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Zymeworks Reports Financial Results for the Third Quarter of 2018

On November 6, 2018 Zymeworks Inc. (NYSE/TSX: ZYME), a clinical-stage biopharmaceutical company developing multifunctional therapeutics, reported financial results for the third quarter ended September 30, 2018 (Press release, Zymeworks, NOV 6, 2018, View Source [SID1234530768]).

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"We continue to expand our business with our seventh pharmaceutical partner, LEO Pharma, recently entering into a strategic collaboration with Zymeworks," said Ali Tehrani, Ph.D., Zymeworks’ President & CEO. "Importantly, this deal represents the evolving structure of our partnerships to include collaborations that provide potential assets for pipeline expansion in new disease areas, as well as significant royalty participation."

Dr. Tehrani continued, "In addition, results from the Phase 1 study for ZW25 will be presented in a plenary session at an upcoming European oncology conference later this month, highlighting new and updated data in gastric and other HER2-expressing cancers, which support our fast-to-market single agent registrational strategy. We are also on track to file an IND for ZW49, our second product candidate, by year end and plan to initiate a Phase 1 study in early 2019."

Recent Business Highlights

Zymeworks and LEO entered into a licensing and research collaboration to generate bispecific antibodies targeting cytokine-receptor pathways with Zymeworks’ Azymetric, EFECT, and antibody generation platforms. The deal expands Zymeworks’ therapeutic reach into new disease areas beyond oncology with potential applications in dermatology, inflammation, and autoimmunity and includes up to US$480 million in upfront and potential milestone payments, in addition to royalties. LEO obtains rights to two bispecifics for dermatology and Zymeworks maintains rights in all other therapeutic areas.

New ZW25 data will be presented at the 30th EORTC-NCI-AACR (Free EORTC-NCI-AACR Whitepaper) symposium in a plenary session by Dr. Murali Beeram, START, San Antonio, TX, on November 14, 2018. Ongoing clinical activity and durability in gastric and tumor-agnostic cohorts will be highlighted, including new patients and data from patients continuing on study since the last data update.

Anthony (Tony) Polverino, Ph.D., joined Zymeworks as Executive Vice President of Early Development and Chief Scientific Officer. With an extensive background in drug discovery and development, including cancer biology and immunotherapy, Dr. Polverino, a former Kite Pharma and Amgen executive, will play a key role in driving Zymeworks’ R&D strategy and the advancement of product candidates from discovery research through translational research/early development.

Zymeworks hosted an R&D Briefing featuring the clinical development strategy of the Company’s lead clinical candidate, ZW25, as well as differentiating IND-enabling studies for its second product candidate, ZW49. Zymeworks also showcased the depth of its ADC platform and selected immuno-oncology programs from its maturing multispecific pipeline.

An IND-submission milestone was achieved in the Lilly collaboration. Eli Lilly is Zymeworks’ first pharmaceutical partner to submit an IND application to the U.S. Food

and Drug Administration (FDA) for a bispecific antibody enabled by Zymeworks’ Azymetric platform.

Financial Results for the Three Months Ended September 30, 2018

Revenue for the three months ended September 30, 2018 was $2.1 million as compared to $0.1 million in the same period in 2017. The change between the two periods was primarily due to a $2.0 million development milestone upon Lilly’s submission of an IND.

For the three months ended September 30, 2018, research and development expenditures were $14.1 million as compared to $11.5 million for the same period in the prior year. The change between the two periods was primarily due to an increase in clinical and drug manufacturing costs for ZW25, as well as an increase in other research and development activities.

General and administrative expenses were $7.5 million for the three months ended September 30, 2018, and $5.3 million for the same period in 2017, primarily due to an increase in non-cash liability classified equity adjustments and stock-based compensation, as well as other increases in compensation and professional fees associated with year-on-year growth following the Company’s initial public offering in 2017.

Non-cash charges for the three months ended September 30, 2018 included $1.8 million ($1.3 million in G&A and $0.5 million in R&D) related to the quarterly mark-to-market revaluation of liability classified equity adjustments (attributed to the accounting treatment of historical stock-based compensation in both Canadian and US dollars) and stock-based compensation.

The net loss for the three months ended September 30, 2018 was $18.8 million as compared to $16.2 million for the same period in 2017. Zymeworks expects R&D expenditures to increase over time due to the ongoing development of product candidates and other clinical, preclinical, and regulatory activities. Additionally, Zymeworks expects to continue receiving revenue from its existing and future strategic partnerships, including technology access fees and milestone-based payments. However, Zymeworks’ ability to receive these payments is dependent upon either Zymeworks or its collaborators successfully completing specified research and development activities.

