: On June 21, 2016, HHS issued a Sole Source Notification indicating its intention by September 23, 2016 to award to the Company a follow-on contract to procure 29.4 million doses of BioThrax with a period of performance of five years. The terms of the contract, including the price per dose and the timing of deliveries, remain subject to contract negotiation.
Notice of Solicitation for Next Generation Anthrax Vaccine: On June 21, 2016, HHS issued a request for proposal seeking a next generation anthrax vaccine for post-exposure prophylaxis of anthrax disease with the ability to confer protection in one or two doses and meeting additional specific criteria relating to safety, efficacy and manufacturing.
2016 FINANCIAL PERFORMANCE
(I) Quarter Ended June 30, 2016 (unaudited)
Revenues
Product Sales
For Q2 2016, product sales were $58.5 million, a decrease of 29% as compared to 2015. The decrease in BioThrax sales was primarily due to a reduction in shipments to the CDC consistent with the April 26, 2016 letter from CDC that indicated that it anticipated procuring less than the total remaining doses of BioThrax under the existing procurement contract. The increase in Other Biodefense sales was primarily due to VIGIV sales to the Strategic National Stockpile (SNS). The increase in Aptevo sales was mainly due to increased sales of IXINITY (received FDA licensure and launched in Q2 2015).

(in millions) Three Months Ended
June 30,
2016 2015 % Change
Product Sales
BioThrax $ 40.0 $ 72.2 (45 )%
Other Biodefense $ 8.3 $ 2.8 192 %
Total Biodefense $ 48.3 $ 75.1 (36 )%
Total Aptevo Products $ 10.2 $ 6.9 47 %
Total Product Sales $ 58.5 $ 82.0 (29 )%

Contract Manufacturing
For Q2 2016, revenue from the Company’s contract manufacturing operations was $10.2 million, an increase of 15% as compared to 2015. The increase is due primarily to services related to plasma collection and related testing activities.
Contracts, Grants and Collaborations
For Q2 2016, contracts, grants and collaborations revenue was $32.8 million, a decrease of 7% as compared to 2015.
Operating Expenses
Cost of Product Sales and Contract Manufacturing
For Q2 2016, cost of product sales and contract manufacturing was $35.6 million, an increase of 31% as compared to 2015, attributable to an increase in rejected BioThrax work-in-process material, as well as increased Other Biodefense and Aptevo product sales.
Research and Development
For Q2 2016, gross research and development (R&D) expenses were $35.3 million, a decrease of 14% as compared to 2015. The decrease primarily reflects lower contract service costs.
For Q2 2016, net R&D expenses were $2.5 million, a decrease of 55% as compared to 2015. Net R&D expenses, which are more representative of the Company’s actual out-of-pocket investment in product development, are calculated as gross research and development expenses less contracts, grants and collaboration revenues.
(in millions) Three Months Ended
June 30,
2016 2015 % Change
Research and Development Expenses (Gross) $ 35.3 $ 40.9 (14 )%
Adjustments:
– Contracts, grants and collaborations revenues $ 32.8 $ 35.2 (7 )%
Net Research and Development Expenses $ 2.5 $ 5.7 (55 )%

Selling, General and Administrative
For Q2 2016, selling, general and administrative expenses were $44.1 million, an increase of 21% as compared to 2015. This increase includes costs associated with the Aptevo spin-off along with increased professional services to support our strategic growth initiatives, higher IXINITY selling costs, and information technology investments.
Net Income/(Loss)
For Q2 2016, GAAP net loss was $(10.9) million, or $(0.27) per diluted share, versus GAAP net income of $14.1 million, or $0.32 per diluted share, in 2015.
(II) Six Months Ended June 30, 2016 (unaudited)
Revenues
Product Sales
For the six months of 2016, product sales were $130.3 million, an increase of 30% as compared to 2015. The increase in BioThrax sales was primarily due to the suspension of shipments to the CDC in Q1 2015 following the discovery of foreign particles in a limited number of vials in two manufactured lots of BioThrax, resulting in reduced sales volume in the first half of 2015. The decrease in Other Biodefense sales was primarily due to lower RSDL shipments. The increase in Aptevo sales was mainly due to increased sales of IXINITY.

(in millions) Six Months Ended
June 30,
2016 2015 % Change
Product Sales
BioThrax $ 99.1 $ 72.2 37 %
Other Biodefense $ 13.0 $ 14.8 (12 )%
Total Biodefense $ 112.1 $ 87.1 29 %
Total Aptevo Products $ 18.1 $ 13.3 37 %
Total Product Sales $ 130.3 $ 100.3 30 %

Contract Manufacturing
For the six months of 2016, revenue from the Company’s contract manufacturing operations was $17.7 million, a decrease of 16% as compared to 2015. The change is primarily due to a decrease of $3.8 million from services related to the production of an MVA Ebola vaccine in 2015.
Contracts, Grants and Collaborations
For the six months of 2016, contracts, grants and collaborations revenue was $64.5 million, a decrease of 6% as compared to 2015.
Operating Expenses
Cost of Product Sales and Contract Manufacturing
For the six months of 2016, cost of product sales and contract manufacturing was $64.1 million, an increase of 39% as compared to 2015, primarily attributable to the 37% increase in BioThrax product sales.
Research and Development
For the six months of 2016, gross research and development (R&D) expenses were $69.5 million, a decrease of 13% as compared to 2015. The decrease primarily reflects lower contract service costs.
For the six months of 2016, net R&D expenses were $5.0 million, a decrease of 56% as compared to 2015.
(in millions) Six Months Ended
June 30,
2016 2015 % Change
Research and Development Expenses (Gross) $ 69.5 $ 79.6 (13 )%
Adjustments:
– Contracts, grants and collaborations revenues $ 64.5 $ 68.3 (6 )%
Net Research and Development Expenses $ 5.0 $ 11.3 (56 )%

