On October 28, 2015 Cellectis (Paris:ALCLS) (NASDAQ:CLLS) (Alternext: ALCLS – Nasdaq: CLLS) reported that a series of three production runs of UCART19, its lead TALEN gene edited product candidate, was performed, confirming the implementation of Cellectis’ manufacturing process in GMP conditions (Filing, 6-K, Cellectis, OCT 28, 2015, View Source [SID:1234507825]).

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

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

                  Schedule Your 30 min Free Demo!

The manufacturing process for Cellectis’ allogeneic CAR T-cell product line, Universal CARTs or UCARTs, yields frozen, off-the-shelf, allogeneic, engineered CAR T-cells. UCARTs are meant to be readily available CAR T-cells for a large patient population. The TALEN-based gene editing (knock-out of the TCR-alpha and CD52 genes) is designed to suppress T-cell alloreactivity and confer resistance to alemtuzumab to the T-cells. This important milestone shows that UCARTs can be manufactured in GMP conditions. It also demonstrates the industrial production of UCART19, as well as the capacity of Cellectis’ pipeline of UCART product candidates to be manufactured for clinical investigations.

"It is very exciting to lead a novel allogeneic gene therapy platform at the critical time when a R&D concept is translated into a GMP clinical grade industrial product to be investigated in clinical studies," said Arjan Roozen, Vice President, GMP Solutions and Manufacturing.

"Cellectis has reached a critical milestone both for the Company and our industry, creating new opportunities for patients. Historically, cell-based therapies have grown in the world of individual grafts. With TALEN-based gene editing they have now started moving toward that of industrial pharmaceutical products broadly available to patients, and Cellectis, as a leading company in the field of gene editing, is at the forefront of this evolution," added David J.D. Sourdive, Executive Vice President, Corporate Development.

About UCART19

UCART19 is a potential best-in-class allogeneic engineered T-cell product for treatment of CD19 expressing hematologic malignancies, initially developed in Chronic lymphocytic leukemia (CLL) and Acute lymphoblastic leukemia (ALL). Servier has an option under the collaboration agreement to acquire the exclusive rights to further develop and commercialize UCART19. Engineered allogeneic CD19 T-cells currently stand out as a real therapeutic innovation for treating various types of leukemia and lymphoma. Cellectis’ approach with UCART19 is based on the preliminary positive results from clinical trials using products based on the CAR technology and has the potential to overcome the limitation of the autologous current approach by providing an allogeneic frozen, "off-the-shelf" T-cell based medicinal product.

Arjan Roozen, Vice President GMP Solutions and Manufacturing

Arjan Roozen received a BSc degree in molecular microbiology from Larenstein, Velp in The Netherlands. Arjan joined Cellectis in March 2015. In his present position of VP GMP Solutions & Manufacturing, he is responsible for all GMP pharmaceutical manufacturing activities including the biological raw materials.

Before joining Cellectis, Arjan worked for over 20 years at different biotechnology departments at Centocor, Solvay Pharmaceuticals, Biogen Idec, Crucell, Proxy laboratories and Pharmacell and gained significant experience in QC, QA and manufacturing GMP aspects. The last 4 years within Pharmacell, Arjan Roozen was responsible for GMP operations involved in significant number of cell therapy technology transfer projects as well as responsible for cell therapy commercial products. He was also involved in regulatory audit and filings for EMA and FDA.

On October 28, 2015 Vertex Pharmaceuticals Incorporated (Nasdaq: VRTX) reported consolidated financial results for the quarter ended September 30, 2015 (Press release, Vertex Pharmaceuticals, OCT 28, 2015, View Source [SID:1234507826]). Vertex also increased its financial guidance for total 2015 KALYDECO (ivacaftor) revenues and reiterated its prior guidance for non-GAAP operating expenses. Key financial results include:

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

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

                  Schedule Your 30 min Free Demo!

"The expansion of our pipeline positions us to generate important proof-of-concept data across multiple diseases next year and is further evidence of our continued execution against the plan we outlined in 2013."

"During the third quarter, more than 3,000 people started treatment with ORKAMBI in the U.S., underscoring the importance of this medicine to people with cystic fibrosis and their doctors and the interest to begin treatment as soon as possible," said Jeffrey Leiden, M.D., Ph.D., Chairman, President and Chief Executive Officer of Vertex. "Importantly, with the planned initiation of the first clinical study of a next-generation corrector this week, we continue to move quickly to develop combinations of our potential medicines that could provide enhanced benefit for people already taking our medicines and for others, to provide the first medicine to treat the underlying cause of their cystic fibrosis."

On October 8, 2015, Vertex provided a comprehensive update on its development program in cystic fibrosis (CF). Key highlights included:

Clinical Development of Next-Generation Correctors

Vertex is preparing to advance two next-generation correctors, known as VX-152 and VX-440, from its research program into clinical development. Vertex will evaluate these next-generation correctors alone and in combination with VX-661/ivacaftor as part of Phase 1 studies in healthy volunteers, and the first Phase 1 study is expected to begin this week. Pending results of these studies, Vertex plans to initiate Phase 2 studies in people with CF evaluating VX-152 or VX-440 in combination with VX-661/ivacaftor in the second half of 2016. The studies of a triple combination (VX-152/VX-661/ivacaftor and VX-440/VX-661/ivacaftor) are planned for the second half of 2016 and are expected to enroll three groups of people with CF: (1) people who carry two copies of the F508del mutation; (2) people who carry one copy of the F508del mutation and a second mutation that results in minimal CFTR function; and (3) people who carry one copy of the F508del mutation and a second mutation that is known to be responsive to ivacaftor. VX-152 and VX-440 are designed to further improve processing and trafficking of the CFTR protein to the cell surface, beyond that observed with a single corrector combined with ivacaftor, which may enable increased CFTR chloride transport, a measure of the function of the CFTR protein at the cell surface. Increased chloride transport may translate to increased clinical benefit for people with CF who have at least one copy of the F508del mutation.

In human bronchial epithelial (HBE) cells with two copies of the F508del mutation, as well as in HBE cells with one copy of the F508del mutation and one copy of a mutation known to result in minimal CFTR function, the triple combinations (VX-152/VX-661/ivacaftor and VX-440/VX-661/ivacaftor) resulted in chloride transport (percent of normal) that was approximately three-fold greater than the use of the lumacaftor/ivacaftor combination in these cells. A significant increase in cilia beat frequency was also observed with triple combination therapy as compared to the use of the lumacaftor/ivacaftor combination in these cells.

KALYDECO (ivacaftor) Supplemental New Drug Application in Residual Function Mutations

On October 7, Vertex announced that its supplemental New Drug Application (sNDA) for the use of KALYDECO in people ages 2 and older with one of 23 residual function mutations was accepted for review by the U.S. Food and Drug Administration (FDA). The FDA granted Vertex’s request for Priority Review of this sNDA, and a target review date of February 6, 2016 was set under the Prescription Drug User Fee Act (PDUFA) for the FDA’s decision on the sNDA. More than 1,500 people with CF in the U.S. have the mutations represented in the sNDA.

Studies of the ENaC Inhibitor VX-371

In June 2015, Vertex and Parion Sciences entered into a collaboration to develop investigational epithelial sodium channel (ENaC) inhibitors for the potential treatment of CF and other pulmonary diseases. Parion is currently conducting an exploratory Phase 2a study (known as the CLEAN-CF study) of inhaled VX-371 (P-1037), compared to treatment with VX-371 with hypertonic saline, in approximately 120 people with CF. Data from this study are expected in mid-2016. Vertex plans to conduct a placebo-controlled Phase 2a study to evaluate VX-371 in patients taking lumacaftor/ivacaftor, both with and without the addition of hypertonic saline, who have two copies of the F508del mutation. This Phase 2a study is expected to begin in early 2016.

