On February 25, 2016 Peregrine Pharmaceuticals, Inc. (NASDAQ: PPHM) (NASDAQ: PPHMP), a biopharmaceutical company focused on developing therapeutics to stimulate the body’s immune system to fight cancer, that it is discontinuing the company’s Phase III SUNRISE trial of bavituximab in patients with previously treated locally advanced or metastatic non-squamous non-small cell lung cancer (NSCLC) (Filing, 8-K, Peregrine Pharmaceuticals, FEB 25, 2016, View Source [SID:1234509235]). The decision to stop the trial was based on the recommendation of the study’s Independent Data Monitoring Committee (IDMC) following a pre-specified interim analysis performed after 33% of targeted overall events (patient deaths) in the study were reached. Results of the analysis demonstrated that the bavituximab plus docetaxel group did not show a sufficient improvement in overall survival as compared to the docetaxel group to warrant continuation of the study. The interim analysis showed that the bavituximab combination group is performing as expected according to the original trial assumptions in terms of overall survival, while the docetaxel group is dramatically outperforming overall survival expectations based on the original trial assumptions and as compared to recently published studies.

"Let me start by taking this opportunity to thank all of the patients, their families, and the physicians who participated in the SUNRISE trial. While we are deeply disappointed by this early outcome from the SUNRISE trial, we plan to take a deliberate and detailed approach in reviewing and verifying all available data from the trial in order to understand what subgroups or other patient characteristics may have impacted the performance of the study. While we perform this analysis, we plan to put our other chemotherapy combination studies on hold until we have a clear understanding of the SUNRISE study results," said Steven W. King, president and chief executive officer of Peregrine. "While this is an unexpected and disappointing setback for the bavituximab chemotherapy combination clinical program, we have not seen anything in this trial result that diminishes our enthusiasm for advancing our immuno-oncology (I-O) combination trials. The I-O combination studies are based on different mechanistic synergies that are clearly separate from the chemotherapy combination being evaluated in the SUNRISE study. In addition, it is important to note that in no way do these results have any impact on our contract manufacturing business conducted through our wholly owned subsidiary, Avid Bioservices. This business has shown consistent revenue growth and has been instrumental in maintaining a strong cash position and our plan is to continue growing this business."

As of February 1, 2016, Avid Bioservices had a revenue backlog in excess of $58 million under committed contracts from existing clients. In addition, Peregrine had $67.5 million in cash and equivalents as of January 31, 2016.

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On February 25, 2016 Keryx Biopharmaceuticals, Inc. (Nasdaq:KERX), a biopharmaceutical company focused on bringing innovative medicines to market for people with renal disease, reported its financial results for the fourth quarter and year ended December 31, 2015 (Press release, Keryx Biopharmaceuticals, FEB 25, 2016, View Source;p=RssLanding&cat=news&id=2143160 [SID:1234509231]). The company also reviewed its commercialization progress with Auryxia (ferric citrate), upcoming milestones and selected 2016 financial guidance.

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"As we enter 2016, the fundamentals of Auryxia are solid, and we plan to build on that foundation to advance our launch in the U.S.," said Greg Madison, chief executive officer of Keryx. "Importantly, the data readout expected in early second quarter from the ferric citrate phase 3 label expansion trial will be an important marker of our efforts to help people with pre-dialysis chronic kidney disease. Specifically, we believe that ferric citrate – which, through its novel mechanism of action, delivers iron orally through the body’s natural absorption process – could be the first FDA-approved oral medicine to treat iron deficiency anemia (IDA) in this patient population."

FOURTH QUARTER 2015 AND RECENT BUSINESS HIGHLIGHTS

Auryxia (ferric citrate) Commercialization

Auryxia net U.S. product sales for the fourth quarter of 2015 were $4.8 million, based on approximately 7,850 prescriptions, an increase of 46 percent from the third quarter. For the full year 2015, Auryxia net U.S. product sales were $10.1 million, representing greater than 18,000 prescriptions.
Cumulative target physicians who have written a prescription for Auryxia increased more than 25 percent from the third quarter of 2015.
Keryx completed its sales force expansion and now will have 95 sales representatives calling on target prescribers. The expansion enables increased reach and frequency of contact with physicians, dieticians and the entire dialysis care team.

Product Expansion Opportunities

Pivotal Phase 3 Trial Aimed at Increasing the Number of Adults Eligible for Treatment with Ferric Citrate

The 24-week pivotal phase 3 trial evaluating ferric citrate for the treatment of IDA in patients with stages 3-5 CKD completed in January, as planned. Early in the second quarter of 2016, Keryx expects to announce topline safety and efficacy results. If the results are successful, Keryx intends to submit a regulatory application for approval to the U.S. FDA in the third quarter of 2016, and submit the data for presentation at a fourth quarter 2016 medical conference.

Potential Geographic Expansion

Keryx is seeking potential partners to make Fexeric (ferric citrate) available to patients in Europe.

