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Roche delivers strong sales growth in the first nine months of 2015

On October 22, 2015 Roche reported strong sales growth in the first nine months of 2015 (Press release, Hoffmann-La Roche , OCT 22, 2015, View Source [SID:1234507757]).

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Group sales increased 6% at constant exchange rates1, 2% in Swiss francs

Pharmaceuticals Division sales up 6%, driven by strong growth of HER2-positive breast cancer medicines, as well as Avastin and Esbriet

Diagnostics Division sales increased 6%, driven by Professional Diagnostics, Molecular Diagnostics and Tissue Diagnostics

Full-year outlook raised

Positive phase III data presented on ocrelizumab, the first medicine for relapsing and for primary progressive forms of multiple sclerosis (MS)

Launch of cobas EGFR Mutation Test v2, the first liquid biopsy PCR test from Roche

For the seventh year running, Roche ranked most sustainable healthcare company in the Dow Jones Sustainability Indices (DJSI)

Commenting on the Group’s first nine months, Roche CEO Severin Schwan said: "With sales continuing to grow strongly, we are raising our outlook for the full year. I am very pleased about the positive newsflow coming from our product pipeline. This includes data on our cancer immunotherapy medicine atezolizumab in bladder and lung cancer and, in particular, strong data on ocrelizumab in both relapsing and primary progressive forms of MS. These medicines have the potential to make a big difference to people living with these terrible diseases."

Group demonstrated continued strong growth

Sales of the Roche Group increased 6% to CHF 35.5 billion in the first nine months. Growth was driven by all regions in the Pharmaceuticals Division and Professional Diagnostics’ sales.

The Swiss franc strengthened considerably against the euro during the first nine months of 2015, whilst weakening against the US dollar. The Japanese yen continued to weaken against the Swiss franc, as did Latin American and most European currencies. Overall, there was a negative currency impact of four percentage points on sales growth.

The DJSI again recognised Roche as the most sustainable company in the healthcare industry for the seventh consecutive year. Roche scored highest in the management of environmental and social topics, and with more than 100 new business partnerships established last year, DJSI also noted Roche’s strong culture of collaboration, broad approach to innovation, and commitment to furthering patient access to healthcare.

HER2 franchise, Avastin and Esbriet driving growth in the Pharmaceuticals Division

In Pharmaceuticals, the oncology and immunology products drove the division’s sales for the first nine months. Sales of the HER2-positive breast cancer medicines, Herceptin, Perjeta and Kadcyla, grew 19%. The outlook for this franchise was further strengthened in July after the European Commission approved Perjeta combination therapy for use before surgery. Avastin (+9%) and MabThera/Rituxan (+5%) also recorded continued strong growth.

In immunology, Actemra/RoActemra (+22%), which is used mainly to treat rheumatoid arthritis, and Xolair (+25%), which is now used in the treatment of chronic hives as well as asthma, grew again significantly. Sales of anti-viral medicine Valcyte and oral chemotherapy Xeloda declined as these medicines are no longer patent protected. Sales of hepatitis medicine Pegasys and eye treatment Lucentis dropped as a result of increased competition.

Strong demand for Esbriet, a treatment for idiopathic pulmonary fibrosis (IPF), a fatal lung disease, continued throughout the third quarter and sales totalled CHF 386 million in the first nine months. In September, additional data were presented from a pooled analysis of three phase III studies that suggested a reduction in treatment-emergent risk of death for IPF patients on Esbriet for more than two years.2 In the same month, Esbriet received approval in Switzerland.

Recently, key milestones were achieved for Roche’s Cotellic (cobimetinib) for use in combination with Zelboraf in advanced melanoma. The company announced final phase III data showing a significant increase in overall survival, and in September, the Committee for Medicinal Products for Human Use (CHMP) recommended EU approval for Cotellic plus Zelboraf for the treatment of patients with BRAF V600 mutation-positive metastatic melanoma. This combination therapy was approved in Switzerland in August and a US FDA decision is anticipated by the end of the year.

Laboratory business main growth contributor in Diagnostics Division
Sales of the Diagnostics Division increased 6%, driven primarily by immunodiagnostic products from the Professional Diagnostics business area (+7%). The Molecular and Tissue Diagnostics business areas also performed well, with sales up 10% and 12%, respectively. Sales in Diabetes Care declined 3% due to ongoing challenging market conditions.

