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MorphoSys AG Reports Third Quarter 2019 Financial Results

On October 29, 2019 MorphoSys AG (FSE: MOR; Prime Standard Segment; MDAX & TecDAX; NASDAQ: MOR) reported its financial results for the third quarter of 2019 (Press release, MorphoSys, OCT 29, 2019, View Source [SID1234549980]).

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"The third quarter of 2019 has significantly advanced our preparations for seeking regulatory approval in the U.S. for our key asset tafasitamab," said Dr. Jean-Paul Kress, Chief Executive Officer of MorphoSys. "Today we announced compelling topline data of Re-MIND, our retrospective study in relapsed/refractory DLBCL. Re-MIND compares real-world data based effectiveness of lenalidomide monotherapy with the efficacy outcomes of the tafasitamab/ lenalidomide combination in our L-MIND trial. We are very pleased that the study met its primary endpoint, showing a superior best objective response rate (ORR) of the tafasitamab/ lenalidomide combination compared to lenalidomide monotherapy. The data complements the L-MIND primary analysis data we published in June this year and considerably supports the BLA submission, which we plan to complete by end of this year. Rolling submission was initiated and the pre-clinical data package was already submitted to the FDA.

Our commitment to unlock tafasitamab’s full clinical potential as well as to maximize the value of our entire proprietary pipeline remains unchanged. We are well on track to start our first-line trial of tafasitamab in DLBCL later this year and we successfully activated the first clinical sites for the phase 1/2 trial with MOR202 in membranous nephropathy.

While we were clearly disappointed to learn that results from the interim analysis for futility of the MOR106 IGUANA study did not support continuation of the clinical development in atopic dermatitis, we remain fully committed to the development of our proprietary early and late-stage drug candidates," Dr. Kress continued.

"The last quarter was a successful quarter for Tremfya(R) and our partner Janssen," commented Jens Holstein, Chief Financial Officer of MorphoSys AG. "Janssen submitted a sBLA for Tremfya(R) to the U.S. FDA for the treatment of patients with psoriatic arthritis and also recently announced the submission of a filing application in the same indication to EMA for Europe. Janssen reported a strong quarter for Tremfya(R) sales. This led us to adapt our expectations for the 2019 royalty income that we now anticipate in the range of EUR30-35 million."

Financial Review for the third quarter of 2019 (IFRS; all figures rounded)

In Q3 2019 MorphoSys continued to focus on the research and development of drug candidates both for its own account as well as with its partners. Group revenues came in at EUR12.5 million in Q3 2019 as compared to EUR55.0 million in the third quarter of the previous year. Revenues in Q3 2018 comprised the payment of EUR47.5 million for the license agreement for MOR106 with Novartis.

Revenues in Q3 2019 also included an estimate of royalties on net sales of Tremfya(R) amounting to EUR9.3 million (estimate only since royalties for Q3 2019 had not been reported by Janssen as of the balance date). Due to the strong sales Janssen reported for Tremfya(R) for Q3 2019, we adapted our royalty guidance for Tremfya(R). We now expect a royalty income ranging from EUR30-35 million at constant US dollar exchange rate, thus we anticipate to reach the upper end of our revenue guidance for 2019.

In the Proprietary Development segment, MorphoSys focuses on research and clinical development of its own drug candidates in the fields of cancer and inflammation. In Q3 2019, this segment recorded revenues of EUR1.4 million compared to EUR48.8 million in Q3 2018, which included the EUR47.5 million payment for the license agreement for MOR106 with Novartis. In the Partnered Discovery segment, MorphoSys applies its proprietary technology to discover new drug candidates for pharmaceutical companies, benefiting from its partners’ development advancements through R&D funding, licensing fees, success-based milestone payments and royalties. In Q3 2019, revenues in this segment amounted to EUR11.0 million compared to EUR6.2 million in Q3 2018.

Total operating expenses increased to EUR40.3 million in the third quarter of 2019 from
EUR25.3 million Q3 2018, based on the ramp-up of preparations for a potential tafasitamab U.S. commercialization as well as build-up of the MorphoSys U.S. operations. In Q3 2019, research and development expenses amounted to EUR25.9 million, as compared to EUR18.0 million in the third quarter of 2018. Expenses for proprietary R&D, including technology development, amounted to EUR23.7 million (Q3 2018: EUR15.9 million).

In the third quarter of 2019, cost of sales amounted to EUR1.0 million (Q3 2018: EUR0.9 million), selling expenses amounted to EUR4.4 million (Q3 2018: EUR1.3 million). General and administrative expenses increased from EUR5.1million in Q3 2018 to EUR9.0 million in Q3 2019.