Fourth Quarter and Year Ended December 31, 2015 Financial Results

"In the fourth quarter of 2015, we strengthened our financial position through a re-alignment of our cost structure and an infusion of capital, which we expect will take the Auryxia franchise to cash flow positive," said Scott Holmes, chief financial officer of Keryx. "For 2016, we expect prescription volume to increase between 20 percent and 35 percent on a sequential quarter basis, ramping as we realize the full impact of our expanded sales force. As we progress through 2016, we are committed to maintaining fiscal discipline, while advancing our business and supporting the continued growth of Auryxia."

At December 31, 2015, the company had cash and cash equivalents of $200.3 million.

Total revenues for the quarter ended December 31, 2015 were approximately $5.8 million, compared to $0.6 million during the same period in 2014. Total revenues for the quarter consisted of Auryxia net U.S. product sales of $4.8 million, and license revenue of $1.0 million associated with royalties received on ferric citrate net sales from Keryx’s Japanese partner. For the year ended 2015, total revenues were $13.7 million, including $10.1 million of Auryxia net U.S. product sales.

Cost of goods sold for the quarter ended December 31, 2015 was $1.1 million. Cost of goods sold for the full year 2015 was $4.5 million, which included $2.6 million related to manufacturing charges incurred as a result of not fully utilizing planned production at certain of the company’s third party manufacturers as reported in the third quarter.

Research and development expenses for the quarter ended December 31, 2015 were $8.0 million compared to $5.8 million during the same period in 2014. The increase was primarily due to an increase in costs associated with our medical affairs efforts in support of Auryxia. For the full year 2015, total research and development expenses were $36.7 million compared to $51.5 million in 2014.

Selling, general and administrative expenses for the quarter ended December 31, 2015 were $21.6 million, as compared to $34.1 million during the same period in 2014. The decrease was related to a $10.5 million decrease in non-cash stock-based compensation expense compared to the prior period, primarily related to expense recognized in connection with the first commercial sale of Auryxia in 2014. For the full year 2015, total selling, general and administrative expenses were $81.4 million compared to $70.1 million in 2014.

Net loss for the fourth quarter ended December 31, 2015 was $37.8 million, or $0.36 per share, compared to a net loss of $40.3 million, or $0.44 per share, for the comparable quarter in 2014. For the full year 2015, net loss was $123.1 million or $1.19 per share compared to a net loss of $111.5 million, or $1.23 per share in 2014.

2016 Financial Guidance

This section contains forward-looking guidance about the financial outlook for Keryx Biopharmaceuticals

Auryxia net U.S. product sales: Keryx expects full year 2016 Auryxia net U.S. product sales to be in the range of $31 to $34 million. The company expects sales to ramp throughout the year, as it realizes the full impact of its expanded sales force.

Cash operating expenses: Keryx reiterated its cash operating expenses in 2016 will be in the range of $87 million to $92 million. Cash operating expense guidance excludes cost of goods sold, license expenses, and other non-cash expenses.*

* Please refer to the section below titled "Use of Non-GAAP Financial Measures" for information about Keryx’s use of non-GAAP financial measures.

On February 25, 2016 Geron Corporation (Nasdaq: GERN) reported financial results for the fourth quarter and year ended December 31, 2015 and recent events (Filing, Q4/Annual, Geron, 2015, FEB 25, 2016, View Source [SID:1234509230]).

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Fourth Quarter and Year-End 2015 Results

For 2015, the company reported net income of $46,000, or $0.00 per share, compared to a net loss of $35.7 million, or $(0.23) per share, for 2014. For the fourth quarter of 2015, the company reported a net loss of $8.5 million, or $(0.05) per share, compared to a net loss of $8.9 million, or $(0.06) per share, for the comparable 2014 period. The company ended 2015 with $146.7 million in cash and investments.

Revenues for 2015 were $36.4 million compared to $1.2 million for 2014. Revenues for the fourth quarter of 2015 were $220,000 compared to $178,000 for the comparable 2014 period. Revenues for 2015 included the full recognition of the $35.0 million upfront payment from Janssen Biotech, Inc. (Janssen) as collaboration revenue upon the company’s transfer of the imetelstat license rights and completion of technology transfer-related activities outlined under the imetelstat collaboration agreement with Janssen in the third quarter of 2015. The upfront cash payment was received in December 2014 and recorded as deferred revenue at that time.

Total operating expenses for 2015 were $36.9 million compared to $37.5 million for 2014. Total operating expenses for the fourth quarter of 2015 were $8.9 million compared to $9.2 million for the comparable 2014 period. Operating expenses for 2015 included restructuring charges of $1.3 million in connection with the company’s organizational resizing announced in March 2015.

Research and development expenses for 2015 were $17.8 million compared to $20.7 million for 2014. Research and development expenses for the fourth quarter of 2015 were $4.0 million compared to $4.4 million for the comparable 2014 period. The decrease in research and development expenses in 2015 compared to 2014 primarily reflects the net result of lower personnel related costs due to the organizational resizing and reduced manufacturing costs for imetelstat drug product, partially offset by higher costs for the clinical development of imetelstat in collaboration with Janssen.