As of September 30, 2018, Zymeworks had $150.0 million in cash and cash equivalents and short-term investments.

Personalis, Inc. to Present New Data at the Society for Immunotherapy of Cancer’s (SITC) 33RD Annual Meeting

On November 6, 2018 Personalis, Inc., a provider of advanced genomic sequencing and analytics for immuno-oncology, reported that the company, along with one of their collaborators, Dr. Sekwon Jang of the Inova Cancer Center, will present new data at the upcoming Society for Immunotherapy of Cancer (SITC) (Free SITC Whitepaper)’s (SITC) (Free SITC Whitepaper) 33rd Annual Meeting, taking place in Washington, D.C., November 9-11, 2018 (Press release, Personalis, NOV 6, 2018, View Source [SID1234530767]).

Following is a list of abstracts that will be presented at the meeting.

Rapid Oral Abstracts

Session ID Title & Presenter Day & Time Location
Rapid Oral Abstracts Molecular profiling of anti-PD-1 treated melanoma patients reveals importance of assessing neoantigen burden and tumor escape mechanisms for clinical treatment
Presenter: Sekwon Jang, MD
Director, Melanoma and Cutaneous Oncology Therapeutics and Research
Inova Melanoma and Skin Cancer Center

November 9:
1:40 PM

Poster section
12
Scientific Poster Presentations

Poster Number Title & Presenter Day & Time Location
P13

Molecular profiling of anti-PD-1 treated melanoma patients reveals importance of assessing neoantigen burden and tumor escape mechanisms for clinical treatment
Presenter: Charles W. Abbott, PhD

November 9
12:45pm-2:15pm and 6:30pm-8:00pm

Hall E
P151 Improving neoantigen identification for therapeutic and diagnostic use in immuno-oncology using mass spectrometry and machine learning
Presenter: Sean M. Boyle, PhD

November 9
12:45pm-2:15pm and 6:30pm-8:00pm

Hall E
P78 More sensitive identification of T-cell receptor beta rearrangements with an augmented transcriptome method
Presenter: Eric Levy, PhD

November 10
12:20pm-1:50pm and 7:00pm-8:30pm

Hall E
Personalis will also be exhibiting during the conference (Booth #617). Representatives will be available to answer questions about the company’s cancer immunogenomics services.

Exelixis to Present at the Stifel 2018 Healthcare Conference on November 13, 2018

On November 6, 2018 Exelixis, Inc. (NASDAQ: EXEL) reported that Michael M. Morrissey, Ph.D., the company’s President and Chief Executive Officer, will provide an overview of the company at the Stifel 2018 Healthcare Conference taking place November 13-14 in New York, NY (Press release, Exelixis, NOV 6, 2018, View Source;p=RssLanding&cat=news&id=2375655 [SID1234530765]). The Exelixis presentation is scheduled for 10:15 AM EST / 7:15 AM PST on Tuesday, November 13, 2018.

To access the webcast link, log onto www.exelixis.com and proceed to the News & Events / Event Calendar page under the Investors & Media heading. Please connect to the company’s website at least 15 minutes prior to the presentation to ensure adequate time for any software download that may be required to listen to the webcast. A replay will also be available at the same location for 14 days.

Diplomat Announces 3rd Quarter Financial Results

On November 6, 2018 Diplomat Pharmacy, Inc. (NYSE: DPLO), the nation’s largest independent provider of specialty pharmacy services, reported financial results for the quarter ended September 30, 2018 (Press release, Diplomat Speciality Pharmacy, NOV 6, 2018, View Source [SID1234530763]). All comparisons, unless otherwise noted, are to the quarter ended September 30, 2017. Prior period financials have been recast to include certain direct expenses as part of cost of sales instead of selling, general and administrative ("SG&A") expense for our specialty segment. This change is a reclassification only and has no impact on overall results.

Third Quarter 2018 Highlights include:

Revenue of $1,373 million, compared to $1,125 million, an increase of 22%
Specialty segment revenue of $1,212 million, compared to $1,125 million
PBM segment revenue of $170 million, which was not part of the business in the prior year period
Specialty segment total prescriptions dispensed of 230,000, compared to 222,000
PBM segment total volume, adjusted to 30-day equivalent, of 1,931,000
Gross margin of 6.8% versus 5.8%
Specialty segment gross margin of 5.5% versus 5.8%
PBM segment gross margin of 15.5%
EPS of $0.00 per diluted common share versus $0.01
Adjusted EBITDA of $41.9 million, compared to $23.2 million
Adjusted EBITDA margin of 3.1% versus 2.1%
Net cash used in operating activities was $33.4 million, compared to net cash provided by operating activities of $38.3 million
Net Debt, including contingent consideration, increased to $646.7 million, from $609.2 million at June 30, 2018
Brian Griffin, Chairman and CEO of Diplomat, commented, "Third quarter results were solid as we continue to successfully execute on our growth plan. Results were driven by strong Specialty segment growth and PBM performance. We recently opened our new state-of-the-art distribution and call center facility in Chandler, Arizona, furthering our efforts to provide the highest quality patient care nationwide. Every day we put our patients first, while at the same time investing in initiatives to drive further growth and productivity."