Earnings before interest and taxes (EBIT) in Q3 2019 totaled EUR-27.0 million (Q3 2018: EUR30.1 million). The Proprietary Development segment reported an EBIT of EUR-30.5 million (Q3 2018: EUR30.3 million). EBIT in the Partnered Discovery segment was EUR8.8 million (Q3 2018: EUR3.8 million). In Q3 2019, the consolidated net loss was EUR-24.2 million (Q3 2018: net profit of EUR30.2 million). The earnings per share for Q3 2019 was EUR-0.76 (Q3 2018: earnings per share of EUR0.96).

At the end of Q3 2019, the Company had EUR412.4 million in cash, reported on the balance sheet under the line items "cash and cash equivalents"; "financial assets at fair value through profit or loss"; and current and non-current "other financial assets at amortized cost". On December 31, 2018, the Group’s liquidity position amounted to EUR454.7 million.

The number of shares issued totaled 31,927,958 at the end of Q3 2019 (year-end 2018: 31,839,572).

Results for the first nine months 2019

During the first nine months of 2019, group revenues amounted to EUR60.7 million (Q1-Q3 2018: EUR66.0 million). Revenues in the first nine months of 2019 comprised the milestone payment by GSK of EUR22.0 million due to the start of phase 3 clinical development of otilimab in RA, whereas revenues in the first nine months of 2018 reflected the upfront payment made by Novartis of EUR47.5 million in connection with the license agreement for MOR106. Expenditure for proprietary R&D, including technology development, amounted to EUR68.8 million in the first nine months of 2019 (Q1-Q3 2018: EUR55.1 million). Consequently, the EBIT in the first nine months of 2019 amounted to EUR-56.3 million, compared to EUR-13.0 million in the first nine months of 2018.

Financial Guidance and Operational Outlook for 2019

For the year 2019, MorphoSys re-affirms its financial guidance. The company expects revenues at the upper end of its guidance of EUR65 to 72 million. The company’s EBIT is expected to be in the range of EUR-105 to -115 million. Expenses for proprietary development and technology development are forecasted to remain in a corridor of EUR95 to 105 million. For Tremfya(R), MorphoSys adapted the royalty guidance and now expects royalty income ranging from EUR30-35 million at constant US dollar exchange rate (up from previously EUR23-30 million).

The guidance does not include revenues from potential future partnerships or licensing agreements for tafasitamab or any other compound currently in MorphoSys’s Proprietary Development segment. Effects from potential in-licensing or co-development deals for new development candidates are also not included.

In its Proprietary Development segment, MorphoSys expects the following events and activities until the end of 2019:

Tafasitamab (MOR208)
– L-MIND trial:

– Complete rolling submission of Biologics License Application to U.S. FDA by year-
end

– Re-MIND study

– Presentation of full data from retrospective observational study of patients treated with lenalidomide only in r/r DLBCL planned at ASH (Free ASH Whitepaper)

– B-MIND trial

– Continue phase 3 study evaluating tafasitamab plus bendamustine in r/r DLBCL

– Event-driven interim analysis for futility on track to be announced in Q4 2019

– Front-line DLBCL: Initiate phase 1b trial of tafasitamab in combination with R-CHOP or R2-CHOP in Q4 2019

– COSMOS: Data to be presented at a medical conference later in 2019

MOR202

– MorphoSys: Start of phase 1/2 trial of MOR202 in anti-PLA2R-antibody positive membranous nephropathy (aMN) in Q4 2019

– I-Mab: Continue two clinical trials of MOR202/TJ202 in r/r multiple myeloma in the Chinese region and expand trials to mainland China under recently IND clearances

MOR106

– MorphoSys, Galapagos and Novartis will explore the future strategy of the compound

In its Partnered Discovery segment, MorphoSys expects the following events until the end of 2019:

Tremfya(R) (guselkumab):

Janssen is currently conducting phase 3 trials of Tremfya(R) in psoriatic arthritis and plans to present data at upcoming medical conferences. Further, Janssen announced that submission of a Marketing Authorization Application to EMA has been completed and the review process has started.

Janssen plans the start of a phase 1 trial of guselkumab in Chinese healthy volunteers, a phase 2 trial of guselkumab in pityriasis rubra pilaris, a phase 2/3 trial in ulcerative colitis and a phase 3 trial in palmoplantar-non-pustular psoriasis, according to clinicaltrials.gov.

BPS-804 (setrusumab):

Mereo Biopharma is currently investigating the antibody setrusumab, directed against sclerostin, in Osteogenesis Imperfecta (OI, brittle bone syndrome). According to clinicaltrails.gov, primary completion of the phase 2b study in adult patients is scheduled for later this year and Mereo Biopharma announced plans to start a pediatric study in OI within 2019.