General and administrative expenses for 2015 were $17.8 million compared to $16.8 million for 2014. General and administrative expenses for the fourth quarter of 2015 were $4.9 million compared to $4.8 million for the comparable 2014 period. The increase in general and administrative expenses in 2015 compared to 2014 primarily reflects higher non-cash stock-based compensation expense.

Interest and other income for 2015 was $677,000 compared to $373,000 for 2014. Interest and other income for the fourth quarter of 2015 was $196,000 compared to $100,000 for the comparable 2014 period. The increase in interest and other income for 2015 compared to 2014 primarily reflects higher cash and investment balances with the receipt of the $35.0 million upfront payment from Janssen and higher yields on the company’s marketable securities portfolio.

Company Events

Publications and Presentations

● The New England Journal of Medicine (NEJM) published two papers in which data from clinical studies of two hematologic myeloid malignancies, essential thrombocythemia (ET) and myelofibrosis (MF), suggest imetelstat may have disease-modifying activity by inhibiting the malignant progenitor cell clones responsible for the underlying diseases in a relatively select manner. The papers are available online in the September 3rd issue at www.NEJM.org.

● Three presentations describing clinical and non-clinical data on imetelstat were made at the 57th annual meeting of the American Society of Hematology (ASH) (Free ASH Whitepaper) in December 2015:

○ Telomerase Inhibitor Imetelstat Therapy in Refractory Anemia with Ring Sideroblasts with or without Thrombocytosis (Abstract #55; oral presentation)

Data were presented for safety and efficacy as of the May 10, 2015 data cut. Nine patients with a form of the myelodysplastic syndromes (MDS) known as refractory anemia with ring sideroblasts (MDS-RARS) were enrolled in the study cohort, classified as having either intermediate-1 or intermediate-2 risk disease by the International Prognostic Scoring System (IPSS). Six of nine (66.7%) patients had prior treatment with erythropoiesis stimulating agents (ESAs).

Three of the eight (37.5%) patients who were dependent on red blood cell transfusions at study entry became transfusion independent, defined as not requiring transfusions for at least eight weeks. The median duration of transfusion independence was 28 weeks (range: nine weeks to 37 weeks).

Adverse events were similar in nature to the adverse events reported in the MF clinical study published in the NEJM.

○ Dynamics of Mutations in Patients with ET Treated with Imetelstat (Abstract #57; oral presentation)

Data from further mutational analyses of patient samples from the clinical study in ET showed that imetelstat treatment suppressed allele burdens of multiple gene mutations in addition to the JAK2V617F, CALR and MPL mutations.

○ Activity of the Telomerase Inhibitor GRN163L (Imetelstat) on Acute Myeloblastic Leukemia Blasts Is Enhanced by DNA Methyltransferase Inhibitors Irrespective of TERT Promoter Methylation Status (Abstract #1267; poster presentation)

Data from an in vitro study showed that imetelstat has activity against samples derived from patients with high risk leukemias, and that activity was enhanced by the demethylating agent 5-azacytadine, which is currently used in the treatment of some patients with high risk MDS or acute myeloid leukemia.

Clinical Development by Janssen

● IMbarkTM. In September 2015, the first patient was dosed in a Phase 2 clinical trial to evaluate imetelstat in patients with MF. The trial, referred to as IMbarkTM, will assess the efficacy, safety and tolerability of two dose levels of single-agent imetelstat and is designed to enroll approximately 200 patients (approximately 100 patients per dosing arm) with intermediate-2 or high risk MF, as defined by the Dynamic International Prognostic Scoring System, who have relapsed after or are refractory to Janus Kinase (JAK) inhibitor treatment. Patients will be assigned randomly, on a 1:1 ratio, to one of two dosing arms – 9.4 mg/kg or 4.7 mg/kg every three weeks. Patients will be blinded to the dosing arm assignment. Dose reductions for adverse events are allowed and will follow protocol-specified algorithms. An internal review of data from the trial is planned after approximately 20 patients per arm have been randomized and followed for at least 12 weeks in order to assess the adequacy of one or both of the initial dosing arms. As a result of this internal review, which is expected to occur in the second half of 2016, one or both dosing arms could continue as planned, be stopped or modified, or alternative doses could be selected.

The co-primary efficacy endpoints for IMbarkTM are spleen response rate and symptom response rate. Spleen response rate is defined as the percentage of patients who achieve ≥ 35% reduction in spleen volume from baseline at the Week 24 visit, as measured by imaging scans and assessed at a central imaging facility and by an Independent Review Committee. Symptom response rate is defined as the percentage of patients who have ≥ 50% reduction in Total Symptom Scores from baseline at the Week 24 visit, based on patient-reported outcomes on a modified Myelofibrosis Symptom Assessment Form version 2.0 electronic diary. The primary efficacy analysis of the co-primary endpoints will occur after all treated patients have been followed for at least 24 weeks, and the data cut for this analysis is expected to occur in the second half of 2017. Formal clinical data from this trial is expected to be presented at a medical conference to be determined in the future.