With four instruments and four test approvals and launches this year, the Diagnostics Division further broadened its industry leading product portfolio. Roche recently launched the cobas EGFR Mutation Test v2 that utilises plasma and/or tumour tissue for non-small cell lung cancer diagnosis and treatment monitoring.

Significant clinical data released at key medical meetings
At this year’s European Cancer Congress (ECC), results were presented from several clinical studies that are supporting regulatory discussions on alectinib, atezolizumab and Cotellic, plus data on earlier-stage cancer immunotherapies. Roche is studying more than 20 medicines in cancer immunotherapy, eight of which are in clinical trials.

At the congress of the European Committee for Treatment and Research in Multiple Sclerosis (ECTRIMS), Roche presented positive phase III data for ocrelizumab in people with relapsing forms of MS and in primary progressive MS. Ocrelizumab is the first medicine to show a clinically meaningful impact on the progression of disability in people with primary progressive MS (PPMS) in a pivotal phase III trial. In this study, the proportion of patients with adverse events and serious adverse events was similar in the ocrelizumab and placebo groups. In two studies in people with the most common form of the disease, relapsing MS, ocrelizumab was superior to high-dose interferon beta-1a in reducing key markers of MS activity over the two-year controlled treatment period: annualised relapse rate, disability progression, and areas of MS-related inflammation and brain injury. The proportion of patients with adverse events and serious adverse events was similar in the ocrelizumab and interferon beta-1a groups. Roche will submit these data to global health authorities in 2016 to seek approval of ocrelizumab for relapsing forms of MS and PPMS.

In September, the US FDA granted Breakthrough Therapy Designation for ACE910 to prevent bleeding episodes in hemophilia A patients aged 12 and older. This is now the ninth Breakthrough Therapy Designation granted for a Roche medicine.

Raised outlook for 2015
Based on the strong performance recorded in the first nine months of 2015, Roche now expects sales growth in the mid-single digit range, at constant exchange rates. Core earnings per share are targeted to grow ahead of sales at constant exchange rates3. Roche expects to further increase its dividend in Swiss francs.

Lilly Reports Third-Quarter 2015 Results, Revises 2015 Financial Guidance

On October 22, 2015 Eli Lilly and Company (NYSE: LLY) reported financial results for the third quarter of 2015 (Press release, Eli Lilly, OCT 22, 2015, View Source [SID:1234507756]).

Certain financial information for 2015 and 2014 is presented on both a reported and a non-GAAP basis. Some numbers in this press release may not add due to rounding. Reported results were prepared in accordance with generally accepted accounting principles (GAAP) and include all revenue and expenses recognized during the period. Non-GAAP measures exclude the items described in the reconciliation tables later in the release. Non-GAAP measures in 2014 include the results of Novartis Animal Health as if the acquisition and the financing for the acquisition had occurred as of January 1, 2014. Non-GAAP financial measures for all periods presented also exclude amortization of intangibles primarily associated with costs of marketed products acquired or licensed from third parties. The company’s 2015 financial guidance is also being provided on both a reported and a non-GAAP basis. The non-GAAP measures are presented to provide additional insights into the underlying trends in the company’s business.

"We are pleased with our strong third-quarter results, which reflect the ongoing actions we are taking to grow revenue and increase productivity while we are replenishing and advancing our pipeline with an array of new, innovative therapies," said John C. Lechleiter, Ph.D., Lilly’s chairman, president and chief executive officer. "Despite headwinds from foreign exchange rates, we are benefiting from recent launches as well as our acquisition of Novartis Animal Health earlier this year."

"This quarter, we had higher sales volume for several key products, including recently launched Cyramza and Trulicity. We also launched several new products in various global markets, including Synjardy in the U.S. for type 2 diabetes. Promising pipeline momentum continued with encouraging news for baricitinib and abemaciclib, while Jardiance reported positive cardiovascular outcomes. Finally, we continued to create new collaborations and pursue smaller-scale acquisitions to bolster our pipeline and our product portfolio."

Looking forward, Lechleiter noted that Lilly could have a regulatory submission and/or decision for multiple potential new medicines in the next 18 months – reinforcing the company’s confidence in its innovation-based strategy and in its ability to grow revenue and expand margins over the balance of this decade.

Key Events Over the Last Three Months

Commercial

The company launched Basaglar, a basal insulin product, in Japan, the UK, Germany and other European markets. Basaglar is part of the Boehringer Ingelheim and Eli Lilly and Company Diabetes Alliance.
The company launched Trulicity in Japan as a treatment for type 2 diabetes.

