On October 27, 2015 Commenting on the results, Joseph Jimenez, CEO of Novartis, reported:
"Novartis continued to make strong progress on innovation and key launches in the third quarter (Press release, Novartis, OCT 27, 2015, View Source [SID:1234507809]). The Pharmaceuticals and Sandoz Divisions continue to perform exceptionally well, offsetting softness in the Alcon Division. Entresto was approved and launched in the US, and Tafinlar + Mekinist was approved in the EU for BRAF-mutant melanoma. We confirm our full-year guidance."

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

                  Schedule Your 30 min Free Demo!

GROUP REVIEW

Novartis has laid out five clear priorities for 2015: deliver strong financial results; strengthen innovation; complete the portfolio transformation; capture cross-divisional synergies; and build a high-performing organization. In each of these areas, we made solid progress in the third quarter and first nine months.

Financial results

Following the announcement of our portfolio transformation transactions on April 22, 2014, Novartis reported the Group’s financial results for the current and prior years as "continuing operations" and "discontinued operations." See page 42 of the Condensed Interim Financial Report for full explanation.

The commentary below focuses on continuing operations, which include the businesses of Pharmaceuticals, Alcon and Sandoz and Corporate activities. Starting on March 2, 2015, the date of the completion of the GSK transactions, continuing operations also include the results from the new oncology assets acquired from GSK and the 36.5% interest in the GSK consumer healthcare joint venture (the latter reported as part of income from associated companies). We also provide detail on discontinued operations and total Group performance on pages 3 and 5.

Third quarter

Continuing operations

Net sales were USD 12.3 billion (-6%, +6% cc). Growth Products[1] contributed USD 4.2 billion or 34% of net sales, up 14% (USD) over the prior-year quarter.

Operating income was USD 2.2 billion (-18%, +2% cc), with growth in Sandoz mostly offset by a decline in Alcon. The adjustments made to operating income to arrive at core operating income amounted to USD 1.3 billion (2014: USD 0.8 billion), mainly on account of a provision for a legal settlement and legal fees and the amortization of the new oncology assets in Pharmaceuticals.

Core operating income was USD 3.5 billion (-3%, +14% cc). Core operating income margin in constant currencies increased 2.2 percentage points, mainly due to strong performance at Pharmaceuticals and Sandoz. Currency had a negative impact of 1.4 percentage points, resulting in a net increase of 0.8 percentage points in US dollar terms to 28.4% of net sales.

Net income was USD 1.8 billion (-42%, -28% cc), down mainly due to the prior-year gain from the sale of Idenix Pharmaceuticals, Inc. shares to Merck & Co. (USD 0.8 billion) and a provision for a legal settlement and legal fees.

EPS was USD 0.75 (-41%, -27% cc), broadly in line with net income.

Core net income was USD 3.1 billion (-2%, +13% cc), broadly in line with core operating income.

Core EPS was USD 1.27 (-1%, +14% cc), broadly in line with core net income.

The free cash flow in the third quarter was USD 2.8 billion (-11%), a decrease of USD 0.3 billion compared to the prior-year period, primarily due to the negative currency impact on operations.

[1] "Growth Products" are an indicator of the rejuvenation of the portfolio, and comprise products launched in a key market (EU, US, Japan) in 2010 or later, or products with exclusivity in key markets until at least 2019 (except Sandoz, which includes only products launched in the last 24 months). They include the acquisition effect of the GSK oncology assets.

Pharmaceuticals net sales reached USD 7.6 billion (-4%, +7% cc), with volume growth of 12 percentage points, which includes the new oncology assets acquired from GSK on March 2, 2015 (sales of USD 0.5 billion in Q3). The negative impact of generic competition was 5 percentage points, largely for Diovan monotherapy, Exforge and Exelon Patch in the US. Pricing impact was negligible. Growth Products – which include Gilenya, Tasigna, Afinitor, Tafinlar + Mekinist, Jakavi, Revolade and Cosentyx – generated USD 3.5 billion or 46% of division net sales. These products grew 34% (cc) over the same period last year.

Operating income was USD 1.8 billion (-18%, 0% cc), as a provision for a conditional settlement in principle of the specialty pharmacies case with, inter alia, the SDNY of USD 400 million (including legal fees), amortization of intangible assets of USD 369 million and net acquisition-related costs of USD 45 million, both mainly related to the new oncology assets, were partly offset by divestment gains. Core operating income was USD 2.4 billion (+1%, +18% cc). Core operating income margin in constant currencies increased by 3.0 percentage points; currency had a negative impact of 1.5 percentage points, resulting in a net increase of 1.5 percentage points to 31.8% of net sales.

Alcon net sales were USD 2.3 billion (-12%, -2% cc) in the third quarter. Surgical sales (-2% cc) were down, mainly due to competitive pressure on intraocular lenses (IOLs) and a slowdown in equipment purchases in the US and emerging markets, particularly in Asia. This was partially offset by solid sales of cataract consumables and vitreoretinal sales. Ophthalmic Pharmaceuticals sales (-3% cc) declined, primarily due to generic competition in the US, which more than offset double-digit growth in Glaucoma fixed-dose combination products and Systane in Dry Eye. Vision Care sales (-1% cc) were impacted by a continued decline in contact lens care, while strong growth in Dailies Total1 was offset by weaker contact lens sales in Asia. Alcon growth acceleration plan development is underway and will be reflected in 2016 guidance given with 2015 full-year results.

Operating income was USD 159 million (-58%, -22% cc). Core operating income was USD 703 million (-27%, -12% cc), primarily impacted by declining sales as well as higher spending in R&D and M&S behind investments to drive growth and an increase in provisions for bad debt in Asia. Core operating income margin in constant currencies decreased by 3.8 percentage points; currency had a negative impact of 2.2 percentage points, resulting in a net decrease of 6.0 percentage points to 30.0% of net sales.

Sandoz net sales reached USD 2.3 billion (-3%, +9% cc) in the third quarter, as volume growth of 21 percentage points more than compensated for 12 percentage points of price erosion (6 percentage points excluding Diovan monotherapy). Global sales of Biopharmaceuticals (which include biosimilars, biopharmaceutical contract manufacturing and Glatopa) grew 28% (cc) to USD 186 million, including continued progress of the newly launched Glatopa. Anti-Infectives franchise sales (consisting of partner label and finished dosage form sales) were up 15% (cc) to USD 349 million.

Operating income amounted to USD 317 million (+17%, +33% cc). Core operating income grew 4% (+17% cc) to USD 433 million, due to strong base business and launch performance. Core operating income margin increased 1.2 percentage points to 18.6% of net sales, as strong operating performance more than offset the high margin sales of the Diovan monotherapy authorized generic in the prior-year quarter.

Discontinued operations[1]

Operational results for discontinued operations in the third quarter of 2015 include one month of results from the influenza Vaccines business, prior to its divestment to CSL Limited on July 31, 2015. Animal Health, OTC and non-influenza Vaccines are not included, as the divestments were closed in the first quarter of 2015. The prior-year period included the results of all divested units during the quarter.

Discontinued operations sales for the quarter amounted to USD 14 million, compared to USD 1.7 billion in the prior-year period.

Discontinued operations operating income was USD 45 million, which included the operating performance of the influenza Vaccines business up to July 31 and is net of the partial reversal of USD 0.1 billion of the impairment recorded in 2014, whereas the prior-year period operating income amounted to USD 241 million.

[1] Discontinued operations are defined on page 42 of the Condensed Interim Financial Report.

Core operating loss for discontinued operations amounted to USD 49 million compared to an income of USD 255 million in the prior-year quarter.

Net income from discontinued operations amounted to USD 83 million compared to an income of USD 138 million in the prior-year quarter.

Total Group

For the total Group, net income amounted to USD 1.9 billion compared to USD 3.2 billion in the prior-year period, and basic earnings per share decreased to USD 0.79 from USD 1.33.

Free cash flow for the total Group amounted to USD 2.8 billion.

Nine months

Continuing operations

Net sales amounted to USD 36.9 billion (-6%, +5% cc) in the first nine months. Growth Products contributed USD 12.3 billion or 33% of net sales, up 17% (USD) over the first nine months of 2014.

Operating income was USD 7.3 billion (-16%, 0% cc), with growth in Pharmaceuticals and Sandoz offset by the decline at Alcon. The adjustments made to operating income to arrive at core operating income amounted to USD 3.4 billion (2014: USD 2.5 billion).

Core operating income was USD 10.7 billion (-5%, +10% cc). Core operating income margin in constant currencies increased 1.3 percentage points, mainly due to higher sales and productivity initiatives. Currency had a negative impact of 1.0 percentage points, resulting in a net increase of 0.3 percentage points to 29.1% of net sales.

Net income was USD 6.0 billion (-28%, -14% cc), down mainly due to the prior-year gain from the sale of Idenix Pharmaceuticals, Inc. shares to Merck & Co. (USD 0.8 billion).

EPS was USD 2.48 (-26%, -12% cc), declining less than net income due to the lower number of average outstanding shares.