Other partnered programs: publication of clinical data and achievement of regulatory milestones from other partnered programs may occur during the remainder of 2019.

Whether, when and to what extent news will be published following the primary completion of trials in the Partnered Discovery segment is at the full discretion of MorphoSys’s partners.

MorphoSys will continue to support its proprietary development activities by evaluating potential in-licensing, co-development, and/or acquisition opportunities or the potential initiation of new proprietary development programs with the goal of maintaining and expanding the Company’s position in its current therapeutic and technological fields of activities.

1) Including MOR107, which concluded a phase 1 study in 2017 and is currently in preclinical investigation with a focus on oncology indications. Tremfya(R) is still considered as a clinical program due to ongoing studies in various indications.

2) Including otilimab (MOR103/GSK3196165), which is fully out-licensed to GSK, and MOR106, for which MorphoSys and Galapagos have signed a global licensing agreement with Novartis.

PP – Percentage points

The interim statement for the third quarter of 2019 (IFRS) is available online at
View Source

MorphoSys will hold its conference call and webcast tomorrow, October 30, 2019 to present the third quarter financial results 2019 and a further outlook for 2019.

Dial-in number for the analyst conference call (in English) at 2:00pm CET; 1:00pm GMT; 9:00am EDT:

Germany: +49 69 201 744 220
For UK residents: +44 203 009 2470
For US residents: +1 877 423 0830
Participant PIN: 97683318#

Please dial in 10 minutes before the beginning of the conference.

A live webcast and slides will be made available at www.morphosys.com.

Approximately two hours after the call, a slide-synchronized audio replay of the conference and a transcript will be available at www.morphosys.com.

MorphoSys AG: Primary Endpoint met in Real-World Data Study Demonstrating Clinical Superiority of the Combination of Tafasitamab and Lenalidomide compared to Lenalidomide alone

On October 29, 2019 MorphoSys AG (FSE: MOR; Prime Standard Segment; MDAX & TecDAX; Nasdaq: MOR) reported topline results from the primary analysis of the retrospective observational matched control cohort (Re-MIND) (Press release, MorphoSys, OCT 29, 2019, View Source [SID1234549979]). This study was designed to compare the effectiveness of lenalidomide monotherapy based on real-world patient data with the efficacy outcomes of the tafasitamab/lenalidomide combination, as investigated in MorphoSys’s L-MIND trial.

Re-MIND collected outcome data from 490 non-transplant eligible patients with relapsed/ refractory diffuse large B cell lymphoma (r/r DLBCL) who had received lenalidomide monotherapy in the U.S. and the EU in a real-world setting. Qualification criteria for matching patients of both studies were pre-specified. As a result, 76 eligible Re-MIND patients were identified and matched 1:1 to 76 of 80 L-MIND patients based on important baseline characteristics. Objective response rates (ORR) were validated based on this subset of 76 patients in Re-MIND and L-MIND, respectively.

The primary endpoint of Re-MIND has been met and shows a statistically significant superior best ORR of the tafasitamab/lenalidomide combination compared to lenalidomide monotherapy. ORR was 67.1% (95% confidence interval (CI): 55.4-77.5) for the tafasitamab/ lenalidomide combination, compared to 34.2% (CI: 23.7-46.0) for the lenalidomide monotherapy (p<0.0001). Superiority was consistently observed across all secondary endpoints, including complete response (CR) rate (tafasitamab/lenalidomide combination 39.5%; CI: 28.4-51.4 versus lenalidomide monotherapy 11.8%; CI: 5.6-21.3; p<0.0001), as well as in pre-specified statistical sensitivity analyses. In addition, there was a significant difference observed in overall survival, which was not reached in the tafasitamab/lenalidomide combination as compared to 9.3 months in the lenalidomide monotherapy (hazard ratio 0.47; CI: 0.30-0.73; p<0.0008).

"Encouraged by the results we achieved with the real-world data approach, we re-affirm our plans to pursue advancement of tafasitamab to market in combination with lenalidomide as a potential, chemo-free treatment option for patients with r/r DLBCL, subject to FDA approval. The data announced today complement the previously published data of the single-arm
L-MIND study and MorphoSys has started the rolling submission of our BLA to the FDA, which we plan to complete by end of this year," commented Dr. Malte Peters, Chief Development Officer of MorphoSys AG.

"I’m very excited about this real-world data approach of the Re-MIND trial to isolate a single-agent contribution of tafasitamab in combination with lenalidomide in a matched patient population in r/r DLBCL. This study further strengthens the synergistic effect of tafasitamab and lenalidomide, as already observed in the L-MIND trial," said Pier Luigi Zinzani, M.D., Ph.D., Professor of Hematology, Head of Lymphoma Group, Institute of Hematology,
"L. e A. Seràgnoli", University of Bologna, Bologna, Italy, and one of the lead investigators in MorphoSys’s Re-MIND study.