In human bronchial epithelial cells from people with CF who have two copies of the F508del mutation, the addition of investigational VX-371 to lumacaftor/ivacaftor resulted in an additional increase in both airway surface liquid and cilia beat frequency as compared to baseline and to the use of VX-371 or lumacaftor/ivacaftor alone. Improvements in airway surface liquid height and cilia beat frequency are measures of increased hydration of the cell surface.

Pipeline Updates:

"Beyond CF, we are advancing multiple potential medicines for the treatment of cancer, pain and other serious diseases, and we recently entered into an important research collaboration with CRISPR Therapeutics to use the company’s gene editing technology to address the underlying genetic causes of many diseases," continued Dr. Leiden. "The expansion of our pipeline positions us to generate important proof-of-concept data across multiple diseases next year and is further evidence of our continued execution against the plan we outlined in 2013."

Vertex recently advanced multiple investigational medicines into clinical development for the potential treatment of cancer and pain and entered into a strategic research collaboration focused on the use of gene editing:

Gene Editing Collaboration

On October 26, Vertex announced that it had entered into a strategic research collaboration with CRISPR Therapeutics focused on the use of CRISPR’s gene editing technology, known as CRISPR-Cas9, to discover and develop potential new treatments aimed at the underlying genetic causes of human disease. The collaboration will evaluate the use of CRISPR-Cas9 across multiple diseases where targets have been validated through human genetics. Vertex and CRISPR will focus their initial gene editing research on discovering treatments to address the mutations and genes known to cause and contribute to cystic fibrosis and sickle cell disease. Vertex and CRISPR will also evaluate a specified number of other genetic targets as part of the collaboration.

Oncology

Vertex has three potential medicines in early development that are designed to inhibit DNA repair pathways that are fundamental to the survival and proliferation of certain cancers. These potential medicines, which were discovered by Vertex scientists, may be applicable to the treatment of multiple tumor types.

VX-970: Multiple Ongoing and Planned Studies in People with Solid Tumors

VX-970 is Vertex’s most advanced drug candidate in oncology. By inhibiting a protein kinase known as ATR, VX-970 targets a critical regulator of the DNA damage repair system. Cancer cells often have defects in the DNA damage repair system that contribute to disease progression and drive reliance on ATR for survival from DNA damage. Inhibition of ATR may therefore selectively kill cancer cells under DNA damaging conditions.

Vertex’s strategy is to evaluate VX-970 in early trials in selected tumor types and patient subtypes that are expected to be responsive to ATR inhibition based on biomarker data. These studies will be used to generate data that will inform potential late-stage clinical development. Vertex is currently conducting two Phase 1 studies of VX-970 dosed intravenously in combination with commonly used DNA-damaging chemotherapies across a range of solid tumor types, and these studies have recently been amended to enroll specific cohorts of triple-negative breast cancer patients and non-small cell lung cancer patients.

Data from a Phase 1 safety and PK study were accepted for presentation at the 2015 AACR-NCI-EORTC (Free AACR-NCI-EORTC Whitepaper) International Conference on Molecular Targets and Cancer Therapeutics (EORTC-NCI-AACR) (Free ASGCT Whitepaper) (Free EORTC-NCI-AACR Whitepaper) hosted by the American Association for Cancer Research (AACR) (Free AACR Whitepaper), the National Cancer Institute (NCI) and the European Organisation for Research and Treatment of Cancer (EORTC), being held November 5-9 in Boston. The data showed that treatment with VX-970 was generally well-tolerated, both alone and in combination with the chemotherapy drug carboplatin, and there was preliminary evidence of antitumor activity. The data will be presented at the AACR (Free AACR Whitepaper)-NCI-EORTC meeting as part of an oral and poster presentation titled "Phase I Trial of First-in-class Ataxia Telangiectasia-mutated and Rad3-related (ATR) Inhibitor VX-970 as Monotherapy or in Combination With Carboplatin in Advanced Cancer Patients With Preliminary Evidence of Target Modulation and Antitumor Activity."

Additionally, Vertex has entered into a cooperative research and development agreement (CRADA) with the National Cancer Institute to support evaluation of VX-970 across other types of cancers. The CRADA enables NCI to conduct multiple clinical studies that will evaluate treatment with VX-970 in people with small cell lung, head and neck, urothelial and other cancers. The first study conducted under the CRADA is ongoing, and six additional studies are planned.

Vertex is also developing a second ATR inhibitor known as VX-803, which is dosed orally. An ongoing Phase 1 study is evaluating escalating doses of VX-803 alone and in combination with chemotherapy.

VX-984: Phase 1 Study Planned for Early 2016

Vertex is developing VX-984, an inhibitor of DNA-dependent protein kinase that also targets the DNA damage repair system. VX-984 could be used to treat a variety of tumor types in combination with commonly used chemotherapy and radiation therapy. Vertex plans to initiate the first clinical study in early 2016 to evaluate escalating doses of VX-984 alone and in combination with the chemotherapy drug pegylated liposomal doxorubicin.

Pain

VX-150: Phase 2 Proof-of-Concept Study in Osteoarthritis

Vertex is developing VX-150 as a potential medicine for the treatment of pain. VX-150 is designed to block pain signaling through inhibition of a sodium channel known as NaV 1.8. Vertex recently completed a Phase 1 study in healthy volunteers to evaluate the safety and pharmacokinetics of VX-150. Based on data from this study, Vertex is preparing to initiate a Phase 2 proof-of-concept study of VX-150 in approximately 100 people with symptomatic osteoarthritis of the knee. This study is expected to begin by the end of 2015. Additionally, Vertex is advancing a second sodium channel inhibitor known as VX-241, which is an inhibitor of a sodium channel known as NaV 1.7. Vertex plans to begin clinical development of VX-241 in the first half of 2016. There is a strong rationale for exploring the treatment of pain through inhibition of sodium channels based on human genetics and well documented roles in pain sensation.

Influenza

JNJ-872 (VX-787): Biomedical Advanced Research and Development Authority (BARDA) To Support Late-Stage Development Activities

In September, the U.S. Department of Health and Human Services’ Office of the Assistant Secretary for Preparedness and Response (ASPR) announced that the Biomedical Advanced Research and Development Authority of ASPR will provide technical assistance and funding of up to $131 million to Janssen Pharmaceuticals Inc. for advanced development of JNJ-872 (VX-787), a potential medicine for the treatment of influenza. JNJ-872 was discovered by Vertex scientists and was out-licensed to Janssen in June 2014. As part of the agreement with Janssen, Vertex may receive development and commercial milestone payments as well as royalties on future product sales.

Third Quarter 2015 Financial Highlights

Revenues:

Net Product Revenues from ORKAMBI were $130.8 million. As of September 30, 2015, more than 3,000 people with CF had started treatment with ORKAMBI.

Net Product Revenues from KALYDECO were $165.9 million compared to $126.8 million for the third quarter of 2014. The increased KALYDECO net product revenues, compared to the third quarter of 2014, resulted primarily from additional people being treated with KALYDECO in both U.S. and ex-U.S. markets.

