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Cardinal Health Reports First Quarter Fiscal 2021 Results

On November 5, 2020 Cardinal Health (NYSE: CAH) reported first quarter fiscal year 2021 revenues of $39.1 billion, an increase of 5% from the first quarter of last year (Press release, Cardinal Health, NOV 5, 2020, View Source [SID1234570107]). First quarter GAAP operating loss was $624 million due to a $1.0 billion pre-tax accrual related to opioid litigation. This quarter’s accrual is incremental to the $5.6 billion accrual recorded in the first quarter of fiscal year 2020. Non-GAAP operating earnings increased 7% to $618 million in the quarter. GAAP diluted loss per share was $0.86, and non-GAAP diluted earnings per share (EPS) increased 19% to $1.51. These results include a moderate negative impact from COVID-19, primarily concentrated in the Pharmaceutical segment.

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Cardinal Health, Inc. is a global, integrated healthcare services and products company, providing customized solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories and physician offices worldwide. (PRNewsfoto/Cardinal Health)

"Our first quarter results and improved outlook for the year demonstrate the resilience of our business model," said Mike Kaufmann, CEO of Cardinal Health. "We delivered strong performance in both segments due to progress against our growth initiatives and disciplined expense management. As we continue to navigate the pandemic, we remain focused on optimizing our core businesses and making strategic investments that create long-term value for our shareholders, customers, communities and employees."

Q1 FY21 summary

First quarter revenue for the Pharmaceutical segment increased 5% to $35.1 billion, driven by sales growth from Pharmaceutical Distribution and Specialty Solutions customers.

Pharmaceutical segment profit increased 1% to $402 million in the first quarter, due to a higher contribution from brand sales mix. As expected, segment profit growth was adversely affected by COVID-19-related volume declines.

First quarter revenue for the Medical segment increased 1% to $4.0 billion, primarily due to sales growth from Cardinal Health at Home.

Medical segment profit increased 36% to $230 million in the first quarter due to cost savings, including global manufacturing efficiencies. The company estimates that COVID-19 had a minimal net impact on the segment’s first quarter results, as the adverse effects of cancelled or deferred elective procedures were offset by the temporary reduction of certain costs and higher volumes in our lab business. Additionally, the impact of personal protective equipment (PPE) cost increases was mostly mitigated through price increases.

Fiscal year 2021 outlook1
Cardinal Health is updating its fiscal year 2021 guidance range for non-GAAP diluted earnings per share attributable to Cardinal Health, Inc. to $5.65 to $5.95 from $5.25 to $5.65. This increased guidance range primarily reflects a combination of a lower-than-previously-expected net headwind related to COVID-19 and improved cost savings.

The company does not provide forward-looking guidance on a GAAP basis as certain financial information, the probable significance of which cannot be determined, is not available and cannot be reasonably estimated. See "Use of Non-GAAP Measures" following the attached schedules for additional explanation.

Opioid lawsuits developments
In October 2019, the company agreed in principle to a global settlement framework with a leadership group of state attorneys general that is designed to resolve all pending and potential opioid lawsuits by states and political subdivisions. Negotiations under this settlement framework continue. In connection with the opioid lawsuits and these discussions, in the first quarter of fiscal year 2021, the company incurred a pre-tax charge of $1.02 billion. This is incremental to the $5.63 billion charge incurred in the first quarter of fiscal year 2020. The total pre-tax accrual for these matters at September 30, 2020 is $6.59 billion. These charges are excluded from the company’s non-GAAP results.

GAAP tax effect of opioid litigation charges
For fiscal 2021, including the tax effects of opioid litigation charges in the calculation of the company’s estimated annual effective tax rate increased the amount of tax benefit in the current quarter by approximately $450 million and is expected to significantly increase the company’s provision for income taxes during the remainder of the fiscal year. The company currently estimates net tax benefits of $35 million and $488 million for fiscal 2021 and 2020 in connection with the opioid lawsuit developments.

Recent highlights

Cardinal Health announced that Sheri Edison joined the board of directors effective September 1. Ms. Edison currently serves as Executive Vice President and General Counsel for Amcor plc.
Cardinal Health board of directors approved a quarterly dividend of $0.4859 per share. The dividend will be payable on January 15, 2021 to shareholders of record at the close of business on January 4, 2021.
Cardinal Health continues to be recognized for its Diversity and Inclusion efforts, recently in the Forbes 2020 America’s Best Employers for Women list, the Diversity Best Practices (DBP) Inclusion Index, and the 2020 LATINA Style, Inc. 50 report.
Upcoming webcasted investor events

Credit Suisse 29th Annual Healthcare Conference at 1:15 p.m. EST, November 9
39th Annual J.P. Morgan Healthcare Conference on January 11-14, 2021
Webcast
Cardinal Health will host a webcast today at 8:30 a.m. EST to discuss first quarter results. To access the webcast and corresponding slide presentation, go to the Investor Relations page at ir.cardinalhealth.com. No access code is required.