Further information about the trial, including participating medical centers around the world, can be found at View Source

● IMergeTM. In January 2016, the first patient was dosed in a Phase 2/3 clinical trial to evaluate imetelstat in patients with MDS. The trial, referred to as IMergeTM, will evaluate imetelstat in transfusion dependent patients with IPSS Low or Intermediate-1 risk MDS who have relapsed after or are refractory to prior treatment with an ESA.

As designed, the trial consists of two parts, and a total of approximately 200 patients are expected to be enrolled. Part 1 of the trial is planned as a Phase 2, open-label, single-arm design to assess the efficacy and safety of imetelstat. Up to 30 patients are expected to be enrolled in Part 1, all of whom will receive imetelstat and be followed for safety, hematologic improvement and reduction in transfusion requirement. Before proceeding to Part 2, the data from Part 1 must support a positive assessment of the benefit/risk profile of imetelstat in these patients. The internal review of data from Part 1 to support advancing to Part 2 is expected to occur in the second half of 2016. Part 2 of the trial is planned as a Phase 3 double-blind, randomized, placebo-controlled design to compare the efficacy of imetelstat against placebo. Approximately 170 patients are expected to be enrolled in Part 2, who will be assigned randomly, in a 2:1 ratio, to receive either imetelstat or placebo.

The primary efficacy endpoint is designed to be the rate of red blood cell transfusion-independence lasting at least eight weeks, defined as the proportion of patients without any red blood cell transfusion during any consecutive eight weeks since entry to the trial. A primary efficacy analysis is planned to occur 12 months after the last patient is enrolled.

Further information about the trial, including participating medical centers around the world, can be found at View Source

Regulatory Designations

● The United States Food and Drug Administration has granted orphan drug designation to imetelstat for the treatment of MF and for the treatment of MDS. In addition, the European Medicine Agency has granted orphan drug designation to imetelstat for the treatment of MF.

On February 25, 2016 Emergent BioSolutions Inc. (NYSE:EBS) reported financial results for the quarter and twelve months ended December 31, 2015 (Press release, Emergent BioSolutions, FEB 25, 2016, View Source;p=RssLanding&cat=news&id=2143557 [SID:1234509229]).

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2015 FINANCIAL HIGHLIGHTS

Total revenues: Q4 2015 of $168.1 million, +14% Y/Y; twelve months 2015 of $522.8 million, +16% Y/Y;
GAAP net income: Q4 2015 of $33.3 million, or $0.71 per diluted share, +11% Y/Y; twelve months 2015 of $62.9 million, or $1.41 per diluted share, +71% Y/Y;

Adjusted net income: Q4 2015 of $37.5 million, or $0.78 per diluted share, +8% Y/Y; twelve months 2015 of $75.6 million, or $1.60 per diluted share, +40% Y/Y;

EBITDA: Q4 2015 of $58.5 million, or $1.22 per diluted share, +10% Y/Y; twelve months 2015 of $130.1 million, or $2.75 per diluted share, +41% Y/Y; and

Adjusted EBITDA: Q4 2015 of $61.7 million, or $1.28 per diluted share, +7% Y/Y; twelve months 2015 of $137.4 million, or $2.91 per diluted share, +30% Y/Y.

2016 FORECAST:

Full Year: revenue of $600 to $630 million; GAAP net income of $75 to $85 million, non-GAAP adjusted net income of $90 to $100 million, and EBITDA of $150 to $160 million

1Q 2016: revenue of $105 to $120 million

"Our strong fourth quarter in 2015 continued our history of growth over the last three years both financially and operationally. Since 2012, we nearly doubled our revenues to over $520 million, achieved a net income CAGR of 38% and expanded our portfolio to nine products," said Daniel J. Abdun-Nabi, president and chief executive officer of Emergent BioSolutions. "2016 will bring a renewed focus on addressing public health threats as we spin off Aptevo Therapeutics, our biosciences business, and enter our next phase of growth. We will continue to establish ourselves as a market leader with a global impact and work to achieve our vision of protecting and enhancing 50 million lives by 2025."

2015 BUSINESS ACCOMPLISHMENTS

Announced plan to implement tax-free spin-off of Aptevo Therapeutics (the Company’s Biosciences business) into a separate, publicly traded company, targeted for mid-2016;

Launched a new platform technology, Emergard, the Company’s military-grade auto-injector device for chemical threats being sold in international markets;

Received three approvals from the U.S. Food and Drug Administration (FDA):

Expansion of the BioThrax (Anthrax Vaccine Adsorbed) label to include post-exposure prophylaxis (PEP) against anthrax disease; the first vaccine to be licensed using the FDA Animal Rule,

IXINITY, a recombinant factor IX treatment for Hemophilia B, and

Anthrasil, an immune globulin for the treatment for inhalational anthrax.

Secured over $95 million in new multi-year contract and grant funding, including the following:

$20 million in multiple contracts with BARDA to manufacture Ebola monoclonal antibodies, including the Company’s first awarded task order under the Center for Innovation in Advanced Development and Manufacturing program,

A $44 million CDC contract to further supply the strategic national stockpile with the Company’s Vaccinia Immune Globulin product, and

A $31 million BARDA contract for the advanced development of NuThrax (anthrax vaccine adsorbed with CPG 7909 adjuvant), the Company’s next generation anthrax vaccine candidate.