Selling, General and Administrative
For the six months of 2016, selling, general and administrative expenses were $83.9 million, an increase of 18% as compared to 2015. This increase includes costs associated with the Aptevo spin-off along with increased professional services to support our strategic growth initiatives, additional selling effort for IXINITY, and information technology investments.
Net Loss
For the six months of 2016, GAAP net loss was $(7.0) million, or $(0.17) per diluted share, versus GAAP net loss of $(7.4) million, or $(0.19) per diluted share, in 2015.
(III) RECONCILIATION OF GAAP NET INCOME/(LOSS) TO ADJUSTED NET INCOME/(LOSS), EBITDA AND ADJUSTED EBITDA
This press release contains three financial measures (Adjusted Net Income/(Loss), EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), and adjusted EBITDA) that are considered "non-GAAP" financial measures under applicable Securities and Exchange Commission rules and regulations. These non-GAAP financial measures should be considered supplemental to and not a substitute for financial information prepared in accordance with generally accepted accounting principles. The Company’s definition of these non-GAAP measures may differ from similarly titled measures used by others. Adjusted Net Income/(Loss) adjusts for specified items that can be highly variable or difficult to predict, or reflect the non-cash impact of charges resulting from purchase accounting. EBITDA reflects net income excluding the impact of depreciation, amortization, interest expense and provision for income taxes. Adjusted EBITDA also excludes specified items that can be highly variable and the non-cash impact of certain purchase accounting adjustments. The Company views these non-GAAP financial measures as a means to facilitate management’s financial and operational decision-making, including evaluation of the Company’s historical operating results and comparison to competitors’ operating results. These non-GAAP financial measures reflect an additional way of viewing aspects of the Company’s operations that, when viewed with GAAP results and the reconciliations to the corresponding GAAP financial measure, may provide a more complete understanding of factors and trends affecting the Company’s business.
The determination of the amounts that are excluded from these non-GAAP financial measures are a matter of management judgment and depend upon, among other factors, the nature of the underlying expense or income amounts. Because non-GAAP financial measures exclude the effect of items that will increase or decrease the Company’s reported results of operations, management strongly encourages investors to review the Company’s consolidated financial statements and publicly filed reports in their entirety.
Reconciliation of GAAP Net Income/(Loss) to Adjusted Net Income/(Loss)
The following table provides a reconciliation of GAAP Net Income/(Loss) to Adjusted Net Income/(Loss) for the three month periods as indicated.

(in millions, except per share value) Three Months Ended June 30,
2016 2015 Source
GAAP Net Income/(Loss) $ (10.9 ) $ 14.1 NA
Adjustments:
+ Spin-off and acquisition-related costs (transaction & integration) 2.6 1.4 SG&A
+ Non-cash amortization charges 2.8 2.8 COGS, SG&A,
Other Income
Tax effect (1.6 ) (1.3 ) NA
Total Adjustments 3.8 2.9 NA
Adjusted Net Income/(Loss)
Adjusted Net Income/(Loss) per Diluted Share
$
$ (7.1
(0.18 )
) $
$
17.0
0.36
NA
The following table provides a reconciliation of GAAP Net Loss to Adjusted Net Income/(Loss) for the six month periods as indicated.
(in millions, except per share value) Six Months Ended June 30,
2016 2015 Source
GAAP Net Loss $ (7.0 ) $ (7.4 ) NA
Adjustments:
+ Spin-off and acquisition-related costs (transaction & integration) 4.9 2.5 SG&A
+ Non-cash amortization charges 5.5 5.3 COGS, SG&A,
Other Income
+ Impact of purchase accounting on inventory step-up – 0.1 SG&A
Tax effect (3.1 ) (2.4 ) NA
Total Adjustments 7.3 5.6 NA
Adjusted Net Income/(Loss)
Adjusted Net Income/(Loss) per Diluted Share $
$ 0.3
0.01
$
$ (1.8
(0.05 )
) NA
Reconciliation of GAAP Net Income/(Loss) to EBITDA and Adjusted EBITDA
The following table provides a reconciliation of GAAP Net Income/(Loss) to EBITDA and Adjusted EBITDA for the three month periods as indicated.