Details of the L-MIND primary analysis were published on June 22, 2019, and can be found here.

About L-MIND
L-MIND is a single arm, open-label phase 2 study, investigating the combination of tafasitamab and lenalidomide in patients with relapsed or refractory diffuse large B cell lymphoma (r/r DLBCL) after up to two prior lines of therapy, including an anti-CD20 targeting therapy (e.g. rituximab), who are not eligible for high-dose chemotherapy and subsequent autologous stem cell transplantation. The study’s primary endpoint is objective response rate (ORR). Secondary outcome measures include duration of response (DoR), progression-free survival (PFS) and overall survival (OS). In May 2019, the study reached its primary completion. Primary analysis data with a cut-off date of November 30, 2018 included 80 patients enrolled into the trial who had received tafasitamab and lenalidomide and had been followed-up as per protocol for at least one year. Efficacy results in this update were based on response rates assessed by an independent review committee for all 80 patients. Based on earlier reported interim data from L-MIND, in October 2017 the U.S. FDA granted Breakthrough Therapy Designation for tafasitamab plus lenalidomide in this patient population. MorphoSys is working towards completion of a BLA submission to the U.S. FDA based on L-MIND by end of 2019.

About Re-MIND
Re-MIND, an observational retrospective study, was designed to isolate the contribution of tafasitamab in the combination with lenalidomide and to prove the combinatorial effect. The study compares real-world response data of patients with relapsed or refractory DLBCL who received lenalidomide monotherapy with the efficacy outcomes of the tafasitamab-lenalidomide combination, as investigated in MorphoSys’s L-MIND trial. Re-MIND collected the efficacy data from 490 r/r DLBCL patients in the U.S. and EU. Eligible patients were matched 1:1 to the L-MIND study population based on important baseline characteristics, such as relevant prognostic factors, laboratory characteristics and patient demographics.

Moleculin Announces New Data Confirms Anti-tumor Efficacy of Annamycin in Both Human and Murine AML Models

On October 29, 2019 Moleculin Biotech, Inc., (Nasdaq: MBRX) ("Moleculin" or the "Company"), a clinical stage pharmaceutical company with a broad portfolio of drug candidates targeting highly resistant tumors, reported the presentation of a poster at the AACR (Free AACR Whitepaper)-NCI-EORTC Molecular Targets and Cancer Therapeutics Conference today in Boston, MA (Press release, Moleculin, OCT 29, 2019, View Source [SID1234549978]). The poster, entitled "Dose and Schedule-Dependent Efficacy of Liposomal Annamycin in Pre-clinical Models of Acute Myeloid Leukemia," presents data documenting the high activity of Annamycin against AML, including in vitro studies in a panel of human AML cell lines, as well as in vivo studies in both human and murine AML models developed under the Company’s sponsored research agreement with MD Anderson Cancer Center.

Moleculin Biotech, Inc. is a clinical stage pharmaceutical company focused on the development of a broad portfolio of oncology drug candidates for the treatment of highly resistant tumors.

"This study highlights an important new finding," commented Walter Klemp, Moleculin’s Chairman and CEO. "We’ve known for some time that Annamycin is effective in AML animal models and the activity that we believe is coming from our current AML clinical trials seems to correlate with this. But, what’s new here is the observation that Annamycin may also be more effective than other drugs due to its high uptake and effectiveness in eliminating AML cells localized in different organs. Additional important observations made with these studies indicates that the long-term exposure of healthy mice (at least 12 doses so far) to a highly efficacious dose of 4 mg/kg administered weekly is not toxic and that even two weekly doses of 4 mg/kg are producing a significant increase in survival. And, because Annamycin is designed to be non-cardiotoxic, this extended dosing regimen may prove to be feasible and beneficial in humans. This potentially opens the door for expanded and improved dosing regimens in future clinical trials."

Quoting from the accepted abstract: "In vivo studies confirmed anti-tumor efficacy of Annamycin in both human and murine AML models. Based on bioluminescence imaging, the liposomal formulation of the drug significantly delayed AML progression in the human OCL-AML3/NSG model at 4 mg/kg with once weekly dosing. Similarly, significant dose-dependent reduction of peripheral blood AML blasts was observed in the murine AML-Turq2 model, and this reduction was strongly correlated with prolongation of animal survival. The median survival of mice receiving four doses of L-Ann once a week at 4 mg/ml was 37 days while mice receiving vehicle lived only 14 days (p=0.0002). Different doses and administration schedules of [Annamycin] were tested in an effort to maximize survival benefits. In summary [Annamycin] is effective in AML, demonstrating significant activity in both in vitro and in vivo mouse models with a distinct pattern of intracellular uptake and organ distribution using a once a week schedule. This suggests that [Annamycin] with this profile, including a lack of cardiotoxicity and activity against [doxorubicin] resistant tumors, may be an advantageous approach in the treatment of AML."