Regulatory

The U.S. Food and Drug Administration (FDA) approved Synjardy (empagliflozin and metformin hydrochloride) tablets and the product was launched in the U.S. for the treatment of adults with type 2 diabetes. Synjardy is part of the Boehringer Ingelheim and Eli Lilly and Company Diabetes Alliance.

The FDA granted Breakthrough Therapy Designation to abemaciclib for patients with refractory hormone-receptor-positive advanced or metastatic breast cancer. Breakthrough Therapy Designation is designed to expedite the development and review of potential medicines that are intended to treat a serious condition, and preliminary clinical evidence indicates that the treatment may demonstrate substantial improvement over available therapy on a clinically significant endpoint.

Clinical

The company and Boehringer Ingelheim announced positive results from a long-term clinical trial investigating cardiovascular (CV) outcomes for Jardiance in adults with type 2 diabetes at high risk for CV events. Jardiance is the only diabetes medicine to have demonstrated a significant reduction in both cardiovascular risk and cardiovascular death in a dedicated outcomes trial.

The company will terminate the Phase III trials of evacetrapib for the treatment of high-risk atherosclerotic cardiovascular disease due to insufficient efficacy.

The company and Incyte Corporation announced positive top-line results for baricitinib, an investigational medicine for patients with moderately-to-severely active rheumatoid arthritis.

The third Phase III study evaluating safety and efficacy of baricitinib met its primary objective of demonstrating non-inferiority of baricitinib monotherapy to methotrexate monotherapy based on ACR20 response rate after 24 weeks of treatment. Additionally, baricitinib was superior to methotrexate based on ACR20 response.

The fourth Phase III study of baricitinib met its primary objective of demonstrating superiority compared to placebo after 12 weeks of treatment based on ACR20 response rate. Baricitinib was also superior to adalimumab in improving signs and symptoms of rheumatoid arthritis as measured by ACR20 response and improvement in the DAS28-hsCRP score after 12 weeks of treatment.

Business Development/Other

The company announced external innovation agreements with:

AstraZeneca to expand their existing immuno-oncology collaboration exploring novel combination therapies for the treatment of patients with solid tumors. The company and AstraZeneca will evaluate the safety and efficacy of a range of additional combinations across the companies’ complementary portfolios.

ImaginAb Inc. to conduct preclinical research studying potential novel T-cell-based immuno-oncology therapies.

Innovent Biologics, Inc. to expand their collaboration to support the development and potential commercialization of up to three anti-PD-1 based bispecific antibodies for cancer treatments over the next decade, both inside and outside of China.

The company acquired worldwide rights from Locemia Solutions to a Phase III intranasal glucagon, a potential treatment for severe hypoglycemia in people with diabetes treated with insulin.

Bristol-Myers Squibb transferred its Erbitux commercialization rights to Lilly in North America.

The company entered into a settlement agreement to resolve patent litigation with Sanofi regarding the company’s insulin glargine product, Basaglar. As a part of the agreement, Lilly and its alliance partner, Boehringer Ingelheim, will have the ability to launch Basaglar in the U.S. on December 15, 2016. Under the terms of the agreement, Sanofi granted Lilly a royalty-bearing license so Lilly can manufacture and sell Basaglar in the Kwikpen device globally.

The U.S. District Court for the Southern District of Indiana ruled that the Alimta vitamin regimen patent would be infringed by the generic challengers’ proposed products. The patent provides intellectual property protection for Alimta until May 2022.
The Japan Patent Office issued a notice of closure in the trial regarding the validity of Lilly’s vitamin regimen patent for Alimta. We expect a written decision upholding the patent validity in the coming weeks. This is the first of two decisions pending. If the patents are ultimately upheld through all challenges and appeals, they would provide intellectual property protection for Alimta in Japan until June 2021.

The company plans to add 30,000 square feet and approximately 50 new jobs to its research and development presence at the Alexandria Center for Life Science in New York, New York. Upon completion in 2016, this space will include a translational immuno-oncology hub and a Lilly "portal," which will provide local academic scientists with opportunities for collaborative access to cutting-edge drug discovery capabilities.