Expenses:

Total combined non-GAAP cost of product revenues and royalty expenses (COR) were $33.5 million, compared to $11.0 million for the third quarter of 2014. GAAP COR expenses were $32.0 million compared to $14.2 million for the third quarter of 2014.
Non-GAAP research and development (R&D) expenses were $201.6 million compared to $157.4 million for the third quarter of 2014. The increased R&D expenses for the third quarter of 2015 were primarily the result of increased costs related to the initiation of the pivotal Phase 3 program for VX-661 in combination with ivacaftor, which includes four Phase 3 studies in more than 1,000 patients. GAAP R&D expenses were $246.3 million compared to $190.9 million for the third quarter of 2014.
Non-GAAP sales, general and administrative (SG&A) expenses were $76.1 million compared to $55.1 million for the third quarter of 2014. This increased SG&A expenses were primarily the result of increased investment in global commercial support for the planned launch of ORKAMBI. GAAP SG&A expenses were $99.8 million compared to $75.2 million for the third quarter of 2014.

Net Loss Attributable to Vertex:

Non-GAAP net loss was $31.9 million, or $0.13 per diluted share, compared to a non-GAAP net loss of $86.2 million, or $0.37 per diluted share, for the third quarter of 2014. The decreased net loss was the result of the first quarter of ORKAMBI product revenues and increased KALYDECO product revenues, offset by increased operating expenses. The GAAP net loss was $95.1 million, or $0.39 per diluted share, compared to Vertex’s third quarter 2014 GAAP net loss of $170.1 million, or $0.72 per diluted share.

Cash Position:

As of September 30, 2015, Vertex had $1.0 billion in cash, cash equivalents and marketable securities compared to $1.4 billion in cash, cash equivalents and marketable securities as of December 31, 2014.
As of September 30, 2015, Vertex had $300 million outstanding from a credit agreement that provides for a secured loan of up to $500 million.

2015 Financial Guidance:

Vertex today increased its financial guidance for total 2015 KALYDECO revenues and reiterated its guidance for non-GAAP operating expenses:

KALYDECO Net Revenues: Vertex now expects KALYDECO net revenues of $605 to $620 million for 2015. The prior range, provided on July 29, 2015, was for KALYDECO net revenues of $575 to $590 million for 2015.
Non-GAAP R&D and SG&A Expenses: Vertex reiterated its guidance for combined non-GAAP R&D and SG&A expenses in 2015 of $1.05 to $1.10 billion. Total combined non-GAAP R&D and SG&A expenses are expected to be in the middle of the guidance range.

Vertex’s expected combined non-GAAP R&D and SG&A expenses exclude stock-based compensation expense and certain other expenses recorded in 2015.

On October 28, 2015 The U.S. Food and Drug Administration reported that it has expanded the approved use of Yervoy (ipilimumab) to include a new use as adjuvant therapy for patients with stage III melanoma, to lower the risk that the melanoma will return following surgery (Press release, , OCT 28, 2015, View Source [SID:1234507834]).

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

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

                  Schedule Your 30 min Free Demo!

Melanoma, the most aggressive type of skin cancer, is the leading cause of death from skin cancer. Melanoma is more likely to spread to other parts of the body than other forms of skin cancer and has been on the rise over the past several decades, according to the National Cancer Institute, with an estimated 73,870 new cases and 9,940 deaths from the disease this year. In stage III melanoma, the cancer has reached one or more lymph nodes. Patients with stage III melanoma are generally treated by surgery to remove the melanoma skin lesions and the nearby lymph nodes.

"Today’s approval of Yervoy extends its use to patients who are at high risk of developing recurrence of melanoma after surgery," said Richard Pazdur, M.D., director of the Office of Hematology and Oncology Products in FDA’s Center for Drug Evaluation and Research. "This new use of the drug in earlier stages of the disease builds on our understanding of the immune system’s interaction with cancer."

Yervoy, administered intravenously, was originally approved in 2011 to treat late-stage melanoma that cannot be removed by surgery. Yervoy is a monoclonal antibody that blocks a molecule known as CTLA-4 (cytotoxic T-lymphocyte antigen). CTLA-4 may play a role in slowing down or turning off the body’s immune system, and affects its ability to fight off cancerous cells. Yervoy may work by allowing the body’s immune system to recognize, target and attack cells in melanoma tumors.

The safety and effectiveness of Yervoy for this new use were studied in 951 patients who received Yervoy or a placebo as adjuvant therapy following complete surgical removal of melanoma. The study measured the amount of time after treatment it took for the cancer to come back ("recurrence-free survival") and overall survival. Forty-nine percent of participants taking Yervoy had their cancer return after an average of 26 months, compared to 62 percent of those receiving a placebo, whose cancer returned after an average of 17 months. The analysis of overall survival data has not yet occurred.

The most common side effects of Yervoy in this study were rash, diarrhea, fatigue, itching, headache, weight loss and nausea. Yervoy can also cause autoimmune disease in the digestive system, liver, skin, nervous system (which would each require treatment with corticosteroids), as well as in the hormone-producing glands (which requires life-long hormone replacement therapy). Women who are pregnant should not take Yervoy because it may cause harm to a developing fetus.

Due to the potential for fatal immune-mediated adverse reactions and unusual severe side effects with Yervoy, the label includes a Boxed Warning. A Medication Guide will also be provided to patients to inform them about the therapy’s potential side effects.

On October 27, 2015 Merck (NYSE: MRK), known as MSD outside the United States and Canada,reported financial results for the third quarter of 2015 (Filing, 8-K, Merck & Co, OCT 27, 2015, View Source [SID:1234507808]).

"Our solid results this quarter demonstrate that our focused strategy, which aims to drive future growth, as well as value for patients, society and shareholders, is working. The evolving market, economic and political dynamics of global health care increasingly underscore that the ability to provide high-value innovation is what will distinguish successful companies going forward," said Kenneth C. Frazier, chairman and chief executive officer, Merck.

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

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

                  Schedule Your 30 min Free Demo!

Additional Executive Commentary

"Our late-stage pipeline and ongoing launches create both near- and longer-term opportunities to generate value through innovation aimed at addressing some of the world’s biggest medical needs — cancer, antibiotic resistance, cardiometabolic disease, hepatitis C and Alzheimer’s disease," said Frazier.

"Our broad, global and balanced portfolio of medicines and vaccines allows us to weather periodic volatility within a particular therapeutic area or region while consistently focusing on the best scientific and medical opportunities," continued Frazier.

"The Global Human Health business performed well in the third quarter with continued growth in our diabetes, hospital acute care and oncology franchises. We continue to be pleased with the progress of KEYTRUDA, which is a priority launch for the company," said Adam Schechter, president, Global Human Health, Merck.

"In the third quarter, Merck Research Laboratories achieved multiple milestones in our oncology and infectious disease clinical development programs, priority areas where we believe we can have the most beneficial impact on the lives of patients around the world," said Dr. Roger M. Perlmutter, president, Merck Research Laboratories. "In particular, the results from KEYNOTE-010, which we announced yesterday, provide unambiguous evidence of the favorable impact that our R&D efforts can have in the treatment of grievous illnesses."

"The third quarter was another demonstration of our strong execution. We remain committed to delivering a leveraged P&L. We have met and will exceed our annual target of $2.5 billion in net savings versus 2012 by the end of this year," said Robert Davis, chief financial officer, Merck.

Select Business Highlights

Worldwide sales were $10.1 billion for the third quarter of 2015, a decrease of 5 percent compared with the third quarter of 2014, including a 7 percent negative impact from foreign exchange and a 2 percent net unfavorable impact resulting from the divestiture of the Consumer Care business and select products, partially offset by the acquisition of Cubist Pharmaceuticals, Inc. (Cubist).