Third Quarter Financial Summary:

Revenue for the third quarter of 2018 was $1,373 million, compared to $1,125 million in the third quarter of 2017, an increase of $248 million or 22%. Revenue was comprised of $1,212 million and $170 million from our Specialty segment and our Pharmacy Benefit Management ("PBM") segment, respectively. The increase in our Specialty segment was driven by manufacturer price increases, approximately $10 million from our recent acquisitions, access to dispense drugs that were new in the past year and increased volume due to both payor and physician relationships. These increases were partially offset by a decrease in hepatitis C business versus the prior year period and reimbursement compression.

Gross profit in the third quarter of 2018 was $93.4 million and generated a 6.8% gross margin, compared to $65.1 million gross profit and a 5.8% gross margin in the third quarter of 2017. Gross profit was comprised of $67.0 million and $26.3 million from our Specialty segment and PBM segment, respectively. The gross margin increase in the quarter was primarily due to the impact of our PBM acquisitions, partially offset by reimbursement compression in our Specialty segment.

SG&A expenses for the third quarter of 2018 were $83.4 million, an increase of $20.6 million, compared to $62.8 million in the third quarter of 2017. This increase is primarily driven by an $11.0 million increase in employee cost, including employee cost for our acquired entities and a $4.0 million increase in share-based compensation. Also contributing to the SG&A expense increase was a $7.0 million increase in amortization expense from definite-lived intangible assets, inclusive of capitalized software for internal use, associated with our acquired entities. We also experienced increases in other SG&A expenses; including, rent due to the addition of our Chandler, Arizona facility, travel, consulting and professional fees, as well as other miscellaneous expenses. These increases were partially offset by a $2.4 million decrease in acquisition related expenses.

Net income attributable to Diplomat for the third quarter of 2018 was $0.2 million compared to $1.0 million in the third quarter of 2017. This decrease was primarily driven by an $8.1 million increase in interest expense due to a significant increase in outstanding debt to fund our PBM acquisitions, partially offset by a $7.6 million increase in income from operations. Adjusted EBITDA for the third quarter of 2018 was $41.9 million compared to $23.2 million in the third quarter of 2017, an increase of $18.7 million.

Earnings per share for the third quarter of 2018 was $0.00 per basic/diluted common share, compared to $0.01 per basic/diluted common share for the third quarter of 2017.

2018 Financial Outlook

For the full-year 2018, we are updating our previous financial guidance:

Revenue between $5.5 and $5.7 billion, versus the previous range of $5.5 and $5.9 billion
Net (loss) income attributable to Diplomat between $(7.5) and $2.6 million, versus the previous range of $(11.0) and $0.5 million
Adjusted EBITDA between $164 and $170 million, no change to previous range
Diluted EPS between $(0.10) and $0.03, versus the previous range of $(0.15) and $0.01
Our EPS expectations assume approximately 74,300,000 weighted average common shares outstanding on a diluted basis and a tax rate of (10)% and 40% versus (5)% and 32%, for the low- and high-end of the range, respectively, for the full year 2018, each of which could differ materially.

Earnings Conference Call Information

As previously announced, the Company will hold a conference call to discuss its third quarter performance this evening, November 6, 2018, at 5:00 p.m. Eastern Time. Shareholders and interested participants may listen to a live broadcast of the conference call by dialing 833-286-5805 (647-689-4450 for international callers) and referencing participant code 7553049 approximately 15 minutes prior to the call. A live webcast of the conference call and associated slide presentation will be available on the investor relations section of the Company’s website for approximately 90 days at ir.diplomat.is.

Exicure, Inc. Provides Update on Corporate Progress and Third Quarter 2018 Financial Results

On November 6, 2018 Exicure, Inc. (OTCQB:XCUR), the pioneer in gene regulatory and immunotherapeutic drugs utilizing three-dimensional, spherical nucleic acid (SNA) constructs, reported financial results for the third quarter ended September 30, 2018, and provided an update on corporate progress (Press release, Exicure, NOV 6, 2018, View Source;p=RssLanding&cat=news&id=2375500 [SID1234530761]).