Merck Announces Third-Quarter 2019 Financial Results

On October 29, 2019 Merck (NYSE: MRK), known as MSD outside the United States and Canada, reported financial results for the third quarter of 2019 (Press release, Merck & Co, OCT 29, 2019, View Source [SID1234549977]).

"We achieved another quarter of strong revenue and earnings growth as we continue to realize the benefits of our sustained investment in research and development and our focus on commercial execution," said Kenneth C. Frazier, chairman and chief executive officer, Merck. "We are confident that the investments we are making now will allow us to convert cutting-edge science into medicines and vaccines of great benefit to patients and value to shareholders."

GAAP (generally accepted accounting principles) earnings per share assuming dilution (EPS) were $0.74 for the third quarter of 2019. Non-GAAP EPS of $1.51 for the third quarter of 2019 excludes a $982 million charge for the acquisition of Peloton Therapeutics, Inc. (Peloton), a $612 million pretax intangible asset impairment charge, other acquisition- and divestiture-related costs, restructuring costs and certain other items. Year-to-date results can be found in the attached tables.

Pipeline Highlights

Oncology

Merck continued to advance the development programs for KEYTRUDA (pembrolizumab), the company’s anti-PD-1 therapy; Lynparza (olaparib), a PARP inhibitor being co-developed and co-commercialized with AstraZeneca; and Lenvima (lenvatinib mesylate), an orally available tyrosine kinase inhibitor being co-developed and co-commercialized with Eisai Co., Ltd. (Eisai).

KEYTRUDA

·Merck announced the following regulatory milestones for KEYTRUDA:

Approval in China as monotherapy for the first-line treatment of patients with locally advanced or metastatic non-small cell lung cancer (NSCLC) whose tumors express PD-L1 based on overall survival results from the KEYNOTE-042 trial. KEYTRUDA is now the first anti-PD-1 therapy approved in China as both monotherapy and in combination with chemotherapy for the first-line treatment of NSCLC;

1Net income attributable to Merck & Co., Inc.
2Merck is providing certain 2019 and 2018 non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s results and permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. Senior management’s annual compensation is derived in part using non-GAAP income and non-GAAP EPS. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP. For a description of the items, see Table 2a attached to this release.

Approval in Europe in combination with axitinib for the first-line treatment of advanced renal cell carcinoma (RCC) across all International Metastatic RCC Database Consortium (IMDC) risk groups based on overall survival results from the KEYNOTE-426 trial;

Approval in the United States by the Food and Drug Administration (FDA) as monotherapy for the treatment of patients with recurrent locally advanced or metastatic squamous cell carcinoma of the esophagus whose tumors express PD-L1 (Combined Positive Score [CPS] > 10) with disease progression after one or more prior lines of therapy based on the results from the KEYNOTE-181 and KEYNOTE-180 trials;

Adoption of a positive opinion by the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) for two regimens of KEYTRUDA, as monotherapy or in combination with platinum and 5-fluorouracil (5-FU) chemotherapy, for the first-line treatment of metastatic or unresectable recurrent head and neck squamous cell carcinoma (HNSCC) in adults whose tumors express PD-L1 with a CPS ≥1 based on data from the KEYNOTE-048 trial; and

Filing acceptance by the FDA for a supplemental Biologics License Application (sBLA) seeking use of KEYTRUDA for the treatment of patients with recurrent and/or metastatic cutaneous squamous cell carcinoma (cSCC) that is not curable by surgery or radiation. The FDA has set a PDUFA date of June 29, 2020.

·Merck presented results from the pivotal neoadjuvant/adjuvant Phase 3 KEYNOTE-522 trial in patients with early-stage triple-negative breast cancer (TNBC), the first randomized trial of an anti-PD-1 therapy in this setting, at the 2019 European Society for Medical Oncology (ESMO) (Free ESMO Whitepaper) Congress. Interim results from the neoadjuvant phase showed the combination of KEYTRUDA plus chemotherapy resulted in a statistically significant increase in pathological complete response versus chemotherapy in patients with early-stage TNBC.

·Merck presented first-time results of a pooled analysis of three randomized KEYNOTE studies (KEYNOTE-189, KEYNOTE-407 and KEYNOTE-021 [Cohort G]) evaluating KEYTRUDA in combination with chemotherapy in advanced NSCLC in which the combination regimen demonstrated an improvement in overall survival among newly diagnosed patients whose tumors do not express PD-L1. The data were presented at the IASLC 2019 World Conference on Lung Cancer.