Core net income was USD 9.3 billion (-5%, +9% cc), broadly in line with core operating income.

Core EPS was USD 3.87 (-3%, +10% cc), growing ahead of core net income due to the lower number of average outstanding shares.

The free cash flow in the first nine months of 2015 was USD 6.3 billion (-9%), a decrease of USD 0.7 billion compared to the prior-year period. This was primarily due to the negative currency impact on operations, partially offset by higher hedging gains and increased proceeds from divestments.

Pharmaceuticals delivered net sales of USD 22.6 billion (-6%, +5% cc) in the first nine months, driven by volume growth (+12 percentage points), which includes the new oncology assets acquired from GSK (sales of USD 1.2 billion), more than offsetting the negative impact of generic competition (-7 percentage points). Pricing impact was negligible.

Operating income was USD 6.1 billion (-11%, +4% cc) for the first nine months. Included in operating income were USD 921 million of amortization of intangible assets and USD 155 million of net acquisition-related costs, mainly related to the new oncology assets acquired from GSK, as well as USD 400 million for a provision for a legal settlement and legal fees, partly offset by divestment gains. Core operating income was USD 7.3 billion (-3%, +12% cc), generating core operating leverage in constant currencies through the continued reduction of functional costs and ongoing productivity initiatives. Core operating income margin in constant currencies improved by 2.0 percentage points; currency had a negative impact of 1.1 percentage points, resulting in a net margin expansion of 0.9 percentage points to 32.4% of net sales.

Alcon net sales were USD 7.5 billion (-8%, +1% cc) in the first nine months. Surgical sales grew 1% (cc), driven by cataract and vitreoretinal consumables, partially offset by lower sales of equipment and IOLs. Ophthalmic Pharmaceuticals grew 1% (cc), driven by double-digit growth of fixed-dose combination products in Glaucoma and Systane in Dry Eye, partially offset by the negative impact of generic competition in the US. Vision Care (0% cc) was flat, as the continued decline in contact lens care solutions offset strong growth in Dailies Total1 and AirOptix Colors.

Operating income was USD 662 million (-46%, -15% cc). Core operating income was USD 2.4 billion (-18%, -5% cc), impacted by higher spending, primarily in M&S, behind investments to drive growth and an increase in provisions for bad debt in Asia. Lower gross margin and higher R&D investment behind RTH258 also contributed to the decline in core operating income. Core operating income margin in constant currencies decreased by 2.0 percentage points; currency had a negative impact of 1.8 percentage points, resulting in a net decrease of 3.8 percentage points to 32.1% of net sales.

Sandoz net sales were USD 6.9 billion (-3%, +10% cc) as volume growth of 17 percentage points more than offset 7 percentage points of price erosion. All regions grew in the first nine months of the year, led by double-digit growth in the US (+16% cc), Asia-Pacific (+15% cc) and Latin America (+22% cc). From a franchise perspective, global sales of Biopharmaceuticals increased 39% (cc) to USD 554 million, including four months of sales of Glatopa. Anti-Infectives franchise sales were USD 1.1 billion (+12% cc).

Operating income was USD 789 million (-1%, +7% cc), including USD 190 million of restructuring charges mainly related to our manufacturing footprint initiative. Core operating income increased 9% (+21% cc) to USD 1.3 billion. Core operating income margin in constant currencies increased by 1.7 percentage points; currency had a positive impact of 0.3 percentage points, resulting in a net increase of 2.0 percentage points to 18.4% of net sales.

Discontinued operations

Operational results for discontinued operations in the first nine months of 2015 include seven months of results from the influenza Vaccines business, as well as results from the non-influenza Vaccines business and OTC until their divestment date on March 2, 2015. Operational results from the Animal Health business, which was divested on January 1, 2015, include only the divestment gain. The prior year included the results of all divested units during the first nine months.

Discontinued operations sales for the first nine months amounted to USD 601 million, including USD 70 million for the influenza Vaccines business. Sales from the non-influenza Vaccines business and OTC up to March 2 amounted to USD 75 million and USD 456 million, respectively. In the prior-year period, net sales were USD 4.3 billion as all divested businesses reported during the full nine months.

Operating income for discontinued operations includes preliminary exceptional pre-tax gains of USD 12.8 billion from the divestment of Animal Health to Lilly (USD 4.6 billion) and the transactions with GSK (USD 2.8 billion for the non-influenza Vaccines business and USD 5.9 billion arising from the contribution of Novartis OTC into the consumer healthcare joint venture). In addition, the GSK transactions resulted in approximately USD 0.5 billion of additional transaction-related expenses.

The remaining operating loss from discontinued operations was USD 0.2 billion, representing the operating performance of the influenza Vaccines business up to July 31, as well as the non-influenza Vaccines business and OTC until their respective divestment dates, and is net of the partial reversal of USD 0.1 billion of the impairment recorded in 2014.

Core operating loss for discontinued operations, which excludes these exceptional items, amounted to USD 223 million in the first nine months of 2015, compared to an income of USD 50 million in the prior-year period.

Net income from discontinued operations amounted to USD 10.8 billion, mainly due to the exceptional gains from the GSK and Lilly transactions, compared to USD 0.5 billion in the first nine months of 2014, which included the exceptional gain from the divestment of the blood transfusion diagnostics unit to Grifols.

Total Group[1]

For the total Group, net income amounted to USD 16.7 billion compared to USD 8.8 billion in the first nine months of 2014, impacted by the exceptional divestment gains included in net income from the discontinued operations. Basic earnings per share increased to USD 6.94 from USD 3.58.

Free cash flow for the total Group amounted to USD 6.0 billion.

Key growth drivers

Underpinning our financial results in the third quarter is a continued focus on key growth drivers, including Gilenya, Tasigna, Afinitor, Tafinlar + Mekinist, Jakavi, Revolade and Cosentyx, as well as Emerging Growth Markets.

Growth Products

Growth Products, an indicator of the rejuvenation of the portfolio, contributed 34% of continuing operations net sales in the third quarter, and were up 14% (USD). In Pharmaceuticals, Growth Products contributed 46% of division net sales in the quarter, and sales for these products were up 34% (cc).

Gilenya (USD 696 million, +16% cc), our oral MS therapy, grew double-digit in the quarter behind strong volume growth.
Tasigna (USD 416 million, +16% cc) continued to drive growth in our CML franchise (which also includes Gleevec/Glivec), with strong volume growth in the US and other markets.

Afinitor (USD 414 million, +9% cc), an oral inhibitor of the mTOR pathway, continued to grow, driven by the US and Emerging Growth Markets.

Tafinlar + Mekinist (USD 135 million) grew as the first approved combination therapy for the treatment of patients with BRAF V600 mutation positive unresectable or metastatic melanoma.

Revolade (USD 117 million), also known as Promacta in the US, saw sales accelerate as the only approved once-daily oral thrombopoietin receptor agonist.

Jakavi (USD 103 million, +77% cc), an oral JAK inhibitor approved for myelofibrosis and polycythemia vera, grew strongly over the previous-year quarter.

Cosentyx (USD 88 million), the first IL-17A inhibitor approved in the US and Europe for psoriasis patients, has progressed strongly since its launch in February 2015.

Biopharmaceuticals (which include biosimilars, biopharmaceutical contract manufacturing and Glatopa) grew 28% (cc) to USD 186 million.

Emerging Growth Markets

Continuing operations net sales in our Emerging Growth Markets – which comprise all markets except the US, Canada, Western Europe, Japan, Australia and New Zealand – grew 4% (cc) in the third quarter, reflecting a general slowdown in the economies of China and India. Growth was led by Turkey (+23% cc) and Brazil (+9% cc).
[1] Total Group results in 9M 2014 include nine months of Consumer Health (both Animal Health and OTC) and Vaccines (both influenza and non-influenza businesses). 9M 2015 includes two months of OTC and the non-influenza business and seven months of the influenza business. Total Group net income and EPS include the impact of the exceptional divestment gains. Total Group free cash flow comprises the free cash flow from continuing operations and discontinued operations.

Strengthen innovation

The third quarter saw continued pipeline progress with positive regulatory decisions and significant clinical trial data released. Key developments are included below.

New approvals and positive opinions

Entresto approved and launched in US; recommended by CHMP; approved by Swissmedic
Entresto (sacubitril/valsartan), previously known as LCZ696, was approved and launched in the US as a treatment for heart failure with reduced ejection fraction (HFrEF). In addition, the CHMP adopted a positive opinion for Entresto in symptomatic chronic HFrEF, and the Swiss health authority approved Entresto to reduce the risk of cardiovascular mortality and morbidity in patients with HFrEF.

Cosentyx received positive CHMP opinion for AS and PsA
In October, the CHMP recommended the approval of Cosentyx (secukinumab) in Europe to treat ankylosing spondylitis (AS) and psoriatic arthritis (PsA).

