On October 27, 2016 United Therapeutics Corporation (NASDAQ: UTHR) reported its financial results for the third quarter ended September 30, 2016 (Press release, United Therapeutics, OCT 27, 2016, View Source [SID1234516036]).

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"Our financial performance continues its strength this quarter," said Martine Rothblatt, Ph.D., United Therapeutics’ Chairman and Chief Executive Officer. "Our growth potential is higher than ever, with new programs in our pipeline for pulmonary hypertension associated with emphysema, fibrosis, heart failure and sickle cell disease. In addition we are launching the clinical development of our dinutuximab monoclonal antibody for small cell lung cancer and other high-risk forms of cancer with GD2 expressing cell tumors. Finally, our second generation parenteral drug delivery systems for treprostinil are continuing their march toward anticipated approvals in 2017 for implantable and 2018 for subcutaneous."

Key financial highlights include (dollars in millions, except per share data):


Three Months Ended
September 30,

Percentage



2016

2015

Changes



Revenues

$
408.2

$
386.2

5.7%

Net income

$
161.8

$
464.4

(65.2)%

Non-GAAP earnings(1)

$
201.5

$
174.7

15.3%

Net income, per diluted share

$
3.50

$
9.24

(62.1)%

Non-GAAP earnings, per diluted share(1)

$
4.36

$
3.48

25.3%

____________________

(1)
See definition of non-GAAP earnings, a non-GAAP financial measure, and a reconciliation of net income to non-GAAP earnings below.
Financial Results for the Three Months Ended September 30, 2016

Revenues

The table below summarizes the components of total revenues (dollars in millions):



Three Months Ended
September 30,

Percentage



2016

2015

Change

Net product sales:







Remodulin


$
152.4

$
150.1

1.5%

Tyvaso


101.8

121.7

(16.4)%

Adcirca


96.0

73.8

30.1%

Orenitram


40.7

34.4

18.3%

Unituxin


17.3

4.7

268.1%

Other

—

1.5

(100.0)%

Total revenues


$
408.2

$
386.2

5.7%

Revenues for the three months ended September 30, 2016 increased by $22.0 million, compared to the same period in 2015. The growth in revenues primarily resulted from the following: (1) a $22.2 million increase in Adcirca net product sales; (2) a $12.6 million increase in Unituxin net product sales; (3) a $6.3 million increase in Orenitram net product sales; and (4) a $2.3 million increase in Remodulin net product sales. These increases were partially offset by a $19.9 million decrease in Tyvaso net product sales.

Expenses

Cost of product sales. The table below summarizes cost of product sales by major categories (dollars in millions):



Three Months Ended
September 30,

Percentage



2016

2015

Change

Category:







Cost of product sales


$
20.0

$
15.0

33.3%

Share-based compensation expense (benefit)


3.6

(8.1)

144.4%

Total cost of product sales


$
23.6

$
6.9

242.0%

Cost of product sales. The increase in cost of product sales of $5.0 million for the three months ended September 30, 2016, as compared to the same period in 2015, was attributable to increased sales.

Share-based compensation. The increase in share-based compensation of $11.7 million for the three months ended September 30, 2016, as compared to the same period in 2015, corresponded to an 11 percent increase in the price of our common stock during the three months ended September 30, 2016, compared to a 25 percent decrease in the price of our common stock during the same period in 2015.

Research and development expense. The table below summarizes research and development expense by major category (dollars in millions):



Three Months Ended
September 30,

Percentage



2016

2015

Change

Category:







Research and development expense


$
37.2

$
40.6

(8.4)%

Share-based compensation expense (benefit)


8.7

(31.0)

128.1%

Total research and development expense


$
45.9

$
9.6

378.1%

Share-based compensation. The increase in share-based compensation of $39.7 million for the three months ended September 30, 2016, as compared to the same period in 2015, corresponded to an 11 percent increase in the price of our common stock during the three months ended September 30, 2016, compared to a 25 percent decrease in the price of our common stock during the same period in 2015.