Lynparza

·Merck and AstraZeneca presented results from the Phase 3 PROfound trial in patients with metastatic castration-resistant prostate cancer (mCRPC) who have a mutation in their homologous recombination repair (HRR) genes and whose disease has progressed on prior treatment with new hormonal agent treatments at the 2019 ESMO (Free ESMO Whitepaper) Congress. In this study, Lynparza improved radiographic progression-free survival versus standard of care in BRCA1/2 or ATM-mutated tumors as well as reduced the risk of disease progression or death in tumors with mutations in other genes associated with HRR.

·Merck and AstraZeneca also presented results from the Phase 3 PAOLA-1 trial at the 2019 ESMO (Free ESMO Whitepaper) Congress, in which Lynparza added to bevacizumab reduced the risk of disease progression or death (41%) in the first-line maintenance setting for patients with advanced ovarian cancer who had a complete or partial response to platinum-based chemotherapy and bevacizumab.

·Merck and AstraZeneca received filing submission acceptances from the FDA and EMA for the use of Lynparza in BRCAm pancreatic cancer based on results from the Phase 3 POLO trial. A decision by the FDA is expected in the fourth quarter of 2019 and from the EMA in the second half of 2020.

Lenvima

Merck and Eisai announced accelerated FDA approval of the combination of KEYTRUDA and Lenvima for patients with certain types of endometrial carcinoma based on data from the KEYNOTE-146/Study 111, marking the first approval of the combination and the first time an anti-PD-1 therapy is approved in combination with a kinase inhibitor for advanced endometrial carcinoma in the United States. Approval was granted under the FDA’s Real-Time Oncology Review pilot program as well as under a new FDA-initiated program in which the FDA partnered with the Australian and Canadian regulatory bodies to review the application, allowing for simultaneous decisions in all three countries.

Other Pipeline Highlights

Merck announced FDA approval expanding the use of both PIFELTRO (doravirine), in combination with other antiretroviral agents, and DELSTRIGO (doravirine/lamivudine/tenofovir disoproxil fumarate) for the treatment of adult patients with HIV-1 infection who are virologically suppressed (HIV-1 RNA less than 50 copies per mL) on a stable antiretroviral regimen with no history of treatment failure.

Merck announced FDA acceptance of a New Drug Application (NDA) for DIFICID (fidaxomicin) for oral suspension and a supplemental NDA (sNDA) for use of DIFICID tablets and oral suspension for the treatment of Clostridium difficile infections in children aged six months or older. The FDA has set a PDUFA date of Jan. 24, 2020 for both applications.

Merck announced the pivotal Phase 3 RESTORE-IMI 2 trial evaluating RECARBRIO (imipenem, cilastatin and relebactam) for use in adults with hospital-acquired bacterial pneumonia and ventilator-associated bacterial pneumonia (HABP/VABP) met its primary endpoint.

Merck announced that the EMA’s CHMP adopted a positive opinion recommending a conditional marketing authorization for the company’s investigational V920 vaccine, brand name ERVEBO (rVSVΔG-ZEBOV-GP, live), for protection against Ebola Virus Disease caused by Zaire Ebola virus, as well as FDA acceptance and priority review for its Biologics License Application (BLA) for V920. The FDA has set a PDUFA date of March 14, 2020.

Pharmaceutical Revenue

Third-quarter pharmaceutical sales were $11.1 billion, an increase of 15% compared with the third quarter of 2018; excluding the unfavorable effect of foreign exchange, sales grew 16% in the third quarter. The increase was driven primarily by growth in oncology and vaccines, partially offset by the ongoing impacts of the loss of market exclusivity for several products as well as lower sales of JANUVIA (sitagliptin) and JANUMET (sitagliptin and metformin HCI). International pharmaceutical sales represented 54% of total sales in the quarter. Performance in international markets was led by China, which had pharmaceutical sales of $898 million representing growth of 84% compared with the third quarter of 2018, driven by vaccines, primarily GARDASIL [Human Papillomavirus Quadrivalent (Types 6, 11, 16 and 18) Vaccine, Recombinant] and GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant), and oncology. Excluding the unfavorable effect of foreign exchange, pharmaceutical sales in China grew by 90%.

Growth in oncology was largely driven by a $1.2 billion increase in sales for KEYTRUDA to $3.1 billion, reflecting strong momentum from the NSCLC indications as well as continued uptake in other indications, including the recently launched RCC and adjuvant melanoma indications, along with growth from Lynparza and Lenvima.