Initiated a Phase 1 clinical trial for MOR209/ES414, an immunotherapeutic protein built on our ADAPTIR platform technology and targeting prostate cancer, which is being developed in collaboration with MorphoSys AG; and

Continued progress towards achieving licensure of Building 55.

2015 FINANCIAL PERFORMANCE

(I) Quarter Ended December 31, 2015 (unaudited)

Revenues

Product Sales

For Q4 2015, product sales were $132.6 million, an increase of 17% as compared to 2014. The increase primarily reflects increased sales of BioThrax during the quarter.

(in millions) Three Months Ended
December 31,
2015 2014 % Change
Product Sales
BioThrax $ 111.9 $ 87.9 27 %
Other biodefense 12.5 14.5 (13 )%
Total Biodefense $ 124.4 $ 102.3 22 %

Total Biosciences $ 8.2 11.0 (25 )%
Total Product Sales $ 132.6 $ 113.4 17 %

Contract Manufacturing

For Q4 2015, revenue from the Company’s contract manufacturing operations was $10.5 million, an increase of 10% as compared to 2014. The increase was primarily due to the timing of fill/finish services to third parties.

Contracts, Grants and Collaborations
For Q4 2015, contracts, grants and collaborations revenue was $24.9 million, unchanged as compared to 2014.

Operating Expenses

Cost of Product Sales and Contract Manufacturing

For Q4 2015, cost of product sales and contract manufacturing was $39.8 million, an increase of 22% as compared to 2014. The increase was primarily attributable to increased sales of BioThrax to the CDC.

Research and Development

For Q4 2015, gross research and development (R&D) expenses were $32.5 million, a decrease of 17% as compared to 2014. The decrease primarily reflects lower contract service costs associated with product candidates and technology platform development activities associated with the Biosciences division.

For Q4 2015, net R&D expenses were $7.6 million, a decrease of 46% as compared to 2014, reflecting a decrease in unfunded development spending in our Biosciences division, including spending on IXINITY, a product that we launched in Q2 2015. Net R&D expenses, which are more representative of the Company’s actual out-of-pocket investment in product development, are calculated as gross research and development expenses less contracts, grants and collaboration revenues.

(in millions) Three Months Ended
December 31,
2015 2014 % Change
Research and Development Expenses (Gross) $ 32.5 $ 39.0 (17 )%
Adjustments:
Contracts, grants and collaborations revenues 24.9 25.0 N/A
Net Research and Development Expenses $ 7.6 $ 14.0 (46 )%

Selling, General and Administrative

For Q4 2015, selling, general and administrative expenses were $46.0 million, an increase of 44% as compared to 2014. The increase was primarily attributable to a one-time $3.5 million reserve for potential write-off of accounts receivable within the Biosciences segment, a charge to write-off certain obsolete fixed assets, and increased information technology costs associated with the implementation of a new ERP system, as well as costs associated with the spin-off of Aptevo Therapeutics and professional services to support the Company’s strategic growth initiatives.

Net Income

For Q4 2015, GAAP net income was $33.3 million, an increase of 11% as compared to 2014. For Q4 2015 and 2014, GAAP net income per diluted share is computed using the if-converted method. This method requires GAAP net income to be adjusted to reflect the impact of interest expense and amortization of debt issuance cost, both net of tax, associated with the Company’s 2.875% Convertible Senior Notes due 2021. As a result, GAAP net income per diluted share for Q4 2015 is adjusted in the amount of $0.9 million, from $33.3 million to $34.2 million, and diluted shares outstanding were 48.1 million. GAAP net income per diluted share for Q4 2014 is adjusted in the amount of $0.6 million, from $30.1 million to $30.7 million, and diluted shares outstanding were 46.4 million.

(II) Twelve Months Ended December 31, 2015 (unaudited)

Revenues

Product Sales

For the twelve months of 2015, product sales were $356.9 million, an increase of 14% as compared to 2014. The increase primarily reflects increased sales of BioThrax in 2015.

(in millions) Twelve Months Ended
December 31,
2015 2014 % Change
Product Sales
BioThrax $ 293.9 $ 245.9 20 %
Other biodefense 35.0 35.9 (3 )%
Total Biodefense $ 328.9 $ 281.8 17 %

Total Biosciences $ 28.0 $ 30.1 (7 )%
Total Product Sales $ 356.9 $ 311.9 14 %

Contract Manufacturing
For the twelve months of 2015, revenue from the Company’s contract manufacturing operations was $43.0 million, an increase of 39% as compared to 2014. The increase was primarily due to a full year of revenues from the Company’s fill/finish facility in Baltimore, plasma based manufacturing from the Company’s Winnipeg facility and contract manufacturing services related to the production of an MVA Ebola vaccine candidate.

Contracts, Grants and Collaborations

For the twelve months of 2015, contracts, grants and collaborations revenue was $122.9 million, an increase of 15% as compared to 2014. The increase was primarily due to development funding for Anthrasil and for our CIADM program.