(in millions, except per share value) Three Months Ended June 30,
2016 2015
GAAP Net Income/(Loss) $ (10.9 ) $ 14.1
Adjustments:
+ Depreciation & Amortization 8.5 8.4
+ Provision For/(Benefit From) Income Taxes (3.9 ) 5.5
+ Total Interest Expense 1.5 1.6
Total Adjustments 6.1 15.5
EBITDA
EBITDA per Diluted Share $
$ (4.8
(0.12
)
) $
$ 29.6
0.62

Additional Adjustments:
+ Spin-off and acquisition-related costs (transaction & integration) 2.6 1.4
Total Additional Adjustments 2.6 1.4
Adjusted EBITDA
Adjusted EBITDA per Diluted Share $
$ (2.2
(0.05
)
) $
$ 31.0
0.65

The following table provides a reconciliation of GAAP Net Loss to EBITDA and Adjusted EBITDA for the six month periods as indicated.
(in millions, except per share value) Six Months Ended June 30,
2016 2015
GAAP Net Loss $ (7.0 ) $ (7.4 )
Adjustments:
+ Depreciation & Amortization 17.0 16.5
+ Provision For/(Benefit From) Income Taxes (0.6 ) (2.8 )
+ Total Interest Expense 3.0 3.3
Total Adjustments 19.4 17.0
EBITDA
EBITDA per Diluted Share $
$ 12.4
0.31
$
$ 9.6
0.25
Additional Adjustments:
+ Spin-off and acquisition-related costs (transaction & integration) 4.9 2.5
+ Impact of purchase accounting on inventory step-up - 0.1
Total Additional Adjustments 4.9 2.6
Adjusted EBITDA
Adjusted EBITDA per Diluted Share $
$ 17.3
0.43 $
$ 12.2
0.32

On August 4, 2016 Radius Health, Inc. ("Radius" or the "Company") (Nasdaq:RDUS), a science-driven biopharmaceutical company that is committed to developing innovative therapeutics in the areas of osteoporosis, oncology and endocrine diseases, reported its financial results for the second quarter ended June 30, 2016, and provided a business update (Press release, Radius, AUG 4, 2016, View Source [SID:1234514295]). As of June 30, 2016, Radius had $400.9 million in cash, cash equivalents and marketable securities.

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"We are pleased to be working with the U.S. Food and Drug Administration and European Medicines Agency as they review our regulatory submissions for abaloparatide-SC for the treatment of postmenopausal osteoporosis. In anticipation of our first potential launch, we are building our commercial organization in the U.S. and continuing our productive partnering discussions," said Robert Ward, President and Chief Executive Officer of Radius. "At the same time, we continue to make steady progress in the development of an optimized transdermal patch line extension for abaloparatide as well as the advancement of our two oncology programs, both of which we believe can add substantial value to Radius."

Pipeline Updates

Abaloparatide-SC

In May 2016, Radius’ new drug application ("NDA") in the United States for abaloparatide-SC for the treatment of postmenopausal women with osteoporosis was accepted for filing by the FDA and was granted a Prescription Drug User Fee Act (PDUFA) date of March 30, 2017. Radius’ marketing authorisation application ("MAA") to the European Medicines Agency ("EMA"), was validated in December 2015 and is currently undergoing regulatory review. We anticipate a CHMP scientific opinion in late 2016 or 2017.

Abaloparatide-TD

Radius is developing abaloparatide-transdermal, or abaloparatide-TD, based on 3M’s patented Microstructured Transdermal System technology for potential use as a short wear-time transdermal patch. Radius commenced a human replicative clinical evaluation of the optimized abaloparatide-TD patch in December 2015 with the goal of achieving comparability to abaloparatide-SC. An abstract submitted to the American Society for Bone Mineral Research 2016 Annual Meeting (ASBMR) was accepted as an oral late-breaking presentation to be made on September 19, 2016 in Atlanta, Georgia.

RAD1901

In December 2014, Radius commenced a Phase 1 multicenter, open-label, two-part, dose-escalation study of RAD1901 in postmenopausal women with estrogen receptor positive (ER+) and HER2-negative advanced breast cancer in the United States. The Phase 1 study is designed to evaluate escalating doses of RAD1901 in Part A. The Part B expansion cohorts allow for an evaluation of additional safety, tolerability and preliminary efficacy. In addition, in December 2015, Radius commenced a Phase 1 FES-PET study in patients with ER+, HER2-negative advanced breast cancer in the European Union, which includes the use of FES-PET imaging to assess estrogen receptor occupancy in tumor lesions following RAD1901 treatment.

As of the end of July, the Phase I Part B expansion cohort for RAD1901 that initiated in March 2016 at 400 mg daily in ER+, HER2-negative advanced breast cancer has enrolled 19 out of 20 patients. We continue to enroll patients in the European Phase I FES-PET trial — the first three-patient dosing cohort is enrolled. We are pleased with the progress across these trials and expect to provide an update on the RAD1901 program at an upcoming scientific meeting.

RAD140

We have reported that RAD140 in preclinical xenograft models of breast cancer has demonstrated potent tumor growth inhibition when administered alone or in combinations with CDK4/6 inhibitors. It is estimated that 77% of breast cancers show expression of the androgen receptor. Our preclinical data suggest that RAD140 activity at the androgen receptor stimulates up-regulation of a tumor suppression pathway. We expect to provide an update on the RAD140 program at an upcoming scientific meeting.