Commercial and Pipeline Highlights

During the third quarter of 2015, the company continued to focus on advancing its pipeline and key therapeutic areas of diabetes, hospital acute care, oncology and vaccines and executing on key launches, including KEYTRUDA (pembrolizumab), an anti-PD-1 therapy, for the treatment of advanced melanoma and metastatic NSCLC in patients whose disease has progressed after other therapies, and BELSOMRA (suvorexant) for the treatment of insomnia.

· Merck significantly advanced the clinical development program for KEYTRUDA.

· The U.S. Food and Drug Administration (FDA) approved KEYTRUDA for the treatment of patients with metastatic NSCLC whose tumors express PD-L1 as determined by an FDA-approved test and who have disease progression on or after platinum-containing chemotherapy across both squamous and non-squamous metastatic NSCLC.

· The National Institute for Health and Care Excellence (NICE) of the U.K. issued a draft recommendation for KEYTRUDA as a first-line treatment option for adults with advanced melanoma. Additionally, NICE issued its final guidance recommending KEYTRUDA for the treatment of advanced melanoma in patients whose disease has progressed after treatment with ipilimumab.

· The FDA accepted for review a supplemental Biologics License Application (sBLA) for KEYTRUDA for the first-line treatment of unresectable or metastatic melanoma. The FDA granted Priority Review with a PDUFA action date of Dec. 19, 2015.

· Additionally, the FDA extended the PDUFA action date for a separate sBLA for KEYTRUDA for the treatment of patients with ipilimumab-refractory advanced melanoma to Dec. 24, 2015. The company submitted additional data that constitutes a major amendment, which will require additional time for review.

· Topline results from KEYNOTE-010 indicated the pivotal study met its primary objective. KEYTRUDA showed superior overall survival compared to chemotherapy in patients with previously treated advanced NSCLC whose tumors express PD-L1. The company plans regulatory submissions based on these data to the FDA by the end of 2015 and the European Medicines Agency (EMA) in early 2016.

· Data were presented at the European Cancer Congress from the KEYNOTE-028 study, which included first-time presentations of findings investigating the use of KEYTRUDA in multiple tumor types.

· More than 25 registration studies for KEYTRUDA have been announced or initiated in more than 10 tumor types. In total, the KEYTRUDA clinical development program encompasses more than 30 tumor types in more than 160 clinical trials, including more than 80 combinations of KEYTRUDA with other cancer treatments.

· The company advanced its clinical development program for the treatment of diabetes.

· The Japanese Pharmaceuticals and Medical Devices Agency approved omarigliptin, which will be known as MARIZEV in Japan, a once-weekly medicine that helps lower blood sugar levels in adults with type 2 diabetes. Japan is the first country where omarigliptin has been approved; the company plans to submit omarigliptin for regulatory approval in the United States by the end of 2015, and other worldwide regulatory submissions will follow.

· At the 51st European Association for the Study of Diabetes Annual Meeting, pivotal Phase 3 data were presented demonstrating omarigliptin achieved its primary efficacy endpoint.

· The company highlighted its commitment to addressing infectious diseases with 40 presentations of data at the joint meeting of the Interscience Conference of Antimicrobial Agents and Chemotherapy, and International Congress of Chemotherapy and Infection.

· Data were presented from the two pivotal Phase 3 clinical studies for bezlotoxumab, an investigational antitoxin for prevention of Clostridium difficile (C. difficile) infection recurrence, which met their primary efficacy endpoints. The company plans to submit new drug applications for regulatory approval of bezlotoxumab in the United States, EU and Canada by the end of 2015.

· Data were presented from a Phase 2 study of relebactam, an investigational beta-lactamase inhibitor with Qualified Infectious Disease Product and Fast Track designations from the FDA for use in combination therapy, which met its primary efficacy endpoint in patients with complicated intra-abdominal infections. The company has initiated pivotal Phase 3 studies in serious bacterial infections.

· The company’s clinical development program for elbasvir/grazoprevir, an investigational once-daily, single tablet combination therapy for the treatment of adult patients with chronic hepatitis C virus (HCV) infection, advanced in the third quarter of 2015.

· The FDA accepted the company’s New Drug Application for Priority Review with a PDUFA action date of Jan. 28, 2016.
· The EMA accepted the company’s Marketing Authorization Application for review, which it will initiate under accelerated assessment timelines.

Pharmaceutical Revenue Performance

Third-quarter pharmaceutical sales declined 2 percent to $8.9 billion, including an 8 percent negative impact from foreign exchange. Excluding the impact of exchange, growth was driven by sales in the core therapeutic areas of hospital acute care, diabetes and oncology. Growth in hospital acute care was driven by the addition of the Cubist portfolio and sales growth of certain inline brands. The increase in diabetes reflects the timing of customer purchases in the United States and global demand growth. Growth in oncology reflects higher sales of KEYTRUDA, which were approximately $160 million for the quarter.

Third-quarter pharmaceutical sales reflect lower sales of REMICADE (infliximab), a treatment for inflammatory diseases, due to loss of exclusivity in the company’s marketing territories in Europe, and NASONEX (mometasone furoate monohydrate), an inhaled nasal corticosteroid for the treatment of nasal allergy symptoms, due to supply constraints in the United States, as well as declines in the HCV portfolio of VICTRELIS (boceprevir) and PEGINTRON (peginterferon alfa-2b). In addition, pharmaceutical sales reflect declines in vaccines, primarily PNEUMOVAX 23 (pneumococcal vaccine polyvalent) driven by lower sales in the United States and PROQUAD (Measles, Mumps, Rubella and Varicella Vaccine Live) driven by the timing of sales activity related to the Pediatric Vaccine Stockpile of the U.S. Centers for Disease Control and Prevention. These declines were partially offset by higher U.S. sales in the franchise of GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) and GARDASIL [Human Papillomavirus Quadrivalent (Types 6, 11, 16, and 18) Vaccine, Recombinant], vaccines to prevent cancers and other diseases caused by HPV.

Animal Health Revenue Performance

Animal Health sales totaled $825 million for the third quarter of 2015, a decrease of 7 percent compared with the third quarter of 2014, including a 14 percent negative impact from foreign exchange. Excluding the impact of exchange, growth was driven by an increase in sales of companion animal products, primarily BRAVECTO (fluralaner), a chewable tablet that kills fleas and ticks in dogs for up to 12 weeks, and new aqua and swine products, including PORCILIS PCV M Hyo, a new swine vaccine.

Other Revenue Performance

Other revenues – primarily comprising alliance revenue, miscellaneous corporate revenues and third-party manufacturing sales – increased to $323 million in the third quarter of 2015.

Third-Quarter 2015 Expense and Other Information

The costs detailed below totaled $7.8 billion on a GAAP basis during the third quarter of 2015 and include $1.4 billion of acquisition- and divestiture-related costs and restructuring costs.

The gross margin was 62.7 percent for the third quarter of 2015 compared to 60.0 percent for the third quarter of 2014, reflecting 12.4 and 14.3 unfavorable percentage point impacts, respectively, from the acquisition- and divestiture-related costs and restructuring costs noted above. The increase in non-GAAP gross margin was driven by lower inventory write-offs and foreign exchange.

Marketing and administrative expenses, on a non-GAAP basis, were $2.4 billion in the third quarter of 2015, a decrease from $2.6 billion in the same period of 2014, which was primarily driven by the favorable impact of foreign exchange and the sale of the Consumer Care business.