Growth in vaccines reflects higher sales of GARDASIL and GARDASIL 9, vaccines to prevent certain cancers and other diseases caused by HPV, primarily due to higher demand in Asia Pacific, particularly in China. Also contributing to sales growth was higher demand in Europe, driven primarily by increased vaccination rates for both boys and girls, as well as higher pricing and demand in the United States, partially offset by public sector buying patterns.

In October 2019, the company borrowed doses of GARDASIL 9 from the U.S. Centers for Disease and Control and Prevention’s (CDC) Pediatric Vaccine Stockpile, which will reduce GARDASIL 9 sales in the fourth quarter of 2019 by approximately $120 million. These doses will be allocated to support routine vaccination in the United States and will allow the company to manufacture doses for other parts of the world, including regions where some of the most vulnerable populations live.

Growth in pediatric vaccines was driven by VARIVAX (Varicella Virus Vaccine Live), a vaccine to help prevent chickenpox, and PROQUAD (Measles, Mumps, Rubella and Varicella Virus Vaccine Live), a combination vaccine to help protect against measles, mumps, rubella and varicella, reflecting higher demand and pricing in the United States and higher demand in Europe and Latin America.

Performance in hospital acute care reflects higher demand globally, particularly in the United States, for BRIDION (sugammadex) Injection 100 mg/mL, a medicine for the reversal of neuromuscular blockade induced by rocuronium bromide or vecuronium bromide in adults undergoing surgery; and the ongoing launch of PREVYMIS (letermovir), a medicine for prophylaxis (prevention) of cytomegalovirus (CMV) infection and disease in adult CMV-seropositive recipients of an allogeneic hematopoietic stem cell transplant.

Pharmaceutical sales growth for the quarter was partially offset by the ongoing impacts from the loss of market exclusivity for INVANZ (ertapenem sodium), ZETIA (ezetimibe) and VYTORIN (ezetimibe/simvastatin), CUBICIN (daptomycin) and REMICADE (infliximab). In addition, the decline in sales of JANUVIA and JANUMET reflects continued pricing pressure in the United States, which more than offset higher demand globally.

Animal Health Revenue

Animal Health sales totaled $1.1 billion for the third quarter of 2019, an increase of 10% compared with the third quarter of 2018. Excluding the unfavorable effect from foreign exchange, Animal Health sales grew 12%. Growth in the third quarter was primarily driven by livestock, due to products acquired in the Antelliq acquisition, along with growth from companion animal products, driven largely by higher sales of the BRAVECTO (fluralaner) line of products for parasitic control.

Animal Health segment profits were $423 million in the third quarter of 2019, an increase of 4% compared with $409 million in the third quarter of 2018.3

GAAP Expense, EPS and Related Information

Gross margin was 67.8% for the third quarter of 2019 compared to 66.5% for the third quarter of 2018. The increase in gross margin for the third quarter of 2019 reflects the favorable impacts of a charge in 2018 related to the termination of a collaboration agreement with Samsung Bioepis Co., Ltd. and product mix, partially offset by higher acquisition- and divestiture-related costs, including the impact of a 2019 intangible asset impairment charge, higher amortization of unfavorable manufacturing variances, higher amortization of intangible assets related to collaborations, higher restructuring costs, as well as manufacturing facilities startup costs.

3 Animal Health segment profits are comprised of segment sales, less all cost of sales, as well as selling, general and administrative expenses and research and development costs directly incurred by the segment. For internal management reporting, Merck does not allocate general and administrative expenses not directly incurred by the segment, nor the cost of financing these activities. Separate divisions maintain responsibility for monitoring and managing these costs, including depreciation related to fixed assets utilized by these divisions and, therefore, they are not included in segment profits.

4 Includes expenses for the amortization of intangible assets and purchase accounting adjustments to inventories recognized as a result of acquisitions, intangible asset impairment charges, and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. Also includes integration, transaction and certain other costs related to business acquisitions and divestitures.

Selling, general and administrative expenses were $2.6 billion in the third quarter of 2019, a 6% increase compared to the third quarter of 2018. The increase primarily reflects higher promotion and administrative costs primarily in support of strategic brands, and higher acquisition- and divestiture-related costs, partially offset by the favorable effects of foreign exchange.

Research and development (R&D) expenses were $3.2 billion in the third quarter of 2019, an increase of 55% compared with the third quarter of 2018. The increase was driven primarily by a $982 million charge recorded in the third quarter of 2019 for the acquisition of Peloton coupled with higher expenses related to clinical development and increased investment in discovery research and early drug development.

Other (income) expense, net, was $35 million of expense in the third quarter of 2019 compared to $172 million of income in the third quarter of 2018 primarily reflecting lower income from investments in equity securities and higher net interest expense.