Radius Expects the Following Upcoming Milestones

Abaloparatide-SC
Receive opinion from the Committee for Medicinal Products for Human Use regarding the EMA’s review of the abaloparatide-SC MAA in late 2016 or 2017
FDA PDUFA date of March 30, 2017
Enter into a collaboration for the potential commercialization of abaloparatide-SC outside the U.S. prior to commercial launch
Three abstracts accepted for poster presentations at ASBMR from the Phase 3 ACTIVE clinical trial
Abaloparatide-TD
Oral late-breaker presentation of the results of the human replicative PK pilot study of an optimized abaloparatide transdermal patch at ASBMR, on September 19, 2016 in Atlanta, Georgia
RAD1901
Expect to provide an update on the RAD1901 program at an upcoming scientific meeting.
RAD140
Expect to provide an update on the RAD140 program at an upcoming scientific meeting.
Radius Expects To Make Presentations at the Following Upcoming Conferences

Radius President and CEO, Robert E. Ward will make a presentation and company management will host one-on-ones at the Canaccord Genuity Growth Conference, August 10, 2016 at the InterContinental Hotel in Boston, MA.
Radius President and CEO, Robert E. Ward, will make a presentation and company management will host one-on-ones at the Rodman & Renshaw 18th Annual Global Investment Conference at the Lotte New York Palace Hotel in New York on September 12.
Four abstracts for abaloparatide were accepted for presentation at ASBMR September 16-19, 2016 in Atlanta, Georgia. Three data presentations are from the Phase 3 ACTIVE trial for abaloparatide-SC, and the fourth is an oral presentation in the Late-Breaking Abstracts session from the pilot PK human replicative study of an optimized transdermal patch titled: "Clinical Development of an Optimized Abaloparatide Transdermal Patch" on September 19, 2016 at 11:36 AM — 11:48 AM.
Recent Corporate Highlights

In July 2016, Radius entered into a pre-clinical collaboration with Takeda Pharmaceutical Company Limited to evaluate the combination of investigational drug RAD1901 with investigational drug TAK-228, an oral mTORC 1/2 inhibitor in Phase 2b development for the treatment of breast, endometrial and renal cancer, with the goal of potentially exploring such combination in a clinical study.

In June, Radius announced the opening of its Wayne, Pennsylvania office, which will serve as the Company’s Commercial and Medical hub and house marketing, sales, human resources, IT, pharmacovigilance, health economics, outcomes research, medical education, clinical affairs and medical affairs staff.

In May, Radius announced that its New Drug Application (NDA) for abaloparatide—SC had been accepted for filing by the U.S. Food and Drug Administration (FDA). The acceptance of the NDA reflects the FDA’s determination that the application is sufficiently complete to permit a substantive review. A PDUFA date of March 30, 2017 has been assigned.
Abaloparatide-SC as a treatment for postmenopausal women with osteoporosis is an investigational product and its safety and efficacy have not been established.

Second Quarter 2016 Financial Results

For the three months ended June 30, 2016, Radius reported a net loss of $43.4 million, or $1.01 per share, as compared to a net loss of $23.0 million, or $0.61 per share for the three months ended June 30, 2015. The increase in net loss for the three months ended June 30, 2016 as compared to the three months ended June 30, 2015 was primarily due to an increase in research and development and general and administrative expenses, partially offset by a decrease in interest expense and an increase in interest income.

Research and development expenses for the three months ended June 30, 2016 were $26.9 million, compared to $16.3 million for the same period in 2015. This increase was primarily driven by higher professional contract services costs associated with the development of RAD1901 to support a Phase 1 study in metastatic breast cancer that commenced in late 2014 and a Phase 2b study in postmenopausal vasomotor symptoms that commenced in December 2015. This increase was also a result of an increase in compensation expense, including stock-based compensation, due to an increase in headcount from June 30, 2015 to June 30, 2016.

General and administrative expenses for the three months ended June 30, 2016 were $17.2 million, compared to $6.0 million for the same period in 2015. This increase was primarily attributable to an increase in professional support costs and legal fees, including the costs associated with increasing headcount and preparing for the potential commercialization of abaloparatide-SC, subject to a favorable regulatory review.
This increase was also driven by an increase in compensation expense due to an increase in headcount from June 30, 2015 to June 30, 2016.

As of June 30, 2016, Radius had $400.9 million in cash, cash equivalents and marketable securities. Based upon Radius’ cash, cash equivalents and marketable securities balance, Radius believes that, prior to the consideration of revenue from the potential future sales of any of its investigational products that may receive regulatory approval or proceeds from collaboration activities, it has sufficient capital to fund its development plans, U.S. commercial scale-up and other operational activities into 2018.

On August 4, 2016 Array BioPharma Inc. (NASDAQ: ARRY), a biopharmaceutical company focused on the discovery, development and commercialization of targeted small molecule cancer therapies, reported results for its fiscal fourth quarter and full year ended June 30, 2016 and provided an update on the progress of its key clinical development programs (Press release, Array BioPharma, AUG 4, 2016, View Source;p=RssLanding&cat=news&id=2192986 [SID:1234514231]).

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Array BioPharma. (PRNewsFoto/Array BioPharma Inc.)
"The recent filing of an NDA for binimetinib in NRAS-mutant melanoma represents an important milestone for Array," said Ron Squarer, Array’s Chief Executive Officer. "We also look forward to announcing top-line results from our Phase 3 COLUMBUS trial in BRAF-mutant melanoma in the third quarter of 2016 and to advancing both the Phase 3 BEACON CRC trial in BRAF-mutant colorectal cancer and a new immuno-oncology Phase 1/2 trial of a CSF-1R inhibitor combined with a PD-1 inhibitor."

KEY PIPELINE UPDATES

Binimetinib (MEK162) and encorafenib (LGX818)

Novartis continues to substantially fund all ongoing trials with binimetinib and encorafenib that were active or planned as of the close of the Novartis Agreements in 2015, including the NEMO and COLUMBUS Phase 3 trials. Reimbursement revenue from Novartis was approximately $107.3 million for the previous 12 months, of which $33.4 million was recorded over the past quarter.