Tafinlar + Mekinist approved in EU for BRAF mutant melanoma; granted FDA priority review
The EC approved the combination of Tafinlar (dabrafenib) and Mekinist (trametinib) for the treatment of adult patients with unresectable or metastatic melanoma with a BRAF V600 mutation. The FDA granted priority review for full approval of the combination in the same patient population.

Odomzo approved in US and EU for locally advanced BCC
Odomzo (sonidegib) received approval in the US and EU for the treatment of certain adult patients with locally advanced basal cell carcinoma (BCC).

Farydak received EC approval in multiple myeloma
The EC approved Farydak (panobinostat) in combination with bortezomib and dexamethasone for the treatment of certain adult patients with relapsed/refractory multiple myeloma.

Promacta FDA approval for children with cITP
The FDA approved an expanded use for Promacta (eltrombopag) to include certain children one year of age and older with chronic immune thrombocytopenia (cITP).

Revolade approved in EU for patients with severe aplastic anemia
The EC approved Revolade (eltrombopag, marketed as Promacta in the US) for the treatment of certain adults with severe aplastic anemia (SAA).

Alcon’s UltraSert Pre-Loaded Delivery System for cataract surgery approved by FDA
Alcon received US approval for the AcrySof IQ Aspheric Intraocular Lens (IOL) with UltraSert Pre-loaded Delivery System for patients undergoing cataract surgery.
Regulatory submissions and filings

Afinitor submitted for GI/lung NET in US, Europe and Japan
Regulatory applications for Afinitor (everolimus) in advanced, progressive, non-functional neuroendocrine tumors (NET) of gastrointestinal (GI) or lung origin were submitted in the US, Europe and Japan.
Arzerra submitted for relapsed CLL in US and Europe

Regulatory applications for Arzerra (ofatumumab) for use as maintenance therapy in patients with relapsed chronic lymphocytic leukemia (CLL) were submitted in the US and Europe.

Sandoz submitted biosimilar etanercept in US
The FDA accepted Sandoz regulatory submission for biosimilar Enbrel (etanercept), a TNF-alpha inhibitor. Sandoz is seeking approval for all indications included in the label of the reference product, including rheumatoid arthritis and psoriasis.

Results from important clinical trials and other highlights

Cosentyx study showed sustained efficacy in psoriasis patients to three years
Data from an extension study showed that Cosentyx provides high levels of skin clearance and sustained efficacy in patients with moderate-to-severe plaque psoriasis while maintaining a favorable safety profile over three years.

COMBI-v data showed OS benefit for Tafinlar + Mekinist in BRAF-mutant melanoma
Updated data from the Phase III COMBI-v study showed a significant overall survival benefit for patients with BRAF V600E/K mutation-positive metastatic melanoma while improving health-related quality of life when treated with the combination of Tafinlar + Mekinist compared to vemurafenib monotherapy (median for the combination 25.6 months vs 18.0 months).

RADIANT-4 study showed Afinitor improved PFS in nonfunctional GI and lung NET
In a Phase III pivotal study, Afinitor reduced risk of disease progression by 52% vs. placebo in patients with advanced, progressive, nonfunctional NET of GI or lung origin. The results of the RADIANT-4 study are serving as the basis of worldwide regulatory submissions.

Secukinumab data in psoriatic arthritis published in NEJM
Results from the pivotal Phase III FUTURE 1 study for secukinumab in psoriatic arthritis were published online in the New England Journal of Medicine (NEJM). Secukinumab is the first IL-17A inhibitor to demonstrate efficacy in a Phase III study in patients with active PsA.

Long term efficacy of Gilenya reinforced by NEDA-4 analysis
The long-term efficacy profile of Gilenya (fingolimod) was reinforced by an analysis evaluating the proportion of Gilenya patients with relapsing multiple sclerosis who achieved no evidence of disease activity (NEDA-4) within each year over seven years.

Novartis continued to add to robust portfolio of programs in immuno-oncology
In October, Novartis broadened its portfolio of cancer immunotherapies with the acquisition of Admune Therapeutics and licensing agreements with Palobiofarma and XOMA Corporation, adding IL-15, adenosine receptor and TGF-beta inhibition programs to the portfolio. Novartis currently has several assets in clinic (including checkpoint inhibitors targeting PD1 and LAG3, as well as a myeloid cell targeting program and CART program CTL019). We are on track to have TIM3, as well as a PD1 + LAG3 combination, in clinic by end of year. We anticipate bringing STING, GITR, TGF-beta and multiple combinations to the clinic in 2016.

Novartis agreed to acquire remaining rights to ofatumumab, strengthening focus in MS
Novartis agreed to acquire all remaining rights to ofatumumab from GSK for relapsing remitting multiple sclerosis (MS) and certain other autoimmune indications.[1]

Novartis formed partnership with Amgen to further reinforce neuroscience pipeline
Through the partnership, Novartis and Amgen agreed to co-develop and co-commercialize a BACE inhibitor program in Alzheimer’s disease, with Novartis oral therapy CNP520 as the lead molecule. Novartis and Amgen also plan to globally co-develop Amgen’s migraine portfolio, including human monoclonal antibody AMG 334. Novartis holds commercialization rights for the migraine portfolio outside of the US, Canada and Japan.

Novartis swapped clinical assets for equity with Mereo BioPharma
The deal involves three mid-stage clinical assets in areas of unmet medical need: brittle bone syndrome, acute exacerbations in COPD and hypogonadotropic hypogonadism. Under the agreement, Novartis sold the clinical assets in exchange for an equity stake in Mereo and will share in the success of the assets.

Jay Bradner appointed NIBR President as Mark Fishman retires
Dr. James (Jay) Bradner, physician-scientist from Dana-Farber Cancer Institute and Harvard Medical School, was appointed President of the Novartis Institutes for BioMedical Research (NIBR), effective March 1, 2016. Dr. Bradner succeeds Dr. Mark Fishman, who will reach his contractual retirement age in March 2016 after 13 years at Novartis.
[1] Transaction is subject to closing conditions

Complete the portfolio transformation

Following our announcement on March 2, 2015 of the completion of the transactions with GSK, the integration has progressed on track. Marketing authorization transfers have been completed for over 80% of total sales of the oncology products.

The divestment of the influenza Vaccines business to CSL, the last step in the portfolio transformation, was completed on July 31, 2015.

Capture cross-divisional synergies

Improving productivity and leveraging synergies across divisions will help us support margins.

Novartis Business Services (NBS), our shared services organization, continues to execute on its priorities and the transformation of the organization is on track. At the end of the third quarter, NBS had approximately 9,400 full-time-equivalent associates, transferred from within the Novartis Group.

The cost within the scope of NBS was stable from the prior year. Moving from division-specific services to a cross-divisional model, NBS continues to scale up the offshoring of transactional services to its five selected Global Service Centers in Mexico City, Kuala Lumpur, Prague, Hyderabad and Dublin.

In the third quarter, we generated approximately USD 500 million in Procurement savings by leveraging our scale.
In addition, we continued to optimize our manufacturing footprint. In the third quarter, we announced the planned exit of our Sandoz manufacturing site in Turbhe, India.

For continuing operations, this brings the total number of production sites that have been or are in the process of being restructured, closed or divested to 24. Exceptional charges amounted to USD 40 million in the third quarter and USD 299 million in the first nine months. Exceptional charges recorded cumulatively since the program began amount to USD 874 million.
In total, our productivity initiatives generated gross savings that contributed approximately USD 850 million in the third quarter.

Build a high-performing organization

We are committed to creating a culture of integrity at Novartis and demonstrating ethical leadership, and have taken concrete steps to increase transparency and strengthen our ethical business practices. The new Novartis Values and Behaviors have an increased emphasis on integrity and the courage to do the right thing.

The company’s focus on quality continued to yield steady improvement in 2015. In the third quarter, a total of 60 global health authority inspections were completed, 12 of which were conducted by the FDA. All 60 were deemed acceptable or good.

On October 22, 2015, the FDA issued a warning letter to our Sandoz Division concerning their Indian sites in Kalwe and Turbhe. The warning letter observations follow an Agency inspection at both sites in August 2014 and are related to deficiencies in current good manufacturing practice (cGMP) for finished pharmaceuticals. The Warning Letter does not contain any new issues versus the 483 observations issued following the inspection in August 2014, which Sandoz has been addressing since then. Sandoz will continue to work closely with the FDA to ensure all observations are resolved to the Agency’s full satisfaction. No supply disruptions are expected.

Capital structure and net debt

Retaining a good balance between investment in the business, a strong capital structure and attractive shareholder returns will remain a priority. Strong cash flows and a sound capital structure have allowed Novartis to focus on driving innovation and growth across its diversified healthcare portfolio, while keeping its double-A credit rating as a reflection of financial strength and discipline.