Research and development (R&D) expenses, on a non-GAAP basis, were $1.6 billion in the third quarter of 2015, a 1 percent increase compared to the third quarter of 2014.

Other (income) expense, net, was $170 million of income in the third quarter of 2015 compared to $166 million of income in the third quarter of 2014. The third quarter of 2015 includes a gain of $250 million on the divestiture of certain migraine clinical development programs. In the third quarter of 2014, the company recorded a gain of $396 million on the divestiture of certain ophthalmic products in several international markets that was partially offset by a $93 million goodwill impairment charge related to the company’s joint venture with Supera Farma Laboratorios S.A. in Brazil.

Financial Guidance

Merck has raised its full-year 2015 non-GAAP EPS range to be between $3.55 and $3.60, including a negative impact from foreign exchange. The range excludes acquisition- and divestiture-related costs, costs related to restructuring programs and certain other items. The company also has raised its full-year 2015 GAAP EPS range to be between $1.64 and $1.74.

At current exchange rates, the company now anticipates full-year 2015 revenues to be between $39.2 billion and $39.8 billion, including a negative impact from foreign exchange and approximately $1 billion of net lost sales from acquisitions and divestitures.

In addition, the company continues to expect full-year 2015 non-GAAP marketing and administrative expenses to be below 2014 levels and R&D expenses to be modestly above 2014 levels.

The company continues to anticipate its full-year 2015 non-GAAP tax rate will be in the range of 23 to 24 percent, not including a 2015 R&D tax credit.

On October 27, 2015 Commenting on the results, Joseph Jimenez, CEO of Novartis, reported:
"Novartis continued to make strong progress on innovation and key launches in the third quarter (Press release, Novartis, OCT 27, 2015, View Source [SID:1234507809]). The Pharmaceuticals and Sandoz Divisions continue to perform exceptionally well, offsetting softness in the Alcon Division. Entresto was approved and launched in the US, and Tafinlar + Mekinist was approved in the EU for BRAF-mutant melanoma. We confirm our full-year guidance."

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

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

                  Schedule Your 30 min Free Demo!

GROUP REVIEW

Novartis has laid out five clear priorities for 2015: deliver strong financial results; strengthen innovation; complete the portfolio transformation; capture cross-divisional synergies; and build a high-performing organization. In each of these areas, we made solid progress in the third quarter and first nine months.

Financial results

Following the announcement of our portfolio transformation transactions on April 22, 2014, Novartis reported the Group’s financial results for the current and prior years as "continuing operations" and "discontinued operations." See page 42 of the Condensed Interim Financial Report for full explanation.

The commentary below focuses on continuing operations, which include the businesses of Pharmaceuticals, Alcon and Sandoz and Corporate activities. Starting on March 2, 2015, the date of the completion of the GSK transactions, continuing operations also include the results from the new oncology assets acquired from GSK and the 36.5% interest in the GSK consumer healthcare joint venture (the latter reported as part of income from associated companies). We also provide detail on discontinued operations and total Group performance on pages 3 and 5.

Third quarter

Continuing operations

Net sales were USD 12.3 billion (-6%, +6% cc). Growth Products[1] contributed USD 4.2 billion or 34% of net sales, up 14% (USD) over the prior-year quarter.

Operating income was USD 2.2 billion (-18%, +2% cc), with growth in Sandoz mostly offset by a decline in Alcon. The adjustments made to operating income to arrive at core operating income amounted to USD 1.3 billion (2014: USD 0.8 billion), mainly on account of a provision for a legal settlement and legal fees and the amortization of the new oncology assets in Pharmaceuticals.

Core operating income was USD 3.5 billion (-3%, +14% cc). Core operating income margin in constant currencies increased 2.2 percentage points, mainly due to strong performance at Pharmaceuticals and Sandoz. Currency had a negative impact of 1.4 percentage points, resulting in a net increase of 0.8 percentage points in US dollar terms to 28.4% of net sales.

Net income was USD 1.8 billion (-42%, -28% cc), down mainly due to the prior-year gain from the sale of Idenix Pharmaceuticals, Inc. shares to Merck & Co. (USD 0.8 billion) and a provision for a legal settlement and legal fees.

EPS was USD 0.75 (-41%, -27% cc), broadly in line with net income.

Core net income was USD 3.1 billion (-2%, +13% cc), broadly in line with core operating income.

Core EPS was USD 1.27 (-1%, +14% cc), broadly in line with core net income.

The free cash flow in the third quarter was USD 2.8 billion (-11%), a decrease of USD 0.3 billion compared to the prior-year period, primarily due to the negative currency impact on operations.

[1] "Growth Products" are an indicator of the rejuvenation of the portfolio, and comprise products launched in a key market (EU, US, Japan) in 2010 or later, or products with exclusivity in key markets until at least 2019 (except Sandoz, which includes only products launched in the last 24 months). They include the acquisition effect of the GSK oncology assets.

Pharmaceuticals net sales reached USD 7.6 billion (-4%, +7% cc), with volume growth of 12 percentage points, which includes the new oncology assets acquired from GSK on March 2, 2015 (sales of USD 0.5 billion in Q3). The negative impact of generic competition was 5 percentage points, largely for Diovan monotherapy, Exforge and Exelon Patch in the US. Pricing impact was negligible. Growth Products – which include Gilenya, Tasigna, Afinitor, Tafinlar + Mekinist, Jakavi, Revolade and Cosentyx – generated USD 3.5 billion or 46% of division net sales. These products grew 34% (cc) over the same period last year.

Operating income was USD 1.8 billion (-18%, 0% cc), as a provision for a conditional settlement in principle of the specialty pharmacies case with, inter alia, the SDNY of USD 400 million (including legal fees), amortization of intangible assets of USD 369 million and net acquisition-related costs of USD 45 million, both mainly related to the new oncology assets, were partly offset by divestment gains. Core operating income was USD 2.4 billion (+1%, +18% cc). Core operating income margin in constant currencies increased by 3.0 percentage points; currency had a negative impact of 1.5 percentage points, resulting in a net increase of 1.5 percentage points to 31.8% of net sales.

Alcon net sales were USD 2.3 billion (-12%, -2% cc) in the third quarter. Surgical sales (-2% cc) were down, mainly due to competitive pressure on intraocular lenses (IOLs) and a slowdown in equipment purchases in the US and emerging markets, particularly in Asia. This was partially offset by solid sales of cataract consumables and vitreoretinal sales. Ophthalmic Pharmaceuticals sales (-3% cc) declined, primarily due to generic competition in the US, which more than offset double-digit growth in Glaucoma fixed-dose combination products and Systane in Dry Eye. Vision Care sales (-1% cc) were impacted by a continued decline in contact lens care, while strong growth in Dailies Total1 was offset by weaker contact lens sales in Asia. Alcon growth acceleration plan development is underway and will be reflected in 2016 guidance given with 2015 full-year results.

Operating income was USD 159 million (-58%, -22% cc). Core operating income was USD 703 million (-27%, -12% cc), primarily impacted by declining sales as well as higher spending in R&D and M&S behind investments to drive growth and an increase in provisions for bad debt in Asia. Core operating income margin in constant currencies decreased by 3.8 percentage points; currency had a negative impact of 2.2 percentage points, resulting in a net decrease of 6.0 percentage points to 30.0% of net sales.