"During the quarter, we made progress in our clinical program in immuno-oncology while expanding our preclinical data in a growing number of disease models," said Dr. David Giljohann, Chief Executive Officer of Exicure. "The FDA informed us that our Phase1b/2 clinical trial in immuno-oncology may proceed. We also completed patient dosing in a Phase1 trial for Exicure’s lead anti-inflammatory compound. Additionally, the Exicure team continues to develop promising preclinical data in neurology, as well as demonstrated the preclinical delivery of our platform in the gastrointestinal tract. All of this work supports a core strategic objective of developing our digital medicines platform in oncology, genetically defined disorders, and inflammatory disease," added Dr. Giljohann.

Corporate Progress

Announced launch of a Phase1b/2 trial for AST-008, Exicure’s TLR9 agonist drug candidate designed for immuno-oncology applications. The IND for AST-008 has been opened by the FDA and we have been informed by the FDA that our proposed Phase1b/2 trial may proceed. We expect patient dosing to begin late this year.
Completed the Phase 1 clinical trial of AST-008 which demonstrated the desired highly potent immune system activation without serious adverse events or dose limiting toxicity.
Completed patient dosing in the Phase 1 clinical trial of XCUR17, our clinical stage anti-inflammatory drug candidate being tested in psoriasis. We expect topline results in 2018.
Presented data at the Oligonucleotide Therapeutics Society meeting showing the distribution and therapeutic efficacy of Exicure’s technology through oral delivery to the GI tract.
Developed preclinical bio-distribution data of Exicure’s platform after intrathecal injection, demonstrating a favorable distribution profile in the CNS, and enabling the potential expansion of the Exicure platform into the central nervous system.
Raised approximately $22.0 million in gross proceeds at a per share price of $4.50 in a private placement offering.
Clinical Updates

AST-008: AST-008 is an SNA consisting of toll-like receptor 9 (TLR9) agonists designed for immuno-oncology applications. The Phase 1 clinical trial of AST-008 was completed during the quarter and demonstrated our desired highly potent immune system activation without serious adverse events or dose limiting toxicity. The IND for AST-008 has been opened by the FDA and we have been informed that our proposed Phase1b/2 trial may proceed. We expect to dose the first patient late this year.

XCUR17: XCUR17 is an antisense SNA that is designed to target the mRNA encoding IL-17RA. In our Phase 1 trial, XCUR17 is being tested in a microplaque study in patients with mild to moderate psoriasis. We have completed patient dosing and expect to report topline results late in 2018.

Third Quarter 2018 Financial Results and Financial Guidance

Cash Position: As of September 30, 2018, Exicure had cash and cash equivalents of $32.4 million compared to $25.8 million as of December 31, 2017.

Research and Development (R&D) Expenses: R&D expense was $4.0 million for the three months ended September 30, 2018 and $3.1 million for the three months ended September 30, 2017, an increase of $0.9 million, or 28%. The increase in R&D expense of $0.9 million was primarily due to higher employee-related expenses of $0.4 million, higher clinical development programs expense of $0.3 million, and higher platform and discovery-related expense of $0.2 million.

General and Administrative (G&A) Expenses: General and administrative expense was $1.9 million for the three months ended September 30, 2018 and $1.3 million for the three months ended September 30, 2017, an increase of $0.6 million, or 51%. This increase was due to higher costs associated with being a public company of $0.3 million, including higher expense for investor and public relations, director and officer insurance, and transfer agent, over the counter and other regulatory compliance related matters, as well as higher legal costs of $0.2 million mostly related to 2018 financing activities, and higher compensation and related expense of $0.1 million associated with salary increases.

Net Loss: Net loss was $5.3 million for the quarter ended September 30, 2018, compared to net loss of $1.9 million for the quarter ended September 30, 2017. The $3.4 million increase in net loss was due principally to a decrease in revenue of $2.4 million that mostly reflects the absence of revenue recognized in the prior period related to the amortization of the upfront payment, and certain reimbursable R&D activities pursuant to a research collaboration, option and license agreement. In addition, we had an increase in Other income of $0.5 million principally due to the fair value adjustment of our common stock warrant liability offsetting the increases in R&D and G&A discussed above.

Cash Runway Guidance: Exicure believes that, based on its current operating plans and estimates of expenses, as of the date of this press release, its existing cash and cash equivalents as of September 30, 2018, will be sufficient to meet its anticipated cash requirements into the first quarter of 2020.