During the first nine months of 2015, 38.7 million treasury shares were delivered as a result of options exercised and share deliveries related to employee participation programs. 8.9 million shares were repurchased on the SIX Swiss Exchange first trading line and from employees. In addition, Novartis repurchased 32.5 million shares on the second trading line in the first nine months of 2015 under the ongoing share buy-back of USD 5.0 billion spread over two years as well as to offset the dilutive impact from its employee participation programs. With these transactions, the total number of shares outstanding decreased by 2.7 million in the first nine months of 2015. Novartis aims to further offset the dilutive impact from its employee participation programs experienced in the first nine months of 2015 over the remainder of the year through purchases on the SIX Swiss Exchange second trading line.

During the first quarter of 2015, Novartis issued three Swiss franc denominated bonds for a total amount of USD 1.5 billion and repaid two bonds for a total amount of USD 2.9 billion (USD 2.0 billion bond issued in March 2010 and a Swiss franc denominated bond of USD 0.9 billion issued in June 2008) in the second quarter of 2015 at maturity.

As of September 30, 2015, the net debt stood at USD 16.6 billion compared to USD 6.5 billion at December 31, 2014. The increase of USD 10.1 billion was driven by the outflows related to the acquisition of the oncology assets from GSK of USD 16.0 billion, the dividend payment of USD 6.6 billion, share repurchases of USD 4.0 billion, divestment related payments of USD 0.8 billion and other net cash outflow items of USD 0.2 billion. This was partially compensated by the free cash flow of USD 6.0 billion, net divestment proceeds of USD 9.9 billion related to the portfolio transformation transactions and proceeds from options exercised of USD 1.6 billion.

The long-term credit rating for the company continues to be double-A (Moody’s Aa3; Standard & Poor’s AA-; Fitch AA).

2015 Group outlook for continuing operations

Barring unforeseen events

Our outlook for full year 2015 remains unchanged. Group net sales in 2015 are expected to grow mid-single digit (cc), after absorbing the impact of generic competition, which is expected to be approximately the same as the prior year (USD 2.4 billion). Group core operating income is expected to grow ahead of sales at a high-single digit rate (cc) in 2015. All these comparisons are versus 2014 continuing operations.

If early October exchange rates prevail for the remainder of the year, the currency impact for the year would be negative 10% on sales and negative 14% on core operating income. This currency impact versus prior-year results from the continued strength of the US dollar against most currencies.

On October 27, 2015 Merck (NYSE: MRK), known as MSD outside the United States and Canada,reported financial results for the third quarter of 2015 (Filing, 8-K, Merck & Co, OCT 27, 2015, View Source [SID:1234507808]).

"Our solid results this quarter demonstrate that our focused strategy, which aims to drive future growth, as well as value for patients, society and shareholders, is working. The evolving market, economic and political dynamics of global health care increasingly underscore that the ability to provide high-value innovation is what will distinguish successful companies going forward," said Kenneth C. Frazier, chairman and chief executive officer, Merck.

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

                  Schedule Your 30 min Free Demo!

Additional Executive Commentary

"Our late-stage pipeline and ongoing launches create both near- and longer-term opportunities to generate value through innovation aimed at addressing some of the world’s biggest medical needs — cancer, antibiotic resistance, cardiometabolic disease, hepatitis C and Alzheimer’s disease," said Frazier.

"Our broad, global and balanced portfolio of medicines and vaccines allows us to weather periodic volatility within a particular therapeutic area or region while consistently focusing on the best scientific and medical opportunities," continued Frazier.

"The Global Human Health business performed well in the third quarter with continued growth in our diabetes, hospital acute care and oncology franchises. We continue to be pleased with the progress of KEYTRUDA, which is a priority launch for the company," said Adam Schechter, president, Global Human Health, Merck.

"In the third quarter, Merck Research Laboratories achieved multiple milestones in our oncology and infectious disease clinical development programs, priority areas where we believe we can have the most beneficial impact on the lives of patients around the world," said Dr. Roger M. Perlmutter, president, Merck Research Laboratories. "In particular, the results from KEYNOTE-010, which we announced yesterday, provide unambiguous evidence of the favorable impact that our R&D efforts can have in the treatment of grievous illnesses."

"The third quarter was another demonstration of our strong execution. We remain committed to delivering a leveraged P&L. We have met and will exceed our annual target of $2.5 billion in net savings versus 2012 by the end of this year," said Robert Davis, chief financial officer, Merck.

Select Business Highlights

Worldwide sales were $10.1 billion for the third quarter of 2015, a decrease of 5 percent compared with the third quarter of 2014, including a 7 percent negative impact from foreign exchange and a 2 percent net unfavorable impact resulting from the divestiture of the Consumer Care business and select products, partially offset by the acquisition of Cubist Pharmaceuticals, Inc. (Cubist).

Commercial and Pipeline Highlights

During the third quarter of 2015, the company continued to focus on advancing its pipeline and key therapeutic areas of diabetes, hospital acute care, oncology and vaccines and executing on key launches, including KEYTRUDA (pembrolizumab), an anti-PD-1 therapy, for the treatment of advanced melanoma and metastatic NSCLC in patients whose disease has progressed after other therapies, and BELSOMRA (suvorexant) for the treatment of insomnia.

· Merck significantly advanced the clinical development program for KEYTRUDA.

· The U.S. Food and Drug Administration (FDA) approved KEYTRUDA for the treatment of patients with metastatic NSCLC whose tumors express PD-L1 as determined by an FDA-approved test and who have disease progression on or after platinum-containing chemotherapy across both squamous and non-squamous metastatic NSCLC.

· The National Institute for Health and Care Excellence (NICE) of the U.K. issued a draft recommendation for KEYTRUDA as a first-line treatment option for adults with advanced melanoma. Additionally, NICE issued its final guidance recommending KEYTRUDA for the treatment of advanced melanoma in patients whose disease has progressed after treatment with ipilimumab.

· The FDA accepted for review a supplemental Biologics License Application (sBLA) for KEYTRUDA for the first-line treatment of unresectable or metastatic melanoma. The FDA granted Priority Review with a PDUFA action date of Dec. 19, 2015.

· Additionally, the FDA extended the PDUFA action date for a separate sBLA for KEYTRUDA for the treatment of patients with ipilimumab-refractory advanced melanoma to Dec. 24, 2015. The company submitted additional data that constitutes a major amendment, which will require additional time for review.

· Topline results from KEYNOTE-010 indicated the pivotal study met its primary objective. KEYTRUDA showed superior overall survival compared to chemotherapy in patients with previously treated advanced NSCLC whose tumors express PD-L1. The company plans regulatory submissions based on these data to the FDA by the end of 2015 and the European Medicines Agency (EMA) in early 2016.

· Data were presented at the European Cancer Congress from the KEYNOTE-028 study, which included first-time presentations of findings investigating the use of KEYTRUDA in multiple tumor types.

· More than 25 registration studies for KEYTRUDA have been announced or initiated in more than 10 tumor types. In total, the KEYTRUDA clinical development program encompasses more than 30 tumor types in more than 160 clinical trials, including more than 80 combinations of KEYTRUDA with other cancer treatments.

· The company advanced its clinical development program for the treatment of diabetes.

· The Japanese Pharmaceuticals and Medical Devices Agency approved omarigliptin, which will be known as MARIZEV in Japan, a once-weekly medicine that helps lower blood sugar levels in adults with type 2 diabetes. Japan is the first country where omarigliptin has been approved; the company plans to submit omarigliptin for regulatory approval in the United States by the end of 2015, and other worldwide regulatory submissions will follow.

· At the 51st European Association for the Study of Diabetes Annual Meeting, pivotal Phase 3 data were presented demonstrating omarigliptin achieved its primary efficacy endpoint.

· The company highlighted its commitment to addressing infectious diseases with 40 presentations of data at the joint meeting of the Interscience Conference of Antimicrobial Agents and Chemotherapy, and International Congress of Chemotherapy and Infection.

· Data were presented from the two pivotal Phase 3 clinical studies for bezlotoxumab, an investigational antitoxin for prevention of Clostridium difficile (C. difficile) infection recurrence, which met their primary efficacy endpoints. The company plans to submit new drug applications for regulatory approval of bezlotoxumab in the United States, EU and Canada by the end of 2015.

· Data were presented from a Phase 2 study of relebactam, an investigational beta-lactamase inhibitor with Qualified Infectious Disease Product and Fast Track designations from the FDA for use in combination therapy, which met its primary efficacy endpoint in patients with complicated intra-abdominal infections. The company has initiated pivotal Phase 3 studies in serious bacterial infections.

· The company’s clinical development program for elbasvir/grazoprevir, an investigational once-daily, single tablet combination therapy for the treatment of adult patients with chronic hepatitis C virus (HCV) infection, advanced in the third quarter of 2015.

· The FDA accepted the company’s New Drug Application for Priority Review with a PDUFA action date of Jan. 28, 2016.
· The EMA accepted the company’s Marketing Authorization Application for review, which it will initiate under accelerated assessment timelines.

Pharmaceutical Revenue Performance

Third-quarter pharmaceutical sales declined 2 percent to $8.9 billion, including an 8 percent negative impact from foreign exchange. Excluding the impact of exchange, growth was driven by sales in the core therapeutic areas of hospital acute care, diabetes and oncology. Growth in hospital acute care was driven by the addition of the Cubist portfolio and sales growth of certain inline brands. The increase in diabetes reflects the timing of customer purchases in the United States and global demand growth. Growth in oncology reflects higher sales of KEYTRUDA, which were approximately $160 million for the quarter.