NEMO: Global Phase 3 trial of binimetinib versus dacarbazine in NRAS-mutant melanoma patients

Array submitted an NDA for binimetinib to the Food and Drug Administration (FDA) at the end of June 2016. Array is planning for an Oncologic Drugs Advisory Committee (ODAC) meeting as part of the regulatory review process. Array is also currently preparing for an Application Orientation Meeting (AOM) with the FDA in September 2016, which we expect will include a discussion of the NDA package including clinical risk / benefit.

Results from the NEMO trial were presented at the 2016 American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) Annual Meeting. The study met its primary endpoint of improving progression-free survival (PFS) compared with dacarbazine treatment. The median PFS on the binimetinib arm was 2.8 months versus 1.5 months on the dacarbazine arm; hazard ratio (HR) 0.62, [95% CI 0.47-0.80], p<0.001. In the pre-specified subset of patients who received prior treatment with immunotherapy, including ipilimumab, nivolumab or pembrolizumab, patients who received binimetinib experienced 5.5 months of median PFS (95% CI, 2.8–7.6), compared with 1.6 months for those receiving treatment with dacarbazine (95% CI, 1.5–2.8). While the results in the pre-specified sub-group of patients who had received prior treatment with immunotherapy are of interest, interpretation beyond overall consistency with the primary result should be made with care. Array anticipates that the primary consideration for marketing approval will be the results for the primary endpoint of the trial.

In addition to improving PFS, binimetinib also demonstrated significant improvement in overall response rate (ORR) and disease control rate (DCR). While there was no statistically significant difference demonstrated in overall survival, the median overall survival (mOS) favored the binimetinib arm.

Confirmed ORR was 15 percent (95% CI, 11-20 percent) in patients receiving binimetinib vs. 7 percent (95% CI, 3-13 percent) in patients receiving dacarbazine.
DCR for patients receiving binimetinib was 58 percent (95% CI, 52-64 percent) vs. 25 percent (95% CI, 18-33 percent) for patients receiving dacarbazine.
mOS was estimated at 11.0 months in patients receiving binimetinib vs. 10.1 months for patients treated with dacarbazine [(HR) = 1.0 (95% CI 0.75-1.33), p=0.499].
Under the NEMO protocol, and in accordance with accepted statistical practice, the subgroup analyses of overall survival (OS) are formally conducted only if the key secondary endpoint of OS reached statistical significance.

Binimetinib was generally well-tolerated and the adverse events (AEs) reported were consistent with previous results in NRAS-mutant melanoma patients. Grade 3/4 AEs reported in greater than or equal to 5 percent of patients receiving binimetinib included increased creatine phosphokinase (CPK) and hypertension.

Activating NRAS mutations are present in up to 20 percent of patients with metastatic melanoma, and are a poor prognostic indicator for these patients. Treatment options for this population remain limited beyond immunotherapy, and these patients face poor clinical outcomes and high mortality.

COLUMBUS: Global Phase 3 trial of binimetinib plus encorafenib versus vemurafenib in BRAF-mutant melanoma patients

Array expects COLUMBUS top-line results during the third quarter of 2016.

Activating BRAF mutations are present in approximately 50 percent of patients with metastatic melanoma. In two separate Phase 1/2 trials in this patient population, binimetinib plus encorafenib demonstrated encouraging clinical activity and an attractive tolerability profile, including low incidence of pyrexia and little to no incidence of rash or photosensitivity. Patients treated in two Phase 3 trials of dabrafenib plus trametinib (COMBI-d and COMBI-v) experienced greater than 50 percent incidence of pyrexia (fever), while in a large, randomized trial of vemurafenib and cobimetinib (coBRIM) nearly 50 percent of patients experienced photosensitivity reactions. Of the patients who experienced pyrexia on COMBI-d and COMBI-v, one-half reported three or more events, and at least half required dose modifications, including interruptions, reductions or discontinuation as a result of their pyrexia. Of the patients who experienced photosensitivity on coBRIM, the median duration of photosensitivity was three months, with some patients experiencing durations as long as 14 months. Only 63 percent of patients on coBRIM with photosensitivity reactions experienced resolution while on study.

BEACON CRC: Global Phase 3 trial of binimetinib, encorafenib and Erbitux (cetuximab) versus Erbitux in BRAF-mutant colorectal cancer (CRC) patients

During the 2016 ASCO (Free ASCO Whitepaper) Annual Meeting, Array, Pierre Fabre, and Merck KGaA, Darmstadt, Germany, jointly announced the initiation of BEACON CRC (Binimetinib, Encorafenib And Cetuximab Combined to treat BRAF-mutant ColoRectal Cancer), a pivotal Phase 3 global clinical trial, assessing the efficacy of binimetinib, encorafenib and Erbitux compared to Erbitux and irinotecan-based therapy in patients with BRAF-mutant CRC.

BEACON CRC is a randomized, open-label, global study evaluating the efficacy and safety of binimetinib, encorafenib and Erbitux in patients with BRAF-mutant metastatic CRC who have previously received first-or second-line systemic therapy. The study includes a safety lead-in with approximately 30 patients. With appropriate results from the lead-in, approximately 615 patients are expected to be randomized 1:1:1 to receive triplet therapy (binimetinib, encorafenib and Erbitux), doublet therapy (encorafenib and Erbitux) or the control arm (irinotecan-based therapy and Erbitux).