Presentation slides and a webcast replay will be available until November 4, 2021.

PROMIS NEUROSCIENCES CLOSES FIRST TRANCHE OF PRIVATE PLACEMENT

On November 5, 2020 ProMIS Neurosciences, Inc. (TSX: PMN) (OTCQB: ARFXF), a biotechnology company focused on the discovery and development of antibody therapeutics targeting toxic oligomers implicated in the development of neurodegenerative diseases, reported that it has completed the first closing of its previously announced private placement offering (the "Offering") of special warrants of the Company ("Special Warrants") at a price of $0.12 per Special Warrant, raising gross proceeds of $1,658,349.72 (Press release, ProMIS Neurosciences, NOV 5, 2020, View Source [SID1234570106]). A second closing (the "Final Closing") of the Offering is expected to be completed within a week.

Each Special Warrant shall be exercisable, without payment of any additional consideration by the holder, into one common share of the Company and one transferable Common Share purchase warrant (a "Warrant"). Each Warrant will entitle the holder thereof to acquire one Common Share at an exercise price of $0.20 per Warrant Share for a period of 60 months until November 4, 2025, subject to acceleration of the expiry date as described below.

If at any time after the expiry of the four month hold period applicable to the Warrants, the twenty-day volume-weighted average trading price of the Shares on the TSX, or such other exchange on which the Shares may be listed, is greater than $0.60, the Company may deliver a notice to the holders of Warrants accelerating the expiry date to a date that is not less than 30 days following the date of such notice.

The net proceeds raised under the Offering will be used for general corporate purposes.

As soon as reasonably practicable after the Final Closing, the Company will take reasonable commercial steps to prepare and file with each of the securities regulatory authorities in each of the provinces of Canada, other than Quebec, in which the of Special Warrants are sold and obtain a receipt for, a final short form prospectus (the "Final Prospectus"), qualifying the distribution of the Shares and Warrants issuable upon exercise of the Special Warrants.

Each Special Warrant will be automatically exercised, without the payment of any additional consideration, into a Share and a Warrant on the date (the "Qualification Date") that is the earlier of (i) four (4) months and a day following Closing, and (ii) the 3rd business day after a receipt is issued for the Final Prospectus qualifying the distribution of the Shares and Warrants issuable upon the exercise of the Special Warrants. For greater certainty, except with the consent of the Company (such consent not to be unreasonably withheld), no Special Warrants may be exercised by the holder thereof prior to the Qualification Date.

In connection with the first tranche of the Offering, the Company has paid cash finder’s fees in the amount of $50,064 and issue a total of 417,200 compensation warrants (the "Compensation Warrants") equal to 7% of the number of Special Warrants issued under the Offering. The Compensation Warrants have the same terms as the Warrants.

The Offering is subject to receipt of the final approval of the TSX.

Five insiders of the Company participated in the Offering and subscribed for total of 1,097,915 Special Warrants. Such participation is considered to be a "related party transaction" as defined under Multilateral Instrument 61-101 ("MI 61-101"). The transaction is exempt from the formal valuation and minority shareholder approval requirements of MI 61-101, as neither the fair market value of any securities issued to nor the consideration paid by such persons exceeded 25% of the Company’s market capitalization.

This press release is not an offer to sell or the solicitation of an offer to buy the securities in the United States or in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to qualification or registration under the securities laws of such jurisdiction. The securities being offered have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, and such securities may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons absent registration or an applicable exemption from U.S. registration requirements and applicable U.S. state securities laws.

Bio-Techne Declares Dividend

On November 5, 2020 Bio-Techne Corporation (NASDAQ: TECH) reported that its Board of Directors has decided to pay a dividend of $0.32 per share for the quarter ended September 30, 2020 (Press release, Bio-Techne, NOV 5, 2020, View Source [SID1234570105]). The quarterly dividend will be payable November 27, 2020 to all common shareholders of record on November 16, 2020. Future cash dividends will be considered by the Board of Directors on a quarterly basis.

10-Q – Quarterly report [Sections 13 or 15(d)]

Regeneron has filed a 10-Q – Quarterly report [Sections 13 or 15(d)] with the U.S. Securities and Exchange Commission .