Third-quarter pharmaceutical sales reflect lower sales of REMICADE (infliximab), a treatment for inflammatory diseases, due to loss of exclusivity in the company’s marketing territories in Europe, and NASONEX (mometasone furoate monohydrate), an inhaled nasal corticosteroid for the treatment of nasal allergy symptoms, due to supply constraints in the United States, as well as declines in the HCV portfolio of VICTRELIS (boceprevir) and PEGINTRON (peginterferon alfa-2b). In addition, pharmaceutical sales reflect declines in vaccines, primarily PNEUMOVAX 23 (pneumococcal vaccine polyvalent) driven by lower sales in the United States and PROQUAD (Measles, Mumps, Rubella and Varicella Vaccine Live) driven by the timing of sales activity related to the Pediatric Vaccine Stockpile of the U.S. Centers for Disease Control and Prevention. These declines were partially offset by higher U.S. sales in the franchise of GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) and GARDASIL [Human Papillomavirus Quadrivalent (Types 6, 11, 16, and 18) Vaccine, Recombinant], vaccines to prevent cancers and other diseases caused by HPV.

Animal Health Revenue Performance

Animal Health sales totaled $825 million for the third quarter of 2015, a decrease of 7 percent compared with the third quarter of 2014, including a 14 percent negative impact from foreign exchange. Excluding the impact of exchange, growth was driven by an increase in sales of companion animal products, primarily BRAVECTO (fluralaner), a chewable tablet that kills fleas and ticks in dogs for up to 12 weeks, and new aqua and swine products, including PORCILIS PCV M Hyo, a new swine vaccine.

Other Revenue Performance

Other revenues – primarily comprising alliance revenue, miscellaneous corporate revenues and third-party manufacturing sales – increased to $323 million in the third quarter of 2015.

Third-Quarter 2015 Expense and Other Information

The costs detailed below totaled $7.8 billion on a GAAP basis during the third quarter of 2015 and include $1.4 billion of acquisition- and divestiture-related costs and restructuring costs.

The gross margin was 62.7 percent for the third quarter of 2015 compared to 60.0 percent for the third quarter of 2014, reflecting 12.4 and 14.3 unfavorable percentage point impacts, respectively, from the acquisition- and divestiture-related costs and restructuring costs noted above. The increase in non-GAAP gross margin was driven by lower inventory write-offs and foreign exchange.

Marketing and administrative expenses, on a non-GAAP basis, were $2.4 billion in the third quarter of 2015, a decrease from $2.6 billion in the same period of 2014, which was primarily driven by the favorable impact of foreign exchange and the sale of the Consumer Care business.

Research and development (R&D) expenses, on a non-GAAP basis, were $1.6 billion in the third quarter of 2015, a 1 percent increase compared to the third quarter of 2014.

Other (income) expense, net, was $170 million of income in the third quarter of 2015 compared to $166 million of income in the third quarter of 2014. The third quarter of 2015 includes a gain of $250 million on the divestiture of certain migraine clinical development programs. In the third quarter of 2014, the company recorded a gain of $396 million on the divestiture of certain ophthalmic products in several international markets that was partially offset by a $93 million goodwill impairment charge related to the company’s joint venture with Supera Farma Laboratorios S.A. in Brazil.

Financial Guidance

Merck has raised its full-year 2015 non-GAAP EPS range to be between $3.55 and $3.60, including a negative impact from foreign exchange. The range excludes acquisition- and divestiture-related costs, costs related to restructuring programs and certain other items. The company also has raised its full-year 2015 GAAP EPS range to be between $1.64 and $1.74.

At current exchange rates, the company now anticipates full-year 2015 revenues to be between $39.2 billion and $39.8 billion, including a negative impact from foreign exchange and approximately $1 billion of net lost sales from acquisitions and divestitures.

In addition, the company continues to expect full-year 2015 non-GAAP marketing and administrative expenses to be below 2014 levels and R&D expenses to be modestly above 2014 levels.

The company continues to anticipate its full-year 2015 non-GAAP tax rate will be in the range of 23 to 24 percent, not including a 2015 R&D tax credit.

On October 27, 2015 Verastem, Inc. (NASDAQ:VSTM) reported four poster presentations at the 2015 AACR (Free AACR Whitepaper)-NCI-EORTC AACR-NCI-EORTC (Free AACR-NCI-EORTC Whitepaper) International Conference on Molecular Targets and Cancer Therapeutics (EORTC-NCI-AACR) (Free ASGCT Whitepaper) (Free EORTC-NCI-AACR Whitepaper) being held November 5-9, 2015 in Boston, Massachusetts (Press release, Verastem, OCT 27, 2015, View Source;p=RssLanding&cat=news&id=2102659 [SID:1234507807]).

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

                  Schedule Your 30 min Free Demo!

The details for the poster presentations at AACR (Free AACR Whitepaper)-NCI-EORTC are as follows:

Title: FAK/PYK2 Inhibitors Defactinib and VS-4718 Enhance Immune Checkpoint Inhibitor Efficacy
Date and time: Friday, November 6 from 12:15 – 3:15 pm
Location: Exhibit Hall C-D
Session info: Tumor Immunology Targets
Abstract ID: A191

Title: Focal Adhesion Kinase Inhibition Enables Efficacy of Checkpoint Immunotherapy in Pancreatic Cancer
Date and time: Saturday, November 7 from 12:30 – 3:30 pm
Location: Exhibit Hall C-D
Session info: Tumor Microenvironment
Abstract ID: B197

Title: FAK Inhibition Induces T Cell-mediated Tumor Regression: A Novel Role for Nuclear FAK in Controlling Tregs via Transcription of Cytokine Networks
Date and time: Friday November 6, 2015 12:15 PM – 3:15 PM
Location: Exhibit Hall C-D
Session info: Tumor Immunology Targets
Abstract ID: A189

Title: FAK Inhibition Targets Cancer Stem Cells
Date and time: Sunday November 8, 2015 12:30 PM – 3:30 PM
Location: Exhibit Hall C-D
Session info: Cancer Stem Cells
Abstract ID: C29

About VS-6063
VS-6063 (defactinib) is an orally available compound designed to target cancer stem cells through the potent inhibition of focal adhesion kinase (FAK). Cancer stem cells are an underlying cause of tumor resistance to chemotherapy, recurrence and ultimate disease progression. Research has demonstrated that FAK activity is critical for the growth and survival of cancer stem cells. VS-6063 is currently being studied in the "Window of Opportunity" study in patients with mesothelioma prior to surgery, a Phase 1/1b study in combination with paclitaxel in patients with ovarian cancer, a trial in patients with KRAS-mutated non-small cell lung cancer and a trial evaluating the combination of VS-6063 and VS-5584 in patients with relapsed mesothelioma.

About VS-4718
VS-4718 is an orally available compound designed to target cancer stem cells through the potent inhibition of focal adhesion kinase (FAK). VS-4718 is currently being studied in a Phase 1 dose escalation study in patients with advanced cancers.

On October 27, 2015 Pfizer Inc. (NYSE: PFE) reported financial results for third quarter 2015 and announced increases to the midpoints of its 2015 financial guidance ranges for reported revenues(1) and adjusted diluted EPS(2) (Press release, Pfizer, OCT 27, 2015, View Source [SID:1234507806]).

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

                  Schedule Your 30 min Free Demo!

On September 3, 2015, Pfizer acquired Hospira, Inc. (Hospira). Consequently, and in accordance with Pfizer’s domestic and international reporting periods(3), financial results for third-quarter 2015 and the nine months ended September 27, 2015 reflect Pfizer’s operations as well as one month of legacy Hospira U.S. operations but do not include any financial results from legacy Hospira international operations.

The company manages its commercial operations through two distinct businesses: an Innovative Products business and an Established Products business. The Innovative Products business is composed of two operating segments: the Global Innovative Pharmaceutical segment (GIP)(4) and the Global Vaccines, Oncology and Consumer Healthcare segment (VOC)(4). The Established Products business consists of the Global Established Pharmaceutical segment (GEP)(4), which includes all legacy Hospira commercial operations. Financial results for each of these segments are presented in the Operating Segment Information section.

2015 FINANCIAL GUIDANCE(6)

Financial guidance ranges for reported revenues(1) and reported(1) and adjusted(2) diluted EPS were updated on September 30, 2015 solely to reflect the anticipated impact of legacy Hospira operations in Pfizer’s financial results from September 3, 2015 through fiscal year-end 2015(3).

The ranges for certain components of Pfizer’s 2015 financial guidance have been updated today as set forth below, primarily reflecting the following:

operational factors impacting Pfizer-standalone (excluding legacy Hospira) operations, including strong performance to date coupled with an improved business outlook for the remainder of the year;

the anticipated impact of legacy Hospira operations from September 3, 2015 through fiscal year-end 2015(3) on financial guidance components other than reported revenues(1) and adjusted diluted EPS(2); and

a minimal favorable impact from foreign exchange rates since mid-July 2015.