The primary endpoint of the trial is OS of the triplet therapy compared to the control arm. Secondary endpoints address efficacy of the doublet therapy compared to the control arm, and the triplet therapy compared to the doublet therapy. Other secondary endpoints include PFS, objective ORR, duration of response, safety and tolerability. Health related quality of life data will also be assessed.

Array will act as the global sponsor of the study. Pierre Fabre licensed commercial rights to binimetinib and encorafenib for Europe and other global markets from Array in December 2015. As part of this collaboration, Pierre Fabre has elected to co-fund 40 percent of the cost of the BEACON CRC trial. Merck KGaA, Darmstadt, Germany, is the owner of Erbitux outside of the United States and Canada, and will supply Erbitux to all trial sites in those geographies as part of the collaboration. If successful, the results would support regulatory submissions for all three parties.

Array also announced updated results from a Phase 2 study of the combination of encorafenib and cetuximab, with or without alpelisib, a selective PI3K alpha inhibitor, in patients with advanced BRAF-mutant CRC at the 2016 ASCO (Free ASCO Whitepaper) meeting. Data from this study suggest that mOS for these patients may exceed one year, which is more than double several historical published benchmarks for this population.

In the Phase 2 study, 102 patients with BRAF-mutant CRC who had progressed after one or more prior therapies were randomized to receive the doublet regimen of encorafenib and cetuximab (ENCO 200 mg PO QD and CETUX per label; n=50) or the triplet regimen of encorafenib, cetuximab and alpelisib (ENCO, CETUX and ALP 300 mg PO QD; n=52). The Phase 2 analysis for these treatment regimens demonstrated promising clinical activity in patients:

Median OS was 12.4 and 13.1 months for the doublet and alpelisib-containing triplet regimens, respectively.
Median PFS was 4.2 and 5.4 months for the doublet and alpelisib-containing triplet regimens, respectively.
ORR was 22 percent and 27 percent for the doublet and alpelisib-containing triplet regimens, respectively.
Grade 3 or 4 AEs occurring in greater than 10 percent of patients included anemia, hyperglycemia and increased lipase.
Several historical published median PFS and median OS results after first-line treatment range from 1.8 to 2.5 months and four to six months, respectively, and published ORR from various studies in this population range between six percent to eight percent. As alpelisib added toxicity with only marginal additional activity, the BEACON CRC trial utilizes binimetinib, a MEK inhibitor, in the triplet arm.

Colorectal cancer is the third most common cancer among men and women in the United States, with more than 134,000 new cases and nearly 50,000 deaths from the disease projected in 2016. In the United States, BRAF mutations occur in 8 to 15 percent of patients with colorectal cancer and represent a poor prognosis for these patients.

ARRY-382

Phase 1/2 dose escalation study initiated with ARRY-382, a colony-stimulating factor-1 receptor (CSF-1R) inhibitor, in combination with pembrolizumab, a PD-1 antibody, for the treatment of patients with advanced solid tumors

In July 2016, Array initiated a Phase 1/2 dose escalation immuno-oncology trial of ARRY-382 in combination with pembrolizumab (Keytruda), a Programmed Cell Death Receptor 1 (PD-1) antibody, in patients with advanced solid tumors. ARRY-382 is a wholly-owned, potent, highly selective, small-molecule inhibitor of CSF-1R kinase activity.

The study will enroll up to 18 patients with selected advanced solid tumors to determine the maximum tolerated dose and/or recommended Phase 2 dose of the combination. In addition, the safety profile, pharmacodynamic effects, and preliminary assessment of activity of the combination will be assessed. With appropriate results, Array has the option to advance the combination into expansion cohorts of patients with metastatic melanoma or advanced non-small cell lung cancer (NSCLC).

Results from a prior Phase 1 study designed to assess the safety, pharmacokinetics and pharmacodynamics of ARRY-382 for treating patients with cancer have been presented and a dose and schedule that demonstrates target engagement based on multiple pharmacodynamic biomarkers was identified for further study.

With this new combination study, Array is strengthening its position in the immuno-oncology field. Earlier this year, Array initiated an immuno-oncology research collaboration with the Dana-Farber Cancer Institute that Array believes has broad potential applicability to its drug discovery efforts.

ARRY-797 (ARRY-371797)

Phase 2 trial ongoing in patients with LMNA A/C-related dilated cardiomyopathy (DCM)

Array is conducting a 12-patient Phase 2 study to evaluate the effectiveness and safety of ARRY-797 in patients with LMNA A/C-related DCM, a serious, genetic cardiovascular disease. Results will be presented at the European Society of Cardiology on August 30, 2016. By age 45, approximately 70 percent of patients with LMNA A/C-related DCM will have died; suffered a major cardiac event; or will have undergone a heart transplant. Array has presented a qualitative summary of the Phase 2 study. The primary endpoint of the study is mean change in the six-minute walk test (6MWT) at 12 weeks relative to the baseline. ARRY-797 exceeded benchmarks set by a number of recently-approved drugs for rare diseases on the basis of the 6MWT as a primary endpoint. Secondary endpoints in the ARRY-797 trial, including changes in N-Terminal pro-Brain-derived Natriuretic Peptide (NT-proBNP, a serum biomarker of heart failure severity), and patient reported outcomes, are directionally consistent with the primary endpoint. Data for patients followed over a 48-week period suggest a durable effect. Taken together, the data to date suggest a path forward for this program, and Array has met with regulators to discuss the design of a study that could be the basis for marketing approval.