Third-Quarter Reported Results

In the third quarter of 2015, worldwide revenue was $4.960 billion, an increase of 2 percent compared with the third quarter of 2014. The revenue growth included an increase of 12 percent due to increased volume, largely offset by decreases of 8 percent due to the unfavorable impact of foreign exchange rates and 2 percent due to lower prices. The 12 percent increase in volume was primarily due to the inclusion of revenue from Novartis Animal Health and increased volume for several products, including the U.S. Evista authorized generic, Cyramza and Trulicity. These worldwide volume increases were partially offset by lower demand for Cymbalta due to the U.S. patent expiration in December 2013. Revenue in the U.S. increased 14 percent to $2.538 billion, due primarily to higher volume, partially offset by lower prices. The U.S. price decrease was driven by a lower price for the Evista authorized generic, which more than offset higher prices for other products. Revenue outside the U.S. decreased 9 percent to $2.422 billion, driven by the unfavorable impact of foreign exchange rates, partially offset by the inclusion of revenue from Novartis Animal Health and increased volumes for the majority of pharmaceutical products.

Gross margin increased 3 percent to $3.723 billion in the third quarter of 2015, as the favorable impact of foreign exchange rates on cost of sales, including the impact on international inventories sold, the inclusion of Novartis Animal Health and increased contribution from recently launched products were largely offset by the unfavorable impact of foreign exchange rates on revenue. Gross margin as a percent of revenue was 75.1 percent, an increase of 1.1 percentage points compared with the third quarter of 2014. The increase in gross margin percent was primarily due to the favorable impact of foreign exchange rates on international inventories sold, partially offset by the inclusion of Novartis Animal Health.

Operating expenses in the third quarter of 2015, defined as the sum of research and development and marketing, selling and administrative expenses, were $2.719 billion, a decline of 7 percent compared with the third quarter of 2014. Research and development expenses decreased 8 percent to $1.143 billion, or 23.1 percent of revenue, driven primarily by a 2014 charge associated with the termination of tabalumab development, and to a lesser extent foreign exchange rates, partially offset by the inclusion of Novartis Animal Health. Marketing, selling and administrative expenses decreased 6 percent to $1.576 billion, due to a 2014 charge associated with the Branded Prescription Drug Fee and foreign exchange rates, partially offset by the inclusion of Novartis Animal Health and expenses related to new product launches.

There were no acquired in-process research and development charges in the third quarter of 2015. In the third quarter of 2014, the company recognized acquired in-process research and development charges totaling $95.0 million related to collaboration agreements with Immunocore Limited and AstraZeneca.

In the third quarter of 2015, the company recognized asset impairment, restructuring and other special charges of $42.4 million. The charges primarily relate to integration costs for Novartis Animal Health and severance costs. In the third quarter of 2014, the company recognized asset impairment, restructuring and other special charges of $36.3 million, primarily severance, associated with cost-containment efforts and costs related to the then pending acquisition of Novartis Animal Health.

Operating income in the third quarter of 2015 was $961.3 million, an increase of 71 percent compared with the third quarter of 2014, driven by higher gross margin, lower operating expenses and lower acquired in-process research and development charges.

Other income (expense) was income of $86.5 million in the third quarter of 2015, compared with income of $93.5 million in the third quarter of 2014. Other income during the third quarter of 2015 was driven by net gains on investments. Other income during the third quarter of 2014 was driven primarily by net gains on investments and income from milestones earned.

The effective tax rate was 23.7 percent in the third quarter of 2015, compared with 23.6 percent in the third quarter of 2014. The 2015 effective tax rate reflects the impact of an increased percentage of forecasted earnings in higher taxed jurisdictions. The 2014 effective tax rate reflects the impact of a $119.0 million nondeductible charge associated with the U.S. Branded Prescription Drug Fee. Neither period includes the benefit of certain expired U.S. tax provisions, including the R&D tax credit.

In the third quarter of 2015, net income and earnings per share both increased 60 percent to $799.7 million, and $0.75, respectively, compared with $500.6 million and $0.47, respectively, in the third quarter of 2014. The increases in net income and earnings per share were driven by higher operating income.