Sandoz net sales reached USD 2.3 billion (-3%, +9% cc) in the third quarter, as volume growth of 21 percentage points more than compensated for 12 percentage points of price erosion (6 percentage points excluding Diovan monotherapy). Global sales of Biopharmaceuticals (which include biosimilars, biopharmaceutical contract manufacturing and Glatopa) grew 28% (cc) to USD 186 million, including continued progress of the newly launched Glatopa. Anti-Infectives franchise sales (consisting of partner label and finished dosage form sales) were up 15% (cc) to USD 349 million.

Operating income amounted to USD 317 million (+17%, +33% cc). Core operating income grew 4% (+17% cc) to USD 433 million, due to strong base business and launch performance. Core operating income margin increased 1.2 percentage points to 18.6% of net sales, as strong operating performance more than offset the high margin sales of the Diovan monotherapy authorized generic in the prior-year quarter.

Discontinued operations[1]

Operational results for discontinued operations in the third quarter of 2015 include one month of results from the influenza Vaccines business, prior to its divestment to CSL Limited on July 31, 2015. Animal Health, OTC and non-influenza Vaccines are not included, as the divestments were closed in the first quarter of 2015. The prior-year period included the results of all divested units during the quarter.

Discontinued operations sales for the quarter amounted to USD 14 million, compared to USD 1.7 billion in the prior-year period.

Discontinued operations operating income was USD 45 million, which included the operating performance of the influenza Vaccines business up to July 31 and is net of the partial reversal of USD 0.1 billion of the impairment recorded in 2014, whereas the prior-year period operating income amounted to USD 241 million.

[1] Discontinued operations are defined on page 42 of the Condensed Interim Financial Report.

Core operating loss for discontinued operations amounted to USD 49 million compared to an income of USD 255 million in the prior-year quarter.

Net income from discontinued operations amounted to USD 83 million compared to an income of USD 138 million in the prior-year quarter.

Total Group

For the total Group, net income amounted to USD 1.9 billion compared to USD 3.2 billion in the prior-year period, and basic earnings per share decreased to USD 0.79 from USD 1.33.

Free cash flow for the total Group amounted to USD 2.8 billion.

Nine months

Continuing operations

Net sales amounted to USD 36.9 billion (-6%, +5% cc) in the first nine months. Growth Products contributed USD 12.3 billion or 33% of net sales, up 17% (USD) over the first nine months of 2014.

Operating income was USD 7.3 billion (-16%, 0% cc), with growth in Pharmaceuticals and Sandoz offset by the decline at Alcon. The adjustments made to operating income to arrive at core operating income amounted to USD 3.4 billion (2014: USD 2.5 billion).

Core operating income was USD 10.7 billion (-5%, +10% cc). Core operating income margin in constant currencies increased 1.3 percentage points, mainly due to higher sales and productivity initiatives. Currency had a negative impact of 1.0 percentage points, resulting in a net increase of 0.3 percentage points to 29.1% of net sales.

Net income was USD 6.0 billion (-28%, -14% cc), down mainly due to the prior-year gain from the sale of Idenix Pharmaceuticals, Inc. shares to Merck & Co. (USD 0.8 billion).

EPS was USD 2.48 (-26%, -12% cc), declining less than net income due to the lower number of average outstanding shares.

Core net income was USD 9.3 billion (-5%, +9% cc), broadly in line with core operating income.

Core EPS was USD 3.87 (-3%, +10% cc), growing ahead of core net income due to the lower number of average outstanding shares.

The free cash flow in the first nine months of 2015 was USD 6.3 billion (-9%), a decrease of USD 0.7 billion compared to the prior-year period. This was primarily due to the negative currency impact on operations, partially offset by higher hedging gains and increased proceeds from divestments.

Pharmaceuticals delivered net sales of USD 22.6 billion (-6%, +5% cc) in the first nine months, driven by volume growth (+12 percentage points), which includes the new oncology assets acquired from GSK (sales of USD 1.2 billion), more than offsetting the negative impact of generic competition (-7 percentage points). Pricing impact was negligible.

Operating income was USD 6.1 billion (-11%, +4% cc) for the first nine months. Included in operating income were USD 921 million of amortization of intangible assets and USD 155 million of net acquisition-related costs, mainly related to the new oncology assets acquired from GSK, as well as USD 400 million for a provision for a legal settlement and legal fees, partly offset by divestment gains. Core operating income was USD 7.3 billion (-3%, +12% cc), generating core operating leverage in constant currencies through the continued reduction of functional costs and ongoing productivity initiatives. Core operating income margin in constant currencies improved by 2.0 percentage points; currency had a negative impact of 1.1 percentage points, resulting in a net margin expansion of 0.9 percentage points to 32.4% of net sales.

Alcon net sales were USD 7.5 billion (-8%, +1% cc) in the first nine months. Surgical sales grew 1% (cc), driven by cataract and vitreoretinal consumables, partially offset by lower sales of equipment and IOLs. Ophthalmic Pharmaceuticals grew 1% (cc), driven by double-digit growth of fixed-dose combination products in Glaucoma and Systane in Dry Eye, partially offset by the negative impact of generic competition in the US. Vision Care (0% cc) was flat, as the continued decline in contact lens care solutions offset strong growth in Dailies Total1 and AirOptix Colors.

Operating income was USD 662 million (-46%, -15% cc). Core operating income was USD 2.4 billion (-18%, -5% cc), impacted by higher spending, primarily in M&S, behind investments to drive growth and an increase in provisions for bad debt in Asia. Lower gross margin and higher R&D investment behind RTH258 also contributed to the decline in core operating income. Core operating income margin in constant currencies decreased by 2.0 percentage points; currency had a negative impact of 1.8 percentage points, resulting in a net decrease of 3.8 percentage points to 32.1% of net sales.

Sandoz net sales were USD 6.9 billion (-3%, +10% cc) as volume growth of 17 percentage points more than offset 7 percentage points of price erosion. All regions grew in the first nine months of the year, led by double-digit growth in the US (+16% cc), Asia-Pacific (+15% cc) and Latin America (+22% cc). From a franchise perspective, global sales of Biopharmaceuticals increased 39% (cc) to USD 554 million, including four months of sales of Glatopa. Anti-Infectives franchise sales were USD 1.1 billion (+12% cc).

Operating income was USD 789 million (-1%, +7% cc), including USD 190 million of restructuring charges mainly related to our manufacturing footprint initiative. Core operating income increased 9% (+21% cc) to USD 1.3 billion. Core operating income margin in constant currencies increased by 1.7 percentage points; currency had a positive impact of 0.3 percentage points, resulting in a net increase of 2.0 percentage points to 18.4% of net sales.

Discontinued operations

Operational results for discontinued operations in the first nine months of 2015 include seven months of results from the influenza Vaccines business, as well as results from the non-influenza Vaccines business and OTC until their divestment date on March 2, 2015. Operational results from the Animal Health business, which was divested on January 1, 2015, include only the divestment gain. The prior year included the results of all divested units during the first nine months.

Discontinued operations sales for the first nine months amounted to USD 601 million, including USD 70 million for the influenza Vaccines business. Sales from the non-influenza Vaccines business and OTC up to March 2 amounted to USD 75 million and USD 456 million, respectively. In the prior-year period, net sales were USD 4.3 billion as all divested businesses reported during the full nine months.

Operating income for discontinued operations includes preliminary exceptional pre-tax gains of USD 12.8 billion from the divestment of Animal Health to Lilly (USD 4.6 billion) and the transactions with GSK (USD 2.8 billion for the non-influenza Vaccines business and USD 5.9 billion arising from the contribution of Novartis OTC into the consumer healthcare joint venture). In addition, the GSK transactions resulted in approximately USD 0.5 billion of additional transaction-related expenses.