Selumetinib (partnered with AstraZeneca)

Registration trials advancing in NSCLC (SELECT-1), thyroid cancer (ASTRA) and neurofibromatosis type 1

AstraZeneca expects top-line results from SELECT-1 in the second half of 2016 and projects a regulatory filing of selumetinib in NSCLC in the first half of 2017. AstraZeneca continues to advance selumetinib in three registration trials: SELECT-1 in patients with KRAS-mutant non-small cell lung cancer (NSCLC); a registration trial in patients with neurofibromatosis type 1; and ASTRA in patients with differentiated thyroid cancer.

SELECT-1 is a 500-patient randomized, double-blind, placebo-controlled study that was designed to evaluate the safety and efficacy of selumetinib plus docetaxel as a second-line therapy in locally advanced or metastatic KRAS-mutant NSCLC. KRAS mutations are among the most common mutations in NSCLC, present in approximately 25 percent of these patients. The study is designed to evaluate PFS as the primary endpoint, and a key secondary endpoint is OS. AstraZeneca’s decision to progress selumetinib to Phase 3 in NSCLC followed the results from a randomized Phase 2 study evaluating the combination of selumetinib with docetaxel against docetaxel alone in KRAS-mutation positive NSCLC. This study demonstrated response rates of 37.2% vs 0% (p<0.0001), and a statistically significant improvement in PFS of 5.3 vs 2.1 months (HR 0.58, p<0.014).

FINANCIAL HIGHLIGHTS

Cash, cash equivalents and marketable securities were approximately $111 million and accounts receivable were approximately $39.3 million as of June 30, 2016. Accounts receivable primarily consist of receivables expected to be paid by Novartis within three months. In March 2015, binimetinib and encorafenib became wholly-owned assets of Array, which prompted changes to the classification of revenue and expenses for the programs. The new expense classifications were included in the financial results for the fourth quarter of fiscal 2015. Beginning in the first quarter of fiscal 2016, Array reports revenue from the Novartis reimbursements under its agreements with Novartis for binimetinib and encorfenib as a separate line item called "reimbursement revenue." The net earnings (or loss) per share described below are diluted net earnings (or loss) per share.

Fourth Quarter of Fiscal 2016 Compared to Third Quarter of Fiscal 2016 (Sequential Quarters Comparison)

Revenue for the fourth quarter of fiscal 2016 was $43.2 million, compared to $43.0 million for the prior sequential quarter.
Cost of partnered programs for the fourth quarter of fiscal 2016 was $5.4 million, compared to $5.8 million for the prior quarter.
Research and development expense was $49.5 million, compared to $48.8 million in the prior quarter.
Net loss for the fourth quarter was $25.0 million, or ($0.17) per share, and was $22.7 million, or ($0.16) per share in the prior quarter. The increase in net loss was primarily due to the initiation of the BEACON CRC trial.
Fourth Quarter of Fiscal 2016 Compared to Fourth Quarter of Fiscal 2015 (Prior Year Comparison)

Revenue for the fourth quarter of fiscal 2016 increased by $30.9 million compared to the same quarter of fiscal 2015, primarily due to reimbursement revenue from Novartis.
Cost of partnered programs decreased by $1.5 million compared to the fourth quarter of fiscal 2015 primarily due to binimetinib development costs being presented as research and development expense instead of cost of partnered programs upon becoming wholly-owned programs.
Research and development expense increased by $30.9 million compared to the fourth quarter of fiscal 2015 due to the change in categorization of binimetinib costs, as well as new investment in encorafenib.
Net loss for the fourth quarter of fiscal 2016 was $25.0 million, or ($0.17) per share, and was $12.7 million, or ($0.09) per share, for the same quarter in fiscal 2015.
Full Year of Fiscal 2016 Compared to Full Year of Fiscal 2015 (Prior Year Comparison)

Revenue was $137.9 million for the fiscal year ended June 30, 2016, compared to $51.9 million for the same period in fiscal 2015.
Net loss for the fiscal year ended June 30, 2016, was $92.8 million, or ($0.65) per share, compared to a net income of $9.4 million, or $0.07 per share, in the comparable prior year period.
The fiscal year ended 2015 included a one-time $80.0 million net gain on the binimetinib and encorafenib agreements.
Net cash used in operating activities for the fiscal year ended June 30, 2016 was $70.1 million.
– See more at: View Source;p=RssLanding&cat=news&id=2192986#sthash.8QT1eig5.dpuf

On August 4, 2016 Endocyte, Inc. (NASDAQ:ECYT), a leader in developing targeted small molecule drug conjugates (SMDCs) and companion imaging agents for personalized therapy, reported financial results for the second quarter ending June 30, 2016, and provided a clinical update (Press release, Endocyte, AUG 4, 2016, View Source [SID:1234514253]).

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"Excitement is building around our lead assets, EC1456 and EC1169, as data to date has demonstrated attractive safety profiles and signs of anti-tumor activity for both agents. Later this month, we will advance EC1456 into targeted patients with non-small cell lung cancer (NSCLC) expressing the folate receptor, who are most likely to respond," said Mike Sherman, Endocyte’s president and chief executive officer. "We look forward to our first visibility into efficacy data for both compounds during the second half of the year."