Third-Quarter 2015 Non-GAAP Measures

On a non-GAAP basis, worldwide revenue was $4.960 billion in the third quarter of 2015, a decline of 4 percent compared with the third quarter of 2014. The revenue decline included decreases of 8 percent due to the unfavorable impact of foreign exchange rates and 2 percent due to lower prices, largely offset by an increase of 7 percent due to increased volume. The increase in volume was primarily due to the U.S. Evista authorized generic, as well as Cyramza and Trulicity, partially offset by lower demand for Cymbalta. U.S. revenue increased 11 percent to $2.538 billion, due primarily to higher volume, partially offset by lower prices. The U.S. price decrease was driven by a lower price for the Evista authorized generic, which more than offset higher prices for other products. Revenue outside the U.S. decreased 15 percent to $2.422 billion, driven by the unfavorable impact of foreign exchange rates, partially offset by increased volumes for the majority of pharmaceutical products.

Gross margin remained relatively flat at $3.861 billion in the third quarter of 2015, as the favorable impact of foreign exchange rates on cost of sales, including the impact on international inventories sold, and increased contribution from recently launched products were offset by the unfavorable impact of foreign exchange rates on revenue. Gross margin as a percent of revenue was 77.8 percent, an increase of 3.0 percentage points compared with the third quarter of 2014. The increase in gross margin percent was due to the favorable impact of foreign exchange rates on international inventories sold.

Operating expenses in the third quarter of 2015 were $2.683 billion, a decline of 7 percent compared with the third quarter of 2014. Research and development expenses decreased 10 percent to $1.143 billion, or 23.0 percent of revenue, driven primarily by a 2014 charge associated with the termination of tabalumab development, and to a lesser extent the favorable impact of foreign exchange rates. Marketing, selling and administrative expenses decreased 5 percent to $1.540 billion, due to the favorable impact of foreign exchange rates, partially offset by expenses related to new product launches.

Other income (expense) was income of $86.5 million in the third quarter of 2015, compared with income of $59.3 million in the third quarter of 2014.

The effective tax rate increased 1.6 percentage points compared to the third quarter of 2014 to 24.9 percent, due to an increased percentage of forecasted earnings in higher taxed jurisdictions.

Net income and earnings per share both increased 22 percent to $949.6 million and $0.89 respectively, compared with $781.2 million and $0.73, respectively, in the third quarter of 2014. The increases in net income and earnings per share were driven by higher operating income.

For further detail, see the reconciliation below as well as the Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information table later in this release.

Year-to-Date Results

For the first nine months of 2015, worldwide revenue increased 1 percent compared to the same period in 2014 to $14.583 billion. Reported net income and earnings per share were $1.930 billion and $1.81, respectively. Net income and earnings per share, on a non-GAAP basis, were $2.828 billion and $2.65, respectively.

For further detail, see the reconciliation below as well as the Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information table later in this release.

Humalog
For the third quarter of 2015, worldwide Humalog sales remained flat at $705.0 million compared with the third quarter of 2014. Sales in the U.S. increased 6 percent to $440.9 million, driven by higher prices and, to a lesser extent, increased demand. Sales outside the U.S. decreased 9 percent to $264.1 million, driven by the unfavorable impact of foreign exchange rates, partially offset by increased volume.

Alimta
For the third quarter of 2015, Alimta generated sales of $628.5 million, a decline of 13 percent compared with the third quarter of 2014. U.S. sales of Alimta decreased 7 percent to $296.7 million, driven by decreased volume due to increased competitive pressures and customer buying patterns. Sales outside the U.S. decreased 18 percent to $331.8 million, driven by the unfavorable impact of foreign exchange rates and, to a lesser extent, lower prices, partially offset by increased volume.

Cialis
Cialis sales for the third quarter of 2015 remained flat at $566.1 million compared with the third quarter of 2014. U.S. sales of Cialis were $313.3 million, a 25 percent increase compared with the third quarter of 2014, driven by higher prices and, to a lesser extent, increased volume. Sales of Cialis outside the U.S. decreased 21 percent to $252.8 million, driven by the unfavorable impact of foreign exchange rates.

Forteo
Third-quarter 2015 sales of Forteo were $348.9 million, a 5 percent increase compared with the third quarter of 2014. U.S. sales of Forteo increased 26 percent to $160.1 million, driven by higher prices and increased volume. Sales outside the U.S. decreased 8 percent to $188.8 million, due to the unfavorable impact of foreign exchange rates, partially offset by increased volume.

Humulin
Worldwide Humulin sales of $316.7 million for the third quarter of 2015 decreased 6 percent compared with the third quarter of 2014. U.S. sales increased 12 percent to $185.5 million, driven by higher prices. Sales outside the U.S. decreased 23 percent to $131.2 million, driven by decreased volume, primarily due to the loss of a government contract in Brazil, and the unfavorable impact of foreign exchange rates.