The remaining operating loss from discontinued operations was USD 0.2 billion, representing the operating performance of the influenza Vaccines business up to July 31, as well as the non-influenza Vaccines business and OTC until their respective divestment dates, and is net of the partial reversal of USD 0.1 billion of the impairment recorded in 2014.

Core operating loss for discontinued operations, which excludes these exceptional items, amounted to USD 223 million in the first nine months of 2015, compared to an income of USD 50 million in the prior-year period.

Net income from discontinued operations amounted to USD 10.8 billion, mainly due to the exceptional gains from the GSK and Lilly transactions, compared to USD 0.5 billion in the first nine months of 2014, which included the exceptional gain from the divestment of the blood transfusion diagnostics unit to Grifols.

Total Group[1]

For the total Group, net income amounted to USD 16.7 billion compared to USD 8.8 billion in the first nine months of 2014, impacted by the exceptional divestment gains included in net income from the discontinued operations. Basic earnings per share increased to USD 6.94 from USD 3.58.

Free cash flow for the total Group amounted to USD 6.0 billion.

Key growth drivers

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

Growth Products

Growth Products, an indicator of the rejuvenation of the portfolio, contributed 34% of continuing operations net sales in the third quarter, and were up 14% (USD). In Pharmaceuticals, Growth Products contributed 46% of division net sales in the quarter, and sales for these products were up 34% (cc).

Gilenya (USD 696 million, +16% cc), our oral MS therapy, grew double-digit in the quarter behind strong volume growth.
Tasigna (USD 416 million, +16% cc) continued to drive growth in our CML franchise (which also includes Gleevec/Glivec), with strong volume growth in the US and other markets.

Afinitor (USD 414 million, +9% cc), an oral inhibitor of the mTOR pathway, continued to grow, driven by the US and Emerging Growth Markets.

Tafinlar + Mekinist (USD 135 million) grew as the first approved combination therapy for the treatment of patients with BRAF V600 mutation positive unresectable or metastatic melanoma.

Revolade (USD 117 million), also known as Promacta in the US, saw sales accelerate as the only approved once-daily oral thrombopoietin receptor agonist.

Jakavi (USD 103 million, +77% cc), an oral JAK inhibitor approved for myelofibrosis and polycythemia vera, grew strongly over the previous-year quarter.

Cosentyx (USD 88 million), the first IL-17A inhibitor approved in the US and Europe for psoriasis patients, has progressed strongly since its launch in February 2015.

Biopharmaceuticals (which include biosimilars, biopharmaceutical contract manufacturing and Glatopa) grew 28% (cc) to USD 186 million.

Emerging Growth Markets

Continuing operations net sales in our Emerging Growth Markets – which comprise all markets except the US, Canada, Western Europe, Japan, Australia and New Zealand – grew 4% (cc) in the third quarter, reflecting a general slowdown in the economies of China and India. Growth was led by Turkey (+23% cc) and Brazil (+9% cc).
[1] Total Group results in 9M 2014 include nine months of Consumer Health (both Animal Health and OTC) and Vaccines (both influenza and non-influenza businesses). 9M 2015 includes two months of OTC and the non-influenza business and seven months of the influenza business. Total Group net income and EPS include the impact of the exceptional divestment gains. Total Group free cash flow comprises the free cash flow from continuing operations and discontinued operations.

Strengthen innovation

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

New approvals and positive opinions

Entresto approved and launched in US; recommended by CHMP; approved by Swissmedic
Entresto (sacubitril/valsartan), previously known as LCZ696, was approved and launched in the US as a treatment for heart failure with reduced ejection fraction (HFrEF). In addition, the CHMP adopted a positive opinion for Entresto in symptomatic chronic HFrEF, and the Swiss health authority approved Entresto to reduce the risk of cardiovascular mortality and morbidity in patients with HFrEF.

Cosentyx received positive CHMP opinion for AS and PsA
In October, the CHMP recommended the approval of Cosentyx (secukinumab) in Europe to treat ankylosing spondylitis (AS) and psoriatic arthritis (PsA).

Tafinlar + Mekinist approved in EU for BRAF mutant melanoma; granted FDA priority review
The EC approved the combination of Tafinlar (dabrafenib) and Mekinist (trametinib) for the treatment of adult patients with unresectable or metastatic melanoma with a BRAF V600 mutation. The FDA granted priority review for full approval of the combination in the same patient population.

Odomzo approved in US and EU for locally advanced BCC
Odomzo (sonidegib) received approval in the US and EU for the treatment of certain adult patients with locally advanced basal cell carcinoma (BCC).

Farydak received EC approval in multiple myeloma
The EC approved Farydak (panobinostat) in combination with bortezomib and dexamethasone for the treatment of certain adult patients with relapsed/refractory multiple myeloma.

Promacta FDA approval for children with cITP
The FDA approved an expanded use for Promacta (eltrombopag) to include certain children one year of age and older with chronic immune thrombocytopenia (cITP).

Revolade approved in EU for patients with severe aplastic anemia
The EC approved Revolade (eltrombopag, marketed as Promacta in the US) for the treatment of certain adults with severe aplastic anemia (SAA).

Alcon’s UltraSert Pre-Loaded Delivery System for cataract surgery approved by FDA
Alcon received US approval for the AcrySof IQ Aspheric Intraocular Lens (IOL) with UltraSert Pre-loaded Delivery System for patients undergoing cataract surgery.
Regulatory submissions and filings

Afinitor submitted for GI/lung NET in US, Europe and Japan
Regulatory applications for Afinitor (everolimus) in advanced, progressive, non-functional neuroendocrine tumors (NET) of gastrointestinal (GI) or lung origin were submitted in the US, Europe and Japan.
Arzerra submitted for relapsed CLL in US and Europe

Regulatory applications for Arzerra (ofatumumab) for use as maintenance therapy in patients with relapsed chronic lymphocytic leukemia (CLL) were submitted in the US and Europe.

Sandoz submitted biosimilar etanercept in US
The FDA accepted Sandoz regulatory submission for biosimilar Enbrel (etanercept), a TNF-alpha inhibitor. Sandoz is seeking approval for all indications included in the label of the reference product, including rheumatoid arthritis and psoriasis.

Results from important clinical trials and other highlights

Cosentyx study showed sustained efficacy in psoriasis patients to three years
Data from an extension study showed that Cosentyx provides high levels of skin clearance and sustained efficacy in patients with moderate-to-severe plaque psoriasis while maintaining a favorable safety profile over three years.

COMBI-v data showed OS benefit for Tafinlar + Mekinist in BRAF-mutant melanoma
Updated data from the Phase III COMBI-v study showed a significant overall survival benefit for patients with BRAF V600E/K mutation-positive metastatic melanoma while improving health-related quality of life when treated with the combination of Tafinlar + Mekinist compared to vemurafenib monotherapy (median for the combination 25.6 months vs 18.0 months).

RADIANT-4 study showed Afinitor improved PFS in nonfunctional GI and lung NET
In a Phase III pivotal study, Afinitor reduced risk of disease progression by 52% vs. placebo in patients with advanced, progressive, nonfunctional NET of GI or lung origin. The results of the RADIANT-4 study are serving as the basis of worldwide regulatory submissions.