Selling, general and administrative expense. The table below summarizes selling, general and administrative expense by major categories (dollars in millions):



Three Months Ended
September 30,

Percentage



2016

2015

Change

Category:







General and administrative


$
42.4

$
41.0

3.4%

Sales and marketing


20.1

21.5

(6.5)%

Share-based compensation expense (benefit)


37.6

(79.8)

147.1%

Total selling, general and administrative expense


$
100.1

$
(17.3)

678.6%

Share-based compensation. The increase in share-based compensation of $117.4 million for the three months ended September 30, 2016, as compared to the same period in 2015, was primarily attributable to an 11 percent increase in the price of our common stock during the three months ended September 30, 2016, compared to a 25 percent decrease in the price of our common stock during the same period in 2015.

Gain on Sale of Intangible Asset

In September 2015, we sold the Rare Pediatric Priority Review Voucher (PPRV) we received from the FDA in connection with the approval of our Biologics License Application for Unituxin. In exchange for the voucher we received $350.0 million from AbbVie Ireland Unlimited Company. The proceeds from the sale of the PPRV were recognized as a gain on the sale of an intangible asset, as the PPRV did not have a carrying value on our consolidated balance sheet at the time of sale.

Income Tax Expense

Our 2016 effective income tax rate decreased as compared to 2015 primarily due to a decrease in non-deductible share-based compensation, which was driven largely by a decrease in our stock price during 2016 compared to 2015.

Share Repurchases

In the third quarter of 2016, we repurchased approximately 1.1 million shares of our common stock at an aggregate cost of $135.8 million. These purchases were made pursuant to our $500 million stock repurchase program, which is effective during calendar year 2016, with $104.5 million of that amount remaining available for additional share repurchases at September 30, 2016.

Non-GAAP Earnings

Non-GAAP earnings is defined as net income, adjusted for: (1) interest expense; (2) license fees; (3) depreciation and amortization; (4) impairment charges; (5) share-based compensation expense (benefit), net (including expenses relating to stock options, share tracking awards, restricted stock units and our employee stock purchase plan); and (6) tax impact on non-GAAP earnings adjustments. For 2015, we also adjusted non-GAAP earnings to eliminate the gain resulting from the sale of the PPRV in September 2015.

A reconciliation of net income to non-GAAP earnings is presented below (in millions, except per share data):



Three Months Ended
September 30,



2016

2015

Net income, as reported

$
161.8

$
464.4

Adjusted for:





Interest expense


0.5

0.8

Depreciation and amortization


8.2

8.2

Share-based compensation expense, net


49.9

(118.9)

Gain on sale of intangible asset


—

(350.0)

Tax (benefit) expense(1)


(18.9)

170.2

Non-GAAP earnings

$
201.5

$
174.7

Non-GAAP earnings per share:





Basic


$
4.66

$
3.84

Diluted


$
4.36

$
3.48

Weighted average number of common shares outstanding:





Basic


43.2

45.5

Diluted


46.2

50.2

______________________

(1)
Represents the total tax impact of the quarterly non-GAAP earnings adjustments based on our actual quarterly effective income tax rates of approximately 32 percent and approximately 37 percent as of September 30, 2016 and 2015, respectively.

On October 27, 2016 Onxeo S.A. (Euronext Paris, Nasdaq Copenhagen: ONXEO), a biopharmaceutical company specializing in the development of innovative drugs for the treatment of orphan diseases, in particular in oncology, reported promising results from preclinical studies evaluating the potential of its already PTCL (peripheral T-cell lymphoma)-approved Beleodaq (belinostat), in combination with checkpoint inhibitors as a potential treatment option for other tumor indications (Press release, Onxeo, OCT 27, 2016, View Source [SID1234516106]). The studies were conducted as the second step of Onxeo’s ongoing preclinical development program in partnership with leading European research institution the University of Navarra’s University Clinic and Center for Applied Medical Research in Spain under the leadership of Prof. Bruno Sangro and Dr. Pablo Sarobe.

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The preclinical studies were performed in an immune-competent mouse syngeneic HCC (hepatocellular carcinoma) model, in which responses to a combination of Beleodaq and checkpoint inhibitors were compared to responses from treatment with checkpoint inhibitors alone. The studies demonstrated a complete cessation of tumor growth in all mice (100%) treated with the combination of Beleodaq and checkpoint inhibitors. The tumor cessation effect continued for approximately one week after the final dose of belinostat was administered. By comparison, checkpoint inhibitors alone inhibited tumor growth in only about 30 percent of mice which received the treatment for the same period.