Cymbalta
For the third quarter of 2015, Cymbalta generated $242.9 million of sales, a decline of 34 percent compared with the third quarter of 2014. Sales of Cymbalta outside the U.S. were $218.3 million, a decline of 27 percent, driven by the unfavorable impact of foreign exchange rates and the loss of exclusivity in Europe in 2014.

Zyprexa
In the third quarter of 2015, Zyprexa sales totaled $237.9 million, a decline of 8 percent compared with the third quarter of 2014. Zyprexa sales outside the U.S. decreased 20 percent to $191.0 million, due primarily to the unfavorable impact of foreign exchange rates.

Strattera
During the third quarter of 2015, Strattera generated $196.9 million of sales, an increase of 3 percent compared with the third quarter of 2014. U.S. sales increased 7 percent to $128.8 million, driven by higher prices. Sales outside the U.S. decreased 4 percent to $68.1 million, driven by the unfavorable impact of foreign exchange rates, largely offset by increased volume.

Effient
Effient sales remained flat at $132.1 million in the third quarter of 2015 compared with the third quarter of 2014. U.S. Effient sales increased 7 percent to $106.3 million, due to higher prices, partially offset by decreased demand. Sales outside the U.S. decreased 19 percent to $25.8 million, driven primarily by the unfavorable impact of foreign exchange rates.

Evista
Evista sales for the third quarter of 2015 were $58.0 million, a decline of 35 percent compared with the third quarter of 2014. U.S. sales of Evista were $15.5 million as sales of the authorized generic led to increased volume and lower prices. Sales outside the U.S. decreased 22 percent to $42.5 million, driven primarily by the unfavorable impact of foreign exchange rates.

Animal Health
In the third quarter of 2015, worldwide animal health sales totaled $778.8 million, an increase of 33 percent compared with the third quarter of 2014. U.S. animal health sales increased 25 percent to $392.6 million, and animal health sales outside the U.S. increased 42 percent to $386.2 million. The increases were primarily driven by the inclusion of revenue from Novartis Animal Health.

Including the sales of Novartis Animal Health in 2014, worldwide animal health sales decreased 9 percent, U.S. sales increased 1 percent, and sales outside the U.S. decreased 18 percent. The increase in U.S. sales was driven by increased volume in food animal products, partially offset by decreased volume in companion animal products. The decline in sales outside the U.S. was driven by the unfavorable impact of foreign exchange rates and to a lesser extent decreased volume, primarily in companion animal products, partially offset by higher prices. Including the sales of Novartis Animal Health in 2014 and excluding the unfavorable impact of foreign exchange rates, worldwide animal health sales decreased 2 percent.

2015 Financial Guidance

The company has revised certain elements of its 2015 financial guidance on a reported basis and on a non-GAAP basis. Full-year 2015 earnings per share are now expected to be in the range of $2.40 to $2.45 on a reported basis. On a non-GAAP basis, full-year 2015 earnings per share are now expected to be in the range of $3.40 to $3.45.

The company still expects 2015 revenue of between $19.7 billion and $20.0 billion.

The company still expects gross margin as a percent of revenue will be approximately 74.5 percent on a reported basis. On a non-GAAP basis, gross margin as a percent of revenue is still expected to be approximately 78.0 percent, reflecting the exclusion of inventory step-up costs associated with the acquisition of Novartis Animal Health as well as amortization of intangibles.

Marketing, selling and administrative expenses on a reported basis are now expected to be in the range of $6.4 billion to $6.6 billion. On a non-GAAP basis, marketing, selling and administrative expenses are now expected to be in the range of $6.3 billion to $6.5 billion. Research and development expenses are now expected to be in the range of $4.6 billion to $4.8 billion.

Other income (expense) is now expected to be in a range between $50 million and $75 million of income on a reported basis, reflecting net gains on investments realized to date, partially offset by the net charge related to the repurchase of debt. On a non-GAAP basis, other income (expense) is now expected to be in a range between $200 million and $225 million of income, reflecting net gains on investments realized to date.

The 2015 tax rate is now expected to be approximately 16.5 percent on a reported basis and 21.5 percent on a non-GAAP basis, reflecting the impact of an increased percentage of forecasted earnings in higher taxed jurisdictions. Both rates assume a full-year 2015 benefit of the R&D tax credit and other tax provisions up for extension. If these items are not extended, the non-GAAP 2015 tax rate would be approximately 1.5 percentage points higher.