EXECUTIVE COMMENTARY

Ian Read, Chairman and Chief Executive Officer, stated, "Our business continues to demonstrate strength across key product lines and geographies which has resulted in another quarter of strong financial performance. We have been intently focused on seeking to generate a greater portion of our earnings from increased revenues and I see our product portfolio, product pipeline and recent business development activity as supporting this objective. Importantly, our research pipeline continues to advance with a focus on therapeutic areas of high unmet need where we also have seen advances in biology which could support the development of potential important new therapies to further strengthen our Innovative Products business. The recent addition of the Hospira business nicely augments our Established Products business, which has a strong presence in both sterile injectables and biosimilars. Overall, I see Pfizer as well positioned both financially and strategically to continue delivering value to patients and shareholders."

Frank D’Amelio, Chief Financial Officer, stated, "Overall, I am very pleased with our financial results to date in 2015. During third-quarter 2015, we were able to grow revenues by 4% operationally, excluding the impact of foreign exchange and legacy Hospira operations, despite the continued significant negative impact from product losses of exclusivity, primarily Celebrex and Zyvox in the U.S. and Lyrica in certain developed Europe markets.

"We raised our 2015 financial guidance for reported revenues(1) and adjusted diluted EPS(2) to reflect the strong performance to date of Pfizer-standalone (excluding legacy Hospira) operations coupled with an improved business outlook for Pfizer-standalone for the remainder of the year. Changes in foreign exchange rates since mid-July 2015 did not materially impact our updated guidance. Additionally, we updated our 2015 financial guidance ranges for adjusted cost of sales(2) as a percentage of reported revenues(1), adjusted SI&A expenses(2),adjusted R&D expenses(2) and reported diluted EPS(1) to reflect the anticipated impact of legacy Hospira operations from September 3, 2015 through fiscal year-end 2015(3) as well as the impact of Pfizer-standalone operations. For the remainder of 2015 and into 2016, we expect to continue to advance the Hospira integration while remaining focused on delivering strong operating results."

QUARTERLY FINANCIAL HIGHLIGHTS (Third-Quarter 2015 vs. Third-Quarter 2014)

Reported revenues(1) decreased $274 million, or 2%, which reflects operational growth of $795 million, or 6%, more than offset by the unfavorable impact of foreign exchange of $1.1 billion, or 9%. Excluding the impact of legacy Hospira operations and foreign exchange, Pfizer-standalone reported revenues(1) increased by $465 million operationally, or 4%.

Operational revenue growth in developed markets was driven primarily by the performance of several key products, including Prevnar 13 in adults, Ibrance and Eliquis — all products that are early in their life cycles — as well as from Lyrica primarily in the U.S., and the inclusion of one month of legacy Hospira U.S. operations. In emerging markets, revenues increased 5% operationally, reflecting continued strong operational growth, primarily from the Innovative Products business.

Operational revenue growth was partially offset primarily by the loss of exclusivity and associated generic competition for Celebrex in the U.S., Zyvox in the U.S. and Lyrica in certain developed Europe markets.

Innovative Products Business Highlights

Revenues for the Innovative Products business increased 21% operationally, reflecting the following:

GIP(4) revenues increased 10% operationally, primarily due to the strong operational performance of Eliquis globally, Lyrica primarily in the U.S., Enbrel in most international markets as well as Xeljanz and Viagra, both primarily in the U.S. Operational growth was partially offset by generic competition for Rapamune in the U.S., which began in October 2014.

VOC(4) revenues increased 37% operationally, reflecting the following:
Global Vaccines(4) revenues increased 50% operationally. Revenues in the U.S. increased 78%, driven by continued strong uptake of Prevnar 13 among adults due to the success of commercial programs and increased demand in preparation for the upcoming flu season. International revenues increased 19% operationally, primarily driven by Prevenar 13, which grew 10% operationally, primarily in emerging markets compared with the year-ago quarter.

Consumer Healthcare(4) revenues increased 7% operationally, primarily due to Nexium 24HR in the U.S. driven by increased demand and lower revenues in third-quarter 2014 as retailers reduced initial stocking levels following the May 2014 launch.
Global Oncology(4) revenues increased 54% operationally, primarily driven by continued strong momentum following the February 2015 U.S. launch of Ibrance for advanced breast cancer and, to a lesser extent, stronger demand for Sutent, Xalkori and Inlyta in most markets.

Established Products Business Highlights

GEP(4) revenues decreased 8% operationally, primarily due to the loss of exclusivity and associated launch of multi-source generic competition for Celebrex in the U.S. in December 2014, for Zyvox in the U.S. beginning in first-half 2015 and for Lyrica in certain developed Europe markets beginning in first-quarter 2015. These declines were partially offset by the inclusion of one month of legacy Hospira U.S. operations, which contributed $330 million, and growth in emerging markets, where revenues increased 1% operationally.

Income Statement Highlights

Adjusted cost of sales(2), adjusted SI&A expenses(2) and adjusted R&D expenses(2) in the aggregate increased $380 million operationally, or 5%, reflecting the following operational factors:

higher adjusted cost of sales(2), primarily reflecting the inclusion of one month of legacy Hospira U.S. operations in third-quarter 2015 and an increase in sales volume, partially offset by a decrease in royalty expense and manufacturing efficiencies;
higher adjusted SI&A expense(2), primarily reflecting increased investments to support recently launched products and certain other in-line products as well as the inclusion of one month of legacy Hospira U.S. operations in third-quarter 2015, partially offset by lower expenses associated with certain products that have recently lost marketing exclusivity, as well as continued benefits from cost-reduction and productivity initiatives; and

lower adjusted R&D expense(2), primarily due to the non-recurrence of upfront payments associated with certain agreements entered into during third-quarter 2014, partially offset by higher clinical trial spend for certain oncology and GIP(4) pipeline programs as well as the inclusion of one month of legacy Hospira U.S. operations in third-quarter 2015.

The effective tax rate on adjusted income(2) declined 1.0 percentage point to 25.8% from 26.8%. This decline was primarily due to an increase in tax benefits associated with the resolution of certain tax positions pertaining to prior years with various foreign tax authorities, partially offset by an unfavorable change in the jurisdictional mix of earnings.

The diluted weighted-average shares outstanding declined by 160 million shares compared to the prior-year quarter due to Pfizer’s share repurchase program, including the impact of the $5 billion accelerated share repurchase agreement executed in February 2015 and completed in July 2015.

In addition to the aforementioned factors, third-quarter 2015 reported earnings were primarily impacted by the following:

Unfavorable impacts:
higher purchase accounting adjustments, restructuring charges and acquisition-related costs primarily associated with the acquisition of Hospira in third-quarter 2015; and

higher asset impairment charges in third-quarter 2015, including an impairment loss related to Pfizer’s 49%-owned equity-method investment with Zhejiang Hisun Pharmaceuticals Co., Ltd. (Hisun) in China.

Favorable impacts:
the non-recurrence of a charge incurred in the prior-year quarter for an additional year of the Branded Prescription Drug Fee in accordance with final regulations issued in third-quarter 2014 by the U.S. Internal Revenue Service; and
a lower effective tax rate, primarily due to an increase in tax benefits associated with the resolution of certain tax positions pertaining to prior years with various foreign tax authorities and the non-recurrence in 2015 of the non-tax deductible charge for the aforementioned additional year of the Branded Prescription Drug Fee incurred in the prior-year quarter, partially offset by the unfavorable change in the jurisdictional mix of earnings.

RECENT NOTABLE DEVELOPMENTS
Product Developments

Ibrance (palbociclib)
Pfizer announced in August 2015 that the European Medicines Agency (EMA) validated for review the Marketing Authorization Application (MAA) for palbociclib in combination with endocrine therapy for the treatment of hormone receptor-positive, human epidermal growth factor receptor 2-negative advanced or metastatic breast cancer. The submission was based on the final results of the PALOMA-1 and PALOMA-3 trials in metastatic breast cancer. Both trials demonstrated that palbociclib in combination with an endocrine therapy improved progression-free survival compared to endocrine therapy alone.

Pfizer, with Alliance Foundation Trials, LLC and the Austrian Breast & Colorectal Cancer Study Group, announced in August 2015 the launch of the Palbociclib Collaborative Adjuvant Study, or PALLAS. This global Phase 3 clinical trial for patients with early-stage breast cancer is being conducted in conjunction with Breast International Group, German Breast Group, National Surgical Adjuvant Breast and Bowel Project and PrECOG, LLC. The PALLAS trial is designed to evaluate whether the addition of palbociclib to standard therapy will improve disease-free survival and prevent the disease from recurring. Approximately 4,600 people are expected to enroll in the trial.