Secukinumab data in psoriatic arthritis published in NEJM
Results from the pivotal Phase III FUTURE 1 study for secukinumab in psoriatic arthritis were published online in the New England Journal of Medicine (NEJM). Secukinumab is the first IL-17A inhibitor to demonstrate efficacy in a Phase III study in patients with active PsA.

Long term efficacy of Gilenya reinforced by NEDA-4 analysis
The long-term efficacy profile of Gilenya (fingolimod) was reinforced by an analysis evaluating the proportion of Gilenya patients with relapsing multiple sclerosis who achieved no evidence of disease activity (NEDA-4) within each year over seven years.

Novartis continued to add to robust portfolio of programs in immuno-oncology
In October, Novartis broadened its portfolio of cancer immunotherapies with the acquisition of Admune Therapeutics and licensing agreements with Palobiofarma and XOMA Corporation, adding IL-15, adenosine receptor and TGF-beta inhibition programs to the portfolio. Novartis currently has several assets in clinic (including checkpoint inhibitors targeting PD1 and LAG3, as well as a myeloid cell targeting program and CART program CTL019). We are on track to have TIM3, as well as a PD1 + LAG3 combination, in clinic by end of year. We anticipate bringing STING, GITR, TGF-beta and multiple combinations to the clinic in 2016.

Novartis agreed to acquire remaining rights to ofatumumab, strengthening focus in MS
Novartis agreed to acquire all remaining rights to ofatumumab from GSK for relapsing remitting multiple sclerosis (MS) and certain other autoimmune indications.[1]

Novartis formed partnership with Amgen to further reinforce neuroscience pipeline
Through the partnership, Novartis and Amgen agreed to co-develop and co-commercialize a BACE inhibitor program in Alzheimer’s disease, with Novartis oral therapy CNP520 as the lead molecule. Novartis and Amgen also plan to globally co-develop Amgen’s migraine portfolio, including human monoclonal antibody AMG 334. Novartis holds commercialization rights for the migraine portfolio outside of the US, Canada and Japan.

Novartis swapped clinical assets for equity with Mereo BioPharma
The deal involves three mid-stage clinical assets in areas of unmet medical need: brittle bone syndrome, acute exacerbations in COPD and hypogonadotropic hypogonadism. Under the agreement, Novartis sold the clinical assets in exchange for an equity stake in Mereo and will share in the success of the assets.

Jay Bradner appointed NIBR President as Mark Fishman retires
Dr. James (Jay) Bradner, physician-scientist from Dana-Farber Cancer Institute and Harvard Medical School, was appointed President of the Novartis Institutes for BioMedical Research (NIBR), effective March 1, 2016. Dr. Bradner succeeds Dr. Mark Fishman, who will reach his contractual retirement age in March 2016 after 13 years at Novartis.
[1] Transaction is subject to closing conditions

Complete the portfolio transformation

Following our announcement on March 2, 2015 of the completion of the transactions with GSK, the integration has progressed on track. Marketing authorization transfers have been completed for over 80% of total sales of the oncology products.

The divestment of the influenza Vaccines business to CSL, the last step in the portfolio transformation, was completed on July 31, 2015.

Capture cross-divisional synergies

Improving productivity and leveraging synergies across divisions will help us support margins.

Novartis Business Services (NBS), our shared services organization, continues to execute on its priorities and the transformation of the organization is on track. At the end of the third quarter, NBS had approximately 9,400 full-time-equivalent associates, transferred from within the Novartis Group.

The cost within the scope of NBS was stable from the prior year. Moving from division-specific services to a cross-divisional model, NBS continues to scale up the offshoring of transactional services to its five selected Global Service Centers in Mexico City, Kuala Lumpur, Prague, Hyderabad and Dublin.

In the third quarter, we generated approximately USD 500 million in Procurement savings by leveraging our scale.
In addition, we continued to optimize our manufacturing footprint. In the third quarter, we announced the planned exit of our Sandoz manufacturing site in Turbhe, India.

For continuing operations, this brings the total number of production sites that have been or are in the process of being restructured, closed or divested to 24. Exceptional charges amounted to USD 40 million in the third quarter and USD 299 million in the first nine months. Exceptional charges recorded cumulatively since the program began amount to USD 874 million.
In total, our productivity initiatives generated gross savings that contributed approximately USD 850 million in the third quarter.

Build a high-performing organization

We are committed to creating a culture of integrity at Novartis and demonstrating ethical leadership, and have taken concrete steps to increase transparency and strengthen our ethical business practices. The new Novartis Values and Behaviors have an increased emphasis on integrity and the courage to do the right thing.

The company’s focus on quality continued to yield steady improvement in 2015. In the third quarter, a total of 60 global health authority inspections were completed, 12 of which were conducted by the FDA. All 60 were deemed acceptable or good.

On October 22, 2015, the FDA issued a warning letter to our Sandoz Division concerning their Indian sites in Kalwe and Turbhe. The warning letter observations follow an Agency inspection at both sites in August 2014 and are related to deficiencies in current good manufacturing practice (cGMP) for finished pharmaceuticals. The Warning Letter does not contain any new issues versus the 483 observations issued following the inspection in August 2014, which Sandoz has been addressing since then. Sandoz will continue to work closely with the FDA to ensure all observations are resolved to the Agency’s full satisfaction. No supply disruptions are expected.

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 nine months of 2015, 38.7 million treasury shares were delivered as a result of options exercised and share deliveries related to employee participation programs. 8.9 million shares were repurchased on the SIX Swiss Exchange first trading line and from employees. In addition, Novartis repurchased 32.5 million shares on the second trading line in the first nine months of 2015 under the ongoing share buy-back of USD 5.0 billion spread over two years as well as to offset the dilutive impact from its employee participation programs. With these transactions, the total number of shares outstanding decreased by 2.7 million in the first nine months of 2015. Novartis aims to further offset the dilutive impact from its employee participation programs experienced in the first nine months of 2015 over the remainder of the year through purchases on the SIX Swiss Exchange second trading line.

During the first quarter of 2015, Novartis issued three Swiss franc denominated bonds for a total amount of USD 1.5 billion and repaid two bonds for a total amount of USD 2.9 billion (USD 2.0 billion bond issued in March 2010 and a Swiss franc denominated bond of USD 0.9 billion issued in June 2008) in the second quarter of 2015 at maturity.

As of September 30, 2015, the net debt stood at USD 16.6 billion compared to USD 6.5 billion at December 31, 2014. The increase of USD 10.1 billion was driven by the outflows related to the acquisition of the oncology assets from GSK of USD 16.0 billion, the dividend payment of USD 6.6 billion, share repurchases of USD 4.0 billion, divestment related payments of USD 0.8 billion and other net cash outflow items of USD 0.2 billion. This was partially compensated by the free cash flow of USD 6.0 billion, net divestment proceeds of USD 9.9 billion related to the portfolio transformation transactions and proceeds from options exercised of USD 1.6 billion.

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

2015 Group outlook for continuing operations

Barring unforeseen events

Our outlook for full year 2015 remains unchanged. Group net sales in 2015 are expected to grow mid-single digit (cc), after absorbing the impact of generic competition, which is expected to be approximately the same as the prior year (USD 2.4 billion). Group core operating income is expected to grow ahead of sales at a high-single digit rate (cc) in 2015. All these comparisons are versus 2014 continuing operations.

If early October exchange rates prevail for the remainder of the year, the currency impact for the year would be negative 10% on sales and negative 14% on core operating income. This currency impact versus prior-year results from the continued strength of the US dollar against most currencies.