Operating Expenses

Cost of Product Sales and Contract Manufacturing

For the twelve months of 2015, cost of product sales and contract manufacturing was $124.3 million, an increase of 5% as compared 2014. The increase was primarily attributable to the increase in the number of BioThrax doses delivered to the CDC.

Research and Development

For the twelve months of 2015, gross R&D expenses were $154.0 million, an increase of 2% as compared to 2014. The increase was primarily attributable to higher contract service costs for product candidates and manufacturing development in the Biodefense segment.

Net R&D expenses for the twelve months of 2015 were $31.1 million, a decrease of 29% as compared to 2014, reflecting a decrease in unfunded development spending in our Biosciences division, including spending on IXINITY.

(in millions) Twelve Months Ended
December 31,
2015 2014 % Change
Research and Development Expenses (Gross) $ 154.0 $ 150.8 2 %
Adjustments:
Contracts, grants and collaboration revenues 122.9 107.3 15 %
Net Research and Development Expenses $ 31.1 $ 43.5 (29 )%

Selling, General and Administrative

For the twelve months of 2015, selling, general and administrative expenses were $148.5 million, an increase of 21% as compared to 2014. The increase was primarily attributable to additional post-acquisition selling, general and administrative costs largely associated with the operations acquired in Q1 2014, including IXINITY launch costs, as well as costs associated with the spin-off of Aptevo Therapeutics and costs associated with professional services to support the Company’s strategic growth initiatives.

Net Income

For the twelve months of 2015, GAAP net income was $62.9 million, an increase of 71% as compared to 2014. For the twelve months of 2015 and 2014, GAAP net income per diluted share is computed using the if-converted method. This method requires GAAP net income to be adjusted to reflect the impact of interest expense and amortization of debt issuance cost, both net of tax, associated with the Company’s 2.875% Convertible Senior Notes due 2021. As a result, GAAP net income per diluted share for the twelve months of 2015 is adjusted in the amount of $3.9 million, from $62.9 million to $66.8 million, and diluted shares outstanding were 47.3 million. GAAP net income per diluted share for the twelve months of 2014 is adjusted in the amount of $3.6 million, from $36.7 million to $40.3 million, and diluted shares outstanding were 45.8 million.

2016 FINANCIAL OUTLOOK

(I) Full Year 2016

For the full year of 2016, the Company reaffirms its forecast for total revenues of $600 to $630 million, driven by growth in BioThrax sales of $305 to $320 million, continued domestic and international sales of the other Biodefense division products, and continued robust development funding through contracts and grants revenues. The Company also forecasts full year 2016 GAAP net income of $75 to $85 million, non-GAAP adjusted net income of $90 to $100 million, and EBITDA of $150 to $160 million (see "Reconciliation of GAAP Net Income to Adjusted Net Income and EBITDA" for a definition of terms and a reconciliation table). The Company’s outlook for 2016 includes the impact of a successful spin-off of Aptevo Therapeutics in mid-2016 and continuous delivery of BioThrax to the CDC under an anticipated follow-on, multiyear procurement contract, but does not include any estimates for BioThrax deliveries from Building 55, the Company’s large scale BioThrax manufacturing facility, or any estimates for potential new corporate development or other M&A transactions.

(II) Q1 2016

For the first quarter of 2016, the Company reaffirms its forecast for total revenues of $105 to $120 million.

RECONCILIATION OF GAAP NET INCOME TO ADJUSTED NET INCOME, EBITDA AND ADJUSTED EBITDA

This press release contains three financial measures (Adjusted Net Income, EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), and adjusted EBITDA) that are considered "non-GAAP" financial measures under applicable Securities & Exchange Commission rules and regulations. These non-GAAP financial measures should be considered supplemental to and not a substitute for financial information prepared in accordance with generally accepted accounting principles. The Company’s definition of these non-GAAP measures may differ from similarly titled measures used by others. Adjusted Net Income adjusts for specified items that can be highly variable or difficult to predict, or reflect the non-cash impact of charges resulting from purchase accounting. EBITDA reflects net income excluding the impact of depreciation, amortization, interest expense and provision for income taxes. Adjusted EBITDA also excludes specified items that can be highly variable and the non-cash impact of certain purchase accounting adjustments. The Company views these non-GAAP financial measures as a means to facilitate management’s financial and operational decision-making, including evaluation of the Company’s historical operating results and comparison to competitors’ operating results. These non-GAAP financial measures reflect an additional way of viewing aspects of the Company’s operations that, when viewed with GAAP results and the reconciliations to the corresponding GAAP financial measure, may provide a more complete understanding of factors and trends affecting the Company’s business.