In addition, mechanistic studies performed on the spleens of the mice demonstrated the generation of an underlying immune response that correlated with the observed therapeutic effect of the combination treatment, showing an increase in production of interleukines (signaling proteins for regulating immune responses) by activated T-cells and a decrease in the number of regulatory T-cells, when compared to mice treated only with checkpoint inhibitors.

Graham Dixon, PhD, Chief Scientific Officer of Onxeo, commented, "These data represent promising findings for the continued evaluation of Beleodaq in cancers beyond peripheral T-cell lymphoma (PTCL) when used as a combination with immuno-oncology agents in various tumor indications such as for example HCC. Approximately 20 percent of cancer patients currently treated with checkpoint inhibitors alone are responding and thus, if translated into the clinic, the positive outcomes from the combination therapy would account for a significant improvement in the number of patients exhibiting high treatment responses. As a next step in our collaboration with Prof. Bruno Sangro and Dr. Pablo Sarobe, we are conducting follow-up studies to fully characterize these preclinical findings demonstrating the potential of Beleodaq in combination with checkpoint inhibitors in various tumor indications, and in particular, are evaluating the immune response in the tumor microenvironment in order to improve the translation of the response into human patients."

On October 27, 2016 amcure, a biopharmaceutical company developing first-in-class cancer therapeutics, reported the initiation and first patient treated in a Phase I/Ib clinical study of their lead program, AMC303, in cancer patients (Press release, amcure, OCT 27, 2016, View Source [SID1234516103]). AMC303 has been developed to target CD44v6, a key molecule in molecular pathways of several receptor-tyrosine-kinases, such as c-MET, VEGFR-2 and RON which are involved in both tumor growth and metastases. This approach provides a potential novel mechanism for the treatment of patients with advanced and solid tumors that have already begun to spread throughout the body.

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"The initiation of the Phase I/Ib study is an important step in amcure’s mission to provide a therapeutic option for patients suffering from cancer when other standard of care treatments have not been effective"
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The study, which will be initially conducted in Belgium and Spain, is designed to assess the safety, tolerability and pharmacokinetics of multiple and increasing doses of AMC303 as a monotherapy in patients with advanced metastatic malignant solid tumors of epithelial origin, for example pancreatic, head and neck, colorectal, gastric and lung cancer, among others. The trial will also seek to determine whether responses to AMC303 correlate with the expression of CD44v6, a cell surface protein that acts as a co-receptor for the activation of several receptor-tyrosine-kinases.

"The initiation of the Phase I/Ib study is an important step in amcure’s mission to provide a therapeutic option for patients suffering from cancer when other standard of care treatments have not been effective," said Klaus Dembowsky, CEO of amcure GmbH. "We believe AMC303 holds great potential because by targeting one specific co-receptor, three relevant oncological pathways are blocked, thus diminishing the means for tumor growth and metastases in patients. We look forward to seeing the results of this initial trial."

In a February 2016 publication in the peer-reviewed journal Gastroenterology, entitled "Inhibition of Tumor Growth and Metastasis in Pancreatic Cancer Models by interference with CD44v6 Signaling," by the co-founder of amcure, Alexandra Matzke-Ogi et al., the ability of the early lead compound AM001 was clearly demonstrated to reduce the primary tumor and metastases. The data suggest a central role for CD44v6 signaling in tumor growth, metastatic spreading and maintenance of metastases in distant organs as well as the regression of already established metastases, making it a very promising tool for cancer therapy.

About AMC303
amcure’s lead compound, AMC303, has been developed as a potential treatment for patients with advanced and metastatic epithelial tumors, e.g. pancreatic cancer, head and neck cancer, gastric cancer, colorectal cancer, breast cancer and lung cancer. AMC303 has a high specificity for inhibiting CD44v6, a co-receptor required for signaling through multiple cellular pathways (c-Met, VEGFR-2, RON) involved in tumor growth, angiogenesis and the development and regression of metastases. AMC303 has also demonstrated strong effects in various in vitro and in vivo assays.