Trumenba (rLP2086, Meningococcal Serogroup B Bivalent Recombinant Lipoprotein vaccine)
Pfizer announced in August 2015 positive topline results of two Phase 3 studies of Trumenba. One study included approximately 3,600 healthy individuals 10 through 18 years of age, and the other study included approximately 3,300 healthy individuals 18 through 25 years of age. Both studies met all primary immunogenicity endpoints, demonstrating robust immune responses against certain invasive meningococcal B strains after the vaccine dose series. Safety and tolerability data from both studies were also consistent with data from previous studies.

Pfizer presented in October 2015 data from a randomized, controlled Phase 2 study of Trumenba, coadministered with routine meningococcal (groups A, C, Y and W) (MCV4) and tetanus, diphtheria and pertussis (Tdap) vaccines in adolescents. The data, which were released in an oral presentation at IDWeek 2015 in San Diego, are based on a study conducted in more than 2,600 healthy individuals 10 through 12 years of age that evaluated the safety, tolerability and immunogenicity of Trumenba when coadministered with MCV4 and Tdap. Data demonstrated that immune responses following Trumenba, MCV4 and Tdap vaccines given concomitantly were noninferior to immune responses to MCV4 and Tdap alone or Trumenba alone.

Xeljanz (tofacitinib citrate)
Pfizer announced in October 2015 that it received a Complete Response Letter from the U.S. Food and Drug Administration (FDA) for its supplemental New Drug Application (sNDA) for Xeljanz (tofacitinib citrate) for the treatment of adult patients with moderate to severe chronic plaque psoriasis. The FDA’s recommendations are specific to the moderate to severe chronic plaque psoriasis sNDA.

Pfizer regularly reviews the Xeljanz development portfolio and recently decided not to advance indications for Crohn’s disease and ankylosing spondylitis. Pfizer will focus its future investments and development programs on indications for rheumatoid arthritis (RA), psoriatic arthritis and ulcerative colitis (UC). Pfizer also has a broad developmental portfolio of other Janus kinase (JAK) inhibitors and new mechanisms of action in inflammation and immunology.

Pfizer intends to re-submit a MAA to the EMA for Xeljanz for the treatment of moderate to severe active RA by first-quarter 2016. The re-submission will include additional safety results and analyses requested by the Agency following the initial review and subsequent discussions, intended to strengthen the characterization of the benefit-risk profile.

Pfizer announced in September 2015 positive top-line results from two of its four Phase 3 studies of Xeljanz (tofacitinib 10 mg, twice daily tablets) for the treatment of adults with moderate to severe UC. Both studies met their primary endpoints as measured by the proportion of patients receiving Xeljanz in remission at week 8 compared to patients receiving placebo. No new or unexpected safety findings for Xeljanz were observed in the studies. Detailed analyses of these induction studies, including additional efficacy and safety data, will be submitted for presentation at a future scientific meeting. The two remaining studies in the Phase 3 UC program are ongoing.

Pfizer announced in July 2015 that the FDA accepted for review Pfizer’s new drug application (NDA) for Xeljanz 11 mg once daily modified release tablets for the treatment of patients with moderate to severe RA who have had an inadequate response or intolerance to methotrexate. The FDA has provided an anticipated Prescription Drug User Fee Act (PDUFA) action date in February 2016.

Xalkori (crizotinib) — In October 2015, the Committee for Medicinal Products for Human Use (CHMP) of the EMA adopted a positive opinion recommending extension of the current indication of Xalkori to include first-line treatment of adults with anaplastic lymphoma kinase (ALK)-positive advanced non-small cell lung cancer (NSCLC). The CHMP recommendation will now be reviewed by the European Commission, which has the authority to approve medicines for the European Union. This recommendation is based on efficacy and safety data from the Phase 3 PROFILE 1014 trial that supports Xalkori as a standard of care in the first-line setting for patients with ALK-positive advanced NSCLC. In Europe, Xalkori is currently indicated for the treatment of adults with previously treated ALK-positive advanced NSCLC.

Eliquis (apixaban)
Bristol-Myers Squibb Company (BMS) and Pfizer presented new data for Eliquis at the ESC Congress 2015 in August and September 2015. The new data reinforce the commitment of the BMS-Pfizer alliance to the ongoing evaluation of Eliquis in both the nonvalvular atrial fibrillation (NVAF) and venous thromboembolism patient populations. In addition, data from the AEGEAN (Assessment of an Educational and Guidance Programme for Eliquis Adherence in Nonvalvular Atrial Fibrillation) study evaluating adherence among NVAF patients further extends the BMS-Pfizer alliance’s commitment to patient care.

BMS and Pfizer announced in September 2015 that the first patient has been enrolled into a Phase 4 clinical trial, AUGUSTUS, designed to evaluate the safety of Eliquis versus warfarin or other vitamin K antagonists in patients with NVAF and a recent acute coronary syndrome or undergoing percutaneous coronary intervention, also known as a stent. AUGUSTUS is anticipated to enroll 4,600 patients from 30 countries, and is one of several new clinical trials that will help provide additional information on the safe and appropriate use of Eliquis for certain types of patients within currently approved indications.

Pipeline Developments

A comprehensive update of Pfizer’s development pipeline, including assets from the recently-completed Hospira acquisition, was published today and is now available at www.pfizer.com/pipeline. It includes an overview of Pfizer’s research and a list of compounds in development with targeted indication and phase of development, as well as mechanism of action for candidates from Phase 2 through registration.

Avelumab(7) (MSB0010718C)
Merck KGaA, Darmstadt, Germany (Merck KGaA) and Pfizer announced in October 2015 that the FDA granted avelumab(7), an investigational fully human anti-PD-L1 IgG1 monoclonal antibody, Fast Track designation for the treatment of metastatic Merkel cell carcinoma (MCC), a rare and aggressive type of skin cancer. The designation relates to the clinical development program for avelumab(7) in metastatic MCC, which includes the Phase 2 study, JAVELIN Merkel 200, to assess the safety and efficacy of avelumab(7) in patients with metastatic MCC who have progressed after at least one prior chemotherapy regimen.
Merck KGaA and Pfizer announced in September 2015 that the FDA granted orphan drug designation for avelumab(7) for the treatment of MCC.

Merck KGaA and Pfizer presented in September 2015 data from six studies evaluating the potential role of PD-L1 inhibition and the safety and efficacy of the investigational cancer immunotherapy avelumab(7) at European Cancer Congress 2015. New data were presented in urothelial (e.g., bladder), mesothelioma and gastric/gastroesophageal cancers. Additional data were also presented from Phase 1b trials in NSCLC and ovarian cancer that built on interim results previously presented at the 2015 Annual Meeting of the American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper).

Inotuzumab ozogamicin — In October 2015, Pfizer announced that its investigational antibody-drug conjugate, inotuzumab ozogamicin, received Breakthrough Therapy designation from the FDA for acute lymphoblastic leukemia (ALL). The Breakthrough Therapy designation was based on the results of the Phase 3 INO-VATE ALL trial, which enrolled 326 adult patients with relapsed or refractory CD22-positive ALL and compared inotuzumab ozogamicin to standard of care chemotherapy.

ALO-02 (oxycodone hydrochloride and naltrexone hydrochloride) — Pfizer recently received notification from the FDA that the October 2015 PDUFA action date was extended by three months to January 2016 with respect to the NDA for ALO-02, an extended-release opioid with abuse deterrent properties for the management of pain severe enough to require daily, around-the-clock, long-term opioid treatment and for which alternative treatment options are inadequate. The NDA for ALO-02 remains under review by the FDA.

PF-06290510 (Staphylococcus aureus (S. aureus) vaccine candidate) — In July 2015, Pfizer announced enrollment of the first patient in a Phase 2b clinical trial of its investigational S. aureus multi-antigen vaccine in adults undergoing elective spinal fusion surgery. The purpose of the study, named STRIVE (STaphylococcus aureus SuRgical Inpatient Vaccine Efficacy), is to evaluate the safety and efficacy of the vaccine to determine if it prevents postoperative invasive S. aureus infections in patients undergoing elective spinal surgery. The trial is expected to enroll approximately 2,600 patients, with final results expected in 2017. PF-06290510 was granted Fast Track designation by the FDA in February 2014.

PF-06410293 — In July 2015, Pfizer began dosing patients in a multinational Phase 3 clinical trial of PF-06410293, a potential biosimilar to Humira(8) (adalimumab). The Phase 3 clinical trial will evaluate the efficacy, safety and immunogenicity of PF-06410293 plus methotrexate and adalimumab sourced from the EU plus methotrexate in subjects with moderately to severely active RA who have had an inadequate response to methotrexate monotherapy.

Corporate Developments

Pfizer announced in October 2015 that it completed its previously announced acquisition of GlaxoSmithKline’s quadrivalent meningococcal ACWY vaccines, Nimenrix and Mencevax, for total consideration of approximately $130 million (€115 million). The transaction was completed on September 30, 2015 and adds two high-quality and complementary vaccines to Pfizer’s portfolio, allowing the company to reach a broader global population. This transaction is not expected to have any significant impact on Pfizer’s 2015 financial performance.