The determination of the amounts that are excluded from these non-GAAP financial measures are a matter of management judgment and depend upon, among other factors, the nature of the underlying expense or income amounts. Because non-GAAP financial measures exclude the effect of items that will increase or decrease the Company’s reported results of operations, management strongly encourages investors to review the Company’s consolidated financial statements and publicly filed reports in their entirety.
Reconciliation of GAAP Net Income to Adjusted Net Income

(in millions, except per share value) Three Months Ended
December 31,
2015 2014 Source
GAAP Net Income $ 33.3 $ 30.1 NA
Adjustments:
Spin-off and acquisition-related costs
(transaction & integration) 2.0 0.6 SG&A
Non-cash amortization charges 2.7 2.3 COGS, SG&A,
Other Income
Impact of purchase accounting on inventory step-up – 1.0 COGS
Restructuring activities 1.2 2.6 SG&A
Tax effect (1.8 ) (2.0 ) NA
Total Adjustments 4.2 4.5 NA
Adjusted Net Income
$
37.5
$
34.6
NA
Adjusted Net Income per Diluted Share $ 0.78 $ 0.75

(in millions, except per share value) Twelve Months Ended
December 31,
2015 2014 Source
GAAP Net Income $ 62.9 $ 36.7 NA
Adjustments:
Spin-off and acquisition-related costs
(transaction & integration) 5.5 8.1 SG&A
Non-cash amortization charges 10.8 9.5 COGS, SG&A,
Other Income
Write-off of syndicated loans – 1.8 Other Income
Impact of purchase accounting on inventory step-up 0.6 3.0 COGS
Restructuring activities 1.2 2.6 SG&A
Tax effect (5.4 ) (7.5 ) NA
Total Adjustments 12.7 17.5 NA
Adjusted Net Income
$
75.6
$
54.2
NA
Adjusted Net Income per Diluted Share $ 1.60 $ 1.18

Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA

(in millions, except per share value) Three Months Ended
December 31,
2015 2014
GAAP Net Income $ 33.3 $ 30.1
Adjustments:
+ Depreciation & Amortization 9.1 7.8
+ Provision For Income Taxes 14.5 14.2
+ Total Interest Expense 1.6 1.2
Total Adjustments 25.2 23.2
EBITDA
$
58.5
$
53.3

EBITDA per Diluted Share $ 1.22 $ 1.15
Additional Adjustments:
+ Spin-off and acquisition-related costs
(transaction & integration) 2.0 0.6
+ Impact of purchase accounting on inventory step-up – 1.0
+ Restructuring activities 1.2 2.6
Total Additional Adjustments 3.2 4.2
Adjusted EBITDA
$
61.7
$
57.5

Adjusted EBITDA per Diluted Share $ 1.28 $ 1.24

(in millions, except per share value) Twelve Months Ended
December 31,
2015 2014
GAAP Net Income $ 62.9 $ 36.7
Adjustments:
+ Depreciation & Amortization 33.8 31.0
+ Provision Income Taxes 26.9 16.3
+ Total Interest Expense 6.5 8.2
Total Adjustments 67.2 55.5
EBITDA
$
130.1
$
92.2

EBITDA per Diluted Share $ 2.75 $ 2.01
Additional Adjustments:
+ Spin-off and acquisition-related costs
(transaction & integration) 5.5 8.1
+ Impact of purchase accounting on inventory step-up 0.6 3.0
+ Restructuring activities 1.2 2.6
Total Additional Adjustments 7.3 13.7
Adjusted EBITDA
$
137.4
$
105.9

Adjusted EBITDA per Diluted Share $ 2.91 $ 2.31

On February 25, 2016 Merrimack Pharmaceuticals, Inc. (Nasdaq: MACK) reported its fourth quarter and full year 2015 financial results (Press release, Merrimack, FEB 25, 2016, View Source [SID:1234509224]). Merrimack will host a live conference call and webcast today, Thursday, February 25 at 4:30 p.m., Eastern time, to provide an update on Merrimack’s progress as well as a summary of these results.

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Investors and the general public are invited to listen to the call by dialing (877) 564-1301 (domestic) or (224) 357-2394 (international) five minutes prior to the start of the call and providing the passcode 43765613. A listen-only webcast of the call can be accessed in the Investors section of Merrimack’s website, investors.merrimack.com, and a replay of the call will be archived there for six weeks following the call.

Key Recent Events

Merrimack’s key recent events include:

Presentation of an updated overall survival analysis of the Phase 3 NAPOLI-1 study of ONIVYDE (irinotecan liposome injection) in combination with fluorouracil (5-FU) and leucovorin that achieved a 63% improvement in 12-month overall survival in patients with post-gemcitabine metastatic pancreatic adenocarcinoma when compared to 5-FU and leucovorin alone at the American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) Gastrointestinal Cancers Symposium in San Francisco;

Publication of the NAPOLI-1 results in The Lancet;

Amendment of the ongoing Phase 2 clinical study of MM-121 (seribantumab) in patients with heregulin-positive non-small cell lung cancer, including a change in the primary endpoint to overall survival to enable a potential registration opportunity for MM-121; and

Closing of a private placement of $175.0 million of senior secured notes, of which $41.2 million was used to repay all amounts outstanding under Merrimack’s private loan agreement.