Merck to Acquire VelosBio

On November 5, 2020 Merck (NYSE: MRK), known as MSD outside the United States and Canada, and VelosBio Inc. reported that the companies have entered into a definitive agreement pursuant to which Merck, through a subsidiary, will acquire all outstanding shares of VelosBio for $2.75 billion in cash, subject to certain customary adjustments (Press release, Merck & Co, NOV 5, 2020, View Source [SID1234570089]). VelosBio is a privately held clinical-stage biopharmaceutical company committed to developing first-in-class cancer therapies targeting receptor tyrosine kinase-like orphan receptor 1 (ROR1). VelosBio’s lead investigational candidate is VLS-101, an antibody-drug conjugate (ADC) targeting ROR1 that is currently being evaluated in a Phase 1 and a Phase 2 clinical trial for the treatment of patients with hematologic malignancies and solid tumors, respectively.

"At Merck, we continue to bolster our growing oncology pipeline with strategic acquisitions that both complement our current portfolio and strengthen our long-term growth potential," said Dr. Roger M. Perlmutter, president, Merck Research Laboratories. "Pioneering work by VelosBio scientists has yielded VLS-101, which in early studies has provided notable evidence of activity in heavily pretreated patients with refractory hematological malignancies, including mantel cell lymphoma and diffuse large B-cell lymphoma."

In October 2020, VelosBio announced the initiation of a Phase 2 clinical trial (NCT04504916) to evaluate VLS-101 for the treatment of patients with solid tumors, including patients with triple-negative breast cancer (TNBC), hormone receptor-positive and/or HER2-positive breast cancer, and non-squamous non-small-cell lung cancer (NSCLC). In early clinical trials, VLS-101 demonstrated a manageable safety profile and early signs of anti-tumor activity. Results of a Phase 1 clinical trial, to be presented virtually at the 62nd American Society of Hematology (ASH) (Free ASH Whitepaper) Annual Meeting (Dec. 5-8, 2020), showed that VLS-101 resulted in objective clinical responses, including complete responses, in 47% (n=7/15) of patients with mantle cell lymphoma (MCL) and 80% (n=4/5) of patients with diffuse large B-cell lymphoma. Patients in this Phase 1 trial had been heavily pretreated with other anticancer medications, and their cancers had failed to respond or had relapsed after initially responding to these other anticancer medications. In addition, VelosBio is developing a preclinical pipeline of next-generation ADCs and bispecific antibodies targeting ROR1 with the potential to complement VLS-101 by offering alternative methods of tumor cell killing.

"Merck is a recognized leader in oncology, and this acquisition reflects the hard work and commitment of all the employees at VelosBio in advancing the science of ROR1," said Dave Johnson, founder and chief executive officer at VelosBio. "We are very pleased that Merck has recognized the value of our first-in-class ROR1-directed investigational therapeutics. As part of Merck’s oncology pipeline, our lead product candidate, VLS-101, is now well positioned to achieve its maximum potential to benefit appropriate cancer patients in need."

The closing of the transaction, which is subject to approval under the Hart-Scott-Rodino Antitrust Improvements Act and other customary conditions, is expected by the end of 2020.

Merck was represented by Gibson Dunn & Crutcher LLP as legal advisor and J.P. Morgan Securities LLC as financial advisor. VelosBio was represented by Cooley LLP as legal advisor and Centerview Partners LLC as financial advisor.

About VLS-101

VLS-101 is an investigational ADC comprising a monoclonal antibody targeting ROR1 that is linked to a chemotherapeutic agent called monomethyl auristatin E (MMAE). After the antibody binds to ROR1 on cancer cells, the ADC is designed to enter those cells and release MMAE to destroy the cancer cells. In mouse models of human hematologic malignancies and solid tumors, VLS-101 showed robust antitumor activity. VLS-101 is in clinical development for patients with previously treated hematologic malignancies and solid tumors. The U.S. Food and Drug Administration has granted VLS-101 orphan drug and fast track designations for the treatment of MCL.

Merck’s Focus on Cancer

Our goal is to translate breakthrough science into innovative oncology medicines to help people with cancer worldwide. At Merck, the potential to bring new hope to people with cancer drives our purpose and supporting accessibility to our cancer medicines is our commitment. As part of our focus on cancer, Merck is committed to exploring the potential of immuno-oncology with one of the largest development programs in the industry across more than 30 tumor types. We also continue to strengthen our portfolio through strategic acquisitions and are prioritizing the development of several promising oncology candidates with the potential to improve the treatment of advanced cancers. For more information about our oncology clinical trials, visit www.merck.com/clinicaltrials.