In September 2015, Pfizer completed its previously announced acquisition of Hospira. As previously disclosed, Pfizer continues to expect the transaction to be immediately accretive to adjusted diluted EPS(2) upon closing, and accretive by $0.10 – $0.12 per share in the first full year after the close, with additional accretion anticipated thereafter. In addition, Pfizer expects the transaction will deliver $800 million in annual cost synergies by 2018. On September 30, 2015, Pfizer updated certain components of its 2015 financial guidance solely to reflect the anticipated impact of Hospira operations on 2015 financial results.

In September 2015, in order to eliminate certain redundancies in Pfizer’s biosimilar drug products pipeline created as a result of the acquisition of Hospira, Pfizer opted to return rights to Celltrion, Inc. and Celltrion Healthcare, Co., Ltd. that Hospira had previously acquired to potential biosimilars to Rituxan(8) (rituximab) and Herceptin(8) (trastuzumab).

In August 2015, Pfizer and Synthon entered into an agreement whereby Pfizer has acquired the exclusive U.S. commercialization rights to glatiramer acetate, a potential generic version of the originator medicine Copaxone(8) for the treatment of relapsing remitting multiple sclerosis. Under the terms of the agreement, Pfizer will have exclusive rights to commercialize both the once-daily 20 mg/ml dosage formulation and the three-times-per-week 40 mg/ml dosage formulation of Synthon’s glatiramer acetate in the U.S. Synthon is responsible for the clinical development, manufacture and supply of glatiramer acetate. Pfizer is solely responsible for the commercialization of glatiramer acetate in the U.S. Financial terms of the agreement were not disclosed.
Please find Pfizer’s press release and associated financial tables, including reconciliations of certain GAAP reported to non-GAAP adjusted information, at the following hyperlink:

View Source

(Note: If clicking on the above link does not open up a new web page, you may need to cut and paste the above URL into your browser’s address bar.)

For additional details, see the associated financial schedules and product revenue tables attached to the press release located at the hyperlink referred to above and the attached disclosure notice.

(1) Reported revenues is defined as revenues in accordance with U.S. generally accepted accounting principles (GAAP). Reported net income is defined as net income attributable to Pfizer Inc. in accordance with U.S. GAAP. Reported diluted earnings per share (EPS) is defined as reported diluted EPS attributable to Pfizer Inc. common shareholders in accordance with U.S. GAAP.

(2) Adjusted income and its components and Adjusted diluted EPS are defined as reported U.S. GAAP net income(1) and its components and reported diluted EPS(1) excluding purchase accounting adjustments, acquisition-related costs, discontinued operations and certain significant items. Adjusted revenue, Adjusted cost of sales, Adjusted selling, informational and administrative (SI&A) expenses, Adjusted research and development (R&D) expenses and Adjusted other (income)/deductions are income statement line items prepared on the same basis as, and therefore components of, the overall Adjusted income measure. As described under Adjusted income in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of Pfizer’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 28, 2015, management uses Adjusted income, among other factors, to set performance goals and to measure the performance of the overall company. We believe that investors’ understanding of our performance is enhanced by disclosing this measure. See the accompanying reconciliations of certain GAAP Reported to non-GAAP Adjusted information for the third quarter and first nine months of 2015 and 2014, as well as reconciliations of full-year 2015 guidance for Adjusted income and Adjusted diluted EPS to full-year 2015 guidance for Reported net income(1) and Reported diluted EPS(1). The Adjusted income and its components and Adjusted diluted EPS measures are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted EPS.

(3) Pfizer’s fiscal year-end for international subsidiaries is November 30, 2015, and Pfizer’s fiscal year-end for U.S. subsidiaries is December 31, 2015. In accordance with Pfizer’s domestic and international reporting periods, Pfizer’s consolidated financial statements for the three and nine months ended September 27, 2015 reflect one month of legacy Hospira U.S. operations but do not include any financial results from legacy Hospira international operations.

(4) For a description of the revenues in each business, see the "Our Strategy––Commercial Operations" sub-section in the Overview of Our Performance, Operating Environment, Strategy and Outlook section of Pfizer’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 28, 2015.

(5) Other includes revenues from Pfizer CentreSource, our contract manufacturing and bulk pharmaceutical chemical sales organization, and revenues related to our transitional manufacturing and supply agreements with Zoetis Inc.

(6) The 2015 financial guidance reflects the following:

Does not assume the completion of any business development transactions not completed as of September 27, 2015, including any one-time upfront payments associated with such transactions.

Excludes the potential effects of the resolution of litigation-related matters not substantially resolved as of September 27, 2015.
Exchange rates assumed are a blend of the actual exchange rates in effect through third-quarter 2015 and the mid-October 2015 exchange rates for the remainder of the year. Excludes the impact of a potential devaluation of the Venezuelan bolivar.
Guidance for reported revenues(1) reflects the anticipated negative impact of $3.3 billion due to recent and expected generic competition for certain Pfizer-standalone (excluding legacy Hospira) products that have recently lost or are anticipated to soon lose patent protection.

Guidance for Pfizer-standalone (excluding legacy Hospira) reported revenues(1) also reflects the anticipated negative impact of $3.1 billion as a result of unfavorable changes in essentially all foreign exchange rates relative to the U.S. dollar compared to foreign exchange rates from 2014. The anticipated negative impact on Pfizer-standalone (excluding legacy Hospira) reported(1) and adjusted(2) diluted EPS resulting from unfavorable changes in foreign exchange rates compared to foreign exchange rates from 2014 is approximately $0.18.

Guidance for the effective tax rate on adjusted income(2) does not assume the renewal of the U.S. R&D tax credit. The renewal of the R&D tax credit is not anticipated to have a material impact on the effective tax rate on adjusted income(2).
Guidance for reported(1) and adjusted diluted EPS(2) assumes diluted weighted-average shares outstanding of approximately 6.25 billion shares.

Reconciliation of the 2015 Adjusted income(2) and Adjusted diluted EPS(2) guidance to the 2015 Reported net income attributable to Pfizer Inc.(1) and Reported diluted EPS attributable to Pfizer Inc.(1) common shareholders guidance:

(7) Avelumab is the proposed International Nonproprietary Name for the anti-PD-L1 monoclonal antibody, MSB0010718C.

(8) Humira is a registered U.S. trademark of Abbvie Biotechnology Ltd. Rituxan is a registered U.S. trademark of Biogen Idec Inc. Herceptin is a registered U.S. trademark of Genentech, Inc. Copaxone is a registered trademark of Teva Pharmaceuticals Industry Ltd.

On October 27, 2015 OncoMed Pharmaceuticals Inc. (NASDAQ:OMED) reported that data related to three of its clinical-stage programs will be presented at the upcoming AACR (Free AACR Whitepaper)-NCI-EORTC AACR-NCI-EORTC (Free AACR-NCI-EORTC Whitepaper) International Conference on Molecular Targets and Cancer Therapeutics (EORTC-NCI-AACR) (Free ASGCT Whitepaper) (Free EORTC-NCI-AACR Whitepaper) taking place November 5-9, 2015 in Boston, MA (Press release, OncoMed, OCT 27, 2015, View Source [SID:1234507805]).

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

                  Schedule Your 30 min Free Demo!

Among the abstracts accepted for presentation are Phase 1a data for single-agent brontictuzumab (anti-Notch1, OMP-52M51) in advanced solid tumors, including initial results from an expansion cohort of patients whose tumors demonstrate an overexpression of the activated form of Notch1 as measured by a companion biomarker. In addition, biomarker data for vantictumab (anti-Fzd7, OMP-18R5) in non-small cell lung cancer, as well as results of preclinical studies for OncoMed’s anti-DLL4/VEGF bispecific (OMP-305B83), will also be presented. Details for the presentation are provided below.

Friday, November 6, 2015

Abstract #A30: Predictive and pharmacodynamic biomarkers of vantictumab (OMP-18R5; anti-Frizzled) in non-small cell lung cancer
Lead author: Ann Kapoun, Ph.D., OncoMed
Poster session A: Biomarkers
Time and location: 12:15 pm – 3:15 pm / Exhibit hall C-D

Sunday, November 8, 2015

Abstract #C42: Safety and preliminary efficacy results of a first-in-human Phase I study of the novel cancer stem cell (CSC) targeting antibody brontictuzumab (OMP-52M51, anti-Notch1) administered intravenously to patients with certain advanced solid tumors
Lead author: Pamela Munster, M.D., University of California, San Francisco
Poster session C: Clinical Trials
Location and time: 12:30 pm – 3:30 pm / Exhibit hall C-D

Abstract #C164: Dual targeting of the DLL4 and VEGF pathways with a bispecific monoclonal antibody inhibits tumor growth and reduces cancer stem cell frequency
Lead author: Wang-Ching Yen, Ph.D., OncoMed
Poster session C: Therapeutic Agents: Biological
Time and location: 12:30 pm -3:30 pm / Exhibit hall C-D