Commercial Update

Merrimack received approval for ONIVYDE from the U.S. Food and Drug Administration on October 22, 2015 and launched ONIVYDE in the United States on October 26, 2015. Net product revenues from U.S. commercial sales of ONIVYDE for the fourth quarter of 2015 were $4.3 million.

Upcoming Milestones

Merrimack anticipates the following upcoming clinical milestones:

Results in the first half of 2017 from the Phase 2 clinical study of ONIVYDE in previously untreated front-line metastatic pancreatic cancer;

Results in 2017 from HERMIONE, the Phase 2 clinical study of MM-302 in patients with HER2-positive metastatic breast cancer that is designed to support a potential Accelerated Approval application to the FDA;

Results in 2017 from the Phase 2 clinical study of MM-141 in patients with front-line metastatic pancreatic cancer who have high serum levels of free IGF-1; and

Results in 2018 from the Phase 2 clinical study of MM-121 in patients with heregulin-positive, locally advanced or metastatic non-small cell lung cancer.

Fourth Quarter and Full Year 2015 Financial Results

The following summarizes Merrimack’s financial results from the quarter and year ended December 31, 2015:

Received $66.5 million of net milestone payments from collaborations in 2015, consistent with Merrimack’s previous financial guidance;

Cash, cash equivalents and marketable securities as of December 31, 2015 were $185.6 million, compared to $124.0 million as of December 31, 2014. The increase was driven by $168.5 million of net proceeds from the issuance of senior secured notes and $38.6 million of net proceeds from an "at the market offering" program, which were offset by $105.4 million of cash used to fund operating activities and the payoff of $41.2 million of previously-existing debt;

Product revenue from the commercial sale of ONIVYDE, net of discounts, allowances and reserves, was $4.3 million for the fourth quarter of 2015 and the year ended December 31, 2015;

License and collaboration revenue was $17.1 million for the fourth quarter of 2015 and $84.9 million for the year ended December 31, 2015, compared to $33.9 million and $102.8 million, respectively, in the comparable periods in 2014. 2015 license and collaboration revenue is comprised of $64.9 million of revenue under the Baxalta proportional performance model and $20.0 million of substantive milestone revenue under Merrimack’s agreement with Baxalta. 2014 license and collaboration revenue is comprised of $10.5 million of revenue recognized under the Baxalta proportional performance revenue recognition model and $92.3 million of revenue recognized under Merrimack’s now-terminated agreement with Sanofi;

Research and development expenses were $44.7 million in the fourth quarter of 2015 and $161.0 million for the year ended December 31, 2015, compared to $30.7 million and $138.5 million, respectively, in the comparable periods in 2014. The increase in 2015 research and development expenses was driven by increased costs as Merrimack prepared for or initiated Phase 2 studies for four of its most advanced product candidates as well as increased preclinical and general spending as Merrimack advanced and grew its preclinical pipeline;

Selling, general and administrative expenses were $19.3 million in the fourth quarter of 2015 and $57.8 million for the year ended December 31, 2015, compared to $8.3 million and $30.5 million, respectively, in the comparable periods in 2014. The increase in 2015 selling, general and administrative expenses was primarily due to incremental expenses incurred to prepare for and support the launch of ONIVYDE; and

Net loss attributable to Merrimack for the fourth quarter of 2015 was $47.8 million, or $0.41 per share, compared to a net loss attributable to Merrimack of $9.7 million, or $0.09 per share, for the fourth quarter of 2014. For the year ended December 31, 2015, net loss attributable to Merrimack was $148.0 million, or $1.33 per share, compared to a net loss attributable to Merrimack of $83.3 million, or $0.80 per share, for the year ended December 31, 2014.

2016 Financial Outlook

Merrimack anticipates the following for 2016:

Receipt of $46.5 million of net milestone payments related to ONIVYDE. This amount is made up of $36.5 million of net substantive milestones expected to increase net income in 2016 and $10.0 million of net non-substantive milestones expected to increase deferred revenues on Merrimack’s balance sheet, as they are included in the Baxalta proportional performance revenue recognition model; and

Aggregate research and development and selling, general and administrative expenses to be in the range of $225 million to $245 million, not including any one time payments to PharmaEngine.
Merrimack 2016 Analyst Day

Merrimack will host an Analyst Day on May 19, 2016 in New York for analysts and institutional investors. A live webcast of the event will be available in the Investors section of Merrimack’s website, investors.merrimack.com, and a replay of the webcast will be archived there for six weeks.

Upcoming Investor Conferences

Merrimack will attend the following investor conferences this spring:

Credit Suisse 2016 London Healthcare Conference on March 1 in London;

Cowen and Company 36th Annual Health Care Conference on March 9 in Boston;

Barclays Global Healthcare Conference on March 15 in Miami; and

Deutsche Bank Securities 41st Annual Healthcare Conference on May 4-5 in Boston.

Live webcasts of the presentations at the Cowen and Company 36th Annual Health Care Conference, the Barclays Global Healthcare Conference and the Deutsche Bank Securities 41st Annual Healthcare Conference can be accessed by visiting the Investors section of Merrimack’s website at investors.merrimack.com. A replay of the webcasts will be archived there for two weeks following each presentation.