The effective income tax rate of 18.7% for the third quarter of 2019 includes the unfavorable impact of the charge for the acquisition of Peloton for which no tax benefit was recognized and the favorable impact of product mix.

GAAP EPS was $0.74 for the third quarter of 2019 compared with $0.73 for the third quarter of 2018.

Non-GAAP Expense, EPS and Related Information

The non-GAAP gross margin was 75.9% for the third quarter of 2019 compared to 76.7% for the third quarter of 2018. The decrease in non-GAAP gross margin primarily reflects higher amortization of unfavorable manufacturing variances, higher amortization of intangible assets related to collaborations, as well as manufacturing facilities startup costs.

Non-GAAP selling, general and administrative expenses were $2.6 billion in the third quarter of 2019, a 5% increase compared to the third quarter of 2018. The increase reflects higher promotion and administrative costs primarily in support of strategic brands, partially offset by the favorable effects of foreign exchange.

Non-GAAP R&D expenses were $2.2 billion in the third quarter of 2019, a 7% increase compared to the third quarter of 2018. The increase primarily reflects higher expenses related to clinical development and increased investment in discovery research and early drug development.

Non-GAAP other (income) expense, net, was $29 million of expense in the third quarter of 2019 compared to $162 million of income in the third quarter of 2018 primarily reflecting lower income from investments in equity securities and higher net interest expense.

The non-GAAP effective income tax rate of 15.7% for the third quarter of 2019 reflects the favorable impact of product mix.

Non-GAAP EPS was $1.51 for the third quarter of 2019 compared with $1.19 for the third quarter of 2018.

Financial Outlook

Merck narrowed and raised its full-year 2019 revenue range to be between $46.5 billion and $47.0 billion, including both the impact of the GARDASIL 9 stockpile borrowing noted above and a negative impact from foreign exchange of approximately 2% at mid-October exchange rates.

Merck reduced its expected full-year GAAP effective tax rate to approximately 16.5% and its expected full-year non-GAAP effective tax rate to approximately 17.5%. These reductions are primarily attributable to favorable product mix.

5 Represents the difference between calculated GAAP EPS and calculated non-GAAP EPS, which may be different than the amount calculated by dividing the impact of the excluded items by the weighted-average shares for the period.

Earnings Conference Call

Investors, journalists and the general public may access a live audio webcast of the call today at 8:00 a.m. EDT on Merck’s website at View Source Institutional investors and analysts can participate in the call by dialing (706) 758-9927 or (877) 381-5782 and using ID code number 5635157. Members of the media are invited to monitor the call by dialing (706) 758-9928 or (800) 399-7917 and using ID code number 5635157. Journalists who wish to ask questions are requested to contact a member of Merck’s Media Relations team at the conclusion of the call.

6 Includes the estimated tax impact on the reconciling items. In addition, includes a $360 million net tax benefit related to the settlement of certain federal income tax matters and a $67 million tax charge related to the finalization of treasury regulations for the Tax Cuts and Jobs Act of 2017.

Lantern Pharma Selects Reprocell Inc. to Provide Preclinical Screening and Biomarker Discovery Services for Portfolio of Targeted Oncology Drugs

On October 29, 2019 Lantern Pharma, a clinical stage oncology biotech leveraging A.I., machine learning (ML) and genomics, reported that it has selected Reprocell to provide preclinical screening and drug sensitivity work for its portfolio of oncology drugs (Press release, Lantern Pharma, OCT 29, 2019, View Source;utm_medium=rss&utm_campaign=lantern-pharma-selects-reprocell-inc-to-provide-preclinical-screening-and-biomarker-discovery-services-for-portfolio-of-targeted-oncology-drugs [SID1234549976]).

The collaboration is designed to obtain millions of data points using panels of unique and genetically edited cell lines from various tumors. The data generated from these studies will help Lantern’s AI platform to generate the biological and genetic basis for drug positioning and maximum drug efficacy. Lantern believes this will help bring oncology therapies to patients more efficiently and affordably than traditional R&D efforts.

These collaborative studies will help demonstrate the tremendous potential for patient stratification for cancer therapies. Following the acquisition of data on cell line panels, Reprocell and Lantern will continue to develop subsequent models including 3D, organoid, and PDX models in the drugs journey from preclinical to clinical stages.

"We are pleased to announce this partnership with Reprocell, a relationship we believe will fuel innovation founded on our mutual abilities to leverage highly advanced cell biology data and rapid A.I.-based machine learning to draw relevant and unique conclusions related to drug development," said Panna Sharma, CEO of Lantern Pharma. "We anticipate this collaboration resulting in a clear vision of how to leverage the initial screening of efficacy of our active compounds against a variety of tumors, and how that data can inform personalized treatment decisions for patients."