EC1456 (Folate-tubulysin)

The EC1456 phase 1 dose escalation data presented at the American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) annual meeting in June highlighted a 45 percent rate of stable disease as best study response across a patient population that included more than a dozen cancer types. Patients are enrolled regardless of their folate receptor (FR) status during this first part of the study.

Endocyte announced today that the maximum tolerated dose (MTD) has been determined in the twice weekly (BIW) dosing schedule for EC1456 at 6.0 mg/m2. Enrollment of FR-positive NSCLC patients in the BIW expansion cohort will begin in August. In this expansion cohort the company plans to evaluate efficacy endpoints, including tumor response, in addition to ongoing assessment of safety. Endocyte’s companion imaging agent, EC20 (etarfolatide), will be utilized to select these patients. The company is continuing to evaluate the MTD in the once weekly dosing regimen.

EC1169 (PSMA-tubulysin)

The EC1169 phase 1 dose escalation study, as presented at ASCO (Free ASCO Whitepaper), highlighted that all patients in the study have some level of prostate specific membrane antigen (PSMA) positivity, and the drug has been well tolerated.

"EC1169 has the potential to be a truly differentiated therapy, and it has shown signs of anti-tumor activity, even at low doses, including reductions of prostate-specific antigen levels greater than 50 percent in some patients," commented Alison Armour, M.D., Endocyte’s chief medical officer. "We have worked with key opinion leaders in prostate cancer to define the expansion phase of this trial, and once we determine the MTD, we plan to begin enrolling second-line chemotherapy metastatic castrate resistant prostate cancer (mCRPC) patients, with a primary study endpoint of radiological progression free survival. We also plan to include an exploratory assessment of taxane-naïve patients, which could allow the possibility of an earlier line therapy."

Upcoming Expected Milestones

Phase 1 updates on EC1456 and EC1169 at the European Society for Medical Oncology (ESMO) (Free ESMO Whitepaper) conference in October 2016
Complete enrollment of first 15 patient cohort in EC1456 expansion trial; single agent efficacy data (tumor response) in NSCLC at a medical meeting in late 2016 or early 2017
EC1169 single agent efficacy data in prostate cancer in late 2016 or early 2017
Updates on plans for earlier stage programs
Second Quarter 2016 Financial Results

Endocyte reported a net loss of $14.0 million, or $0.33 per basic and diluted share, for the second quarter of 2016, compared to a net loss of $10.6 million, or $0.25 per basic and diluted share, for the same period in 2015.

Research and development expenses were $6.8 million for the second quarter of 2016, compared to $6.7 million for the same period in 2015. The slight increase was primarily attributable to an increase in expenses related to the EC1456 and EC1169 dose escalation trials, which was partially offset by a decrease in expenses related to the TARGET trial, which is now complete, and a decrease in compensation expenses, primarily related to noncash stock compensation.

General and administrative expenses were $7.4 million for the second quarter of 2016, compared to $4.1 million for the same period in 2015. The increase in expenses was primarily attributable to an increase in compensation expense related to the resignation of the company’s former Chief Executive Officer, P. Ron Ellis. The company executed a separation agreement with Mr. Ellis during the three months ended June 30, 2016, and under this agreement, the company incurred additional compensation expense of $2.8 million for noncash stock compensation and $0.8 million of expense for a cash payment. The increase in general and administrative expenses was partially offset by a decrease in legal fees.

Cash, cash equivalents and investments were $154.6 million at June 30, 2016, compared to $188.6 million at June 30, 2015, and $173.6 million at December 31, 2015.

Financial Expectations

The company revised guidance for its expected cash balance at the end of 2016 to be above $130 million. Previous guidance was between $125 and $130 million cash balance at the end of 2016.

About the EC1456 Phase 1 Trial

This open-label, multicenter, non-randomized, dose-escalation study is divided into two parts. The first part of the study was designed to evaluate safety and tolerability and identify the MTD of EC1456 in patients with metastatic or locally advanced solid tumors.

The second part of the study will determine the efficacy of EC1456 in patients with FR-positive NSCLC treated with the MTD. The BIW dosing schedule at 6.0 mg/m2 will be evaluated first. Upon the completion of this dosing schedule, additional patients will be enrolled in a once per week dosing schedule cohort. Single agent tumor response will be evaluated, which will inform and may trigger additional work in combination therapies and indications such as triple-negative breast cancer, ovarian cancer and endometrial cancer. Patient FR-status will be determined using the investigational companion imaging agent, EC20 (etarfolatide). EC1456 is currently being evaluated in a phase 1 study in patients with advanced solid tumors (ClinicalTrials.gov Identifier: NCT01999738).

About the EC1169 Phase 1 Trial

This open-label, multicenter, non-randomized, dose-escalation study is divided into two parts. The first part of the study was designed to evaluate safety and tolerability and identify the MTD of EC1169 in patients with prostate cancer.

The second part of the study will determine the efficacy of the MTD of EC1169 in mCRPC patients who have been previously treated with a taxane-based chemotherapy. The primary study endpoint will be radiological progression free survival in patients selected as PSMA-positive. A second cohort will include an exploratory assessment of taxane-naïve patients. Patient PSMA status will be determined using the investigational companion imaging agent, EC0652. EC1169 is currently being evaluated in a phase 1 study in mCRPC patients (ClinicalTrials.gov Identifier: NCT02202447).