Capital expenditures are now expected to be approximately $1.1 billion.

The company’s 2015 financial guidance, on a reported basis, does not include the potential impact of the recent acquisition of worldwide rights to an intranasal glucagon from Locemia Solutions.

Merrimack Announces U.S. FDA Approval of ONIVYDE™ (irinotecan liposome injection) for the Treatment of Patients with Metastatic Pancreatic Cancer

On October 22, 2015 Merrimack (Nasdaq: MACK) reported that ONIVYDE (irinotecan liposome injection) has been approved by the U.S. Food and Drug Administration (FDA) in combination with fluorouracil (5-FU) and leucovorin for the treatment of patients with metastatic adenocarcinoma of the pancreas after disease progression following gemcitabine-based therapy (Press release, Merrimack, OCT 22, 2015, View Source [SID:1234507770]).

ONIVYDE is not indicated for use as a single agent. With this approval, ONIVYDE in combination with 5-FU and leucovorin becomes the first and only FDA-approved treatment option for patients in this setting.

Experience the interactive Multimedia News Release here: View Source

"This is an important day for patients facing pancreatic cancer," said Andrea Wang-Gillam, M.D., Ph.D., Associate Professor of Medicine, Clinical Director of GI Oncology Program, Division of Oncology, at Washington University School of Medicine, St. Louis, and a key investigator on the ONIVYDE Phase 3 NAPOLI-1 study. "With a long history of failed clinical studies in the post-gemcitabine setting, this approval is a significant achievement in the oncology community. It brings a new therapy to the many patients who are facing this aggressive disease and are in need of treatment options."

"We are thrilled to be able to deliver this groundbreaking therapy to patients battling metastatic pancreatic cancer," said Robert Mulroy, President and CEO of Merrimack. "Pancreatic cancer is an aggressive and devastating disease, with very few patients surviving beyond one year. ONIVYDE provides a clinically significant treatment option to a patient population where there is currently no standard of care. We are grateful to the many patients, clinicians, researchers and partners that worked with us to make ONIVYDE available. Today’s approval by the FDA is a pivotal milestone in our company’s history, representing years of hard work and commitment to our mission of engineering new treatment options for cancer patients in need."

The FDA approval is based on the results of an international Phase 3 randomized, controlled study (NAPOLI-1). In this study, ONIVYDE in combination with 5-FU and leucovorin achieved its primary endpoint of a significant improvement in overall survival (p=0.014, unstratified HR=0.68, 95% CI: [0.50-0.93]) with a 45% improvement in median overall survival of 6.1 months for patients receiving the ONIVYDE combination regimen compared to 4.2 months for patients who received 5-FU and leucovorin alone. The ONIVYDE combination also demonstrated improvement in progression free survival (3.1 months vs. 1.5 months, HR=0.55, 95% CI: [0.41-0.75]). The monotherapy regimen in this study did not achieve its primary endpoint and, therefore, ONIVYDE is not indicated as a single agent. The most common adverse reactions ( > 20 %) of ONIVYDE were diarrhea, fatigue/asthenia, vomiting, nausea, decreased appetite, stomatitis and pyrexia, and the most common severe laboratory abnormalities ( > 10% Grade 3 or 4) were lymphopenia and neutropenia. For additional safety information, please see Important Safety Information including Boxed Warning below.

"This is a pivotal achievement for the pancreatic cancer community because it provides a new treatment option for some patients facing this difficult disease," said Julie Fleshman, President and CEO of the Pancreatic Cancer Action Network. "We applaud the dedication of those involved in this advancement, knowing it will impact our goal to double pancreatic cancer survival by 2020."

There are approximately 49,000 patients diagnosed with pancreatic cancer each year in the United States1, the overwhelming majority of whom have adenocarcinoma2. Most patients receive gemcitabine-based therapy during either adjuvant/neoadjuvant treatment for locally advanced disease or during first- or second-line therapy for metastatic disease, but are left with no standard of care therapy upon progression3. ONIVYDE in combination with 5-FU and leucovorin is now approved for these patients whose disease has progressed following gemcitabine-based therapy.

Merrimack expects ONIVYDE to be available in the United States next week and is committed to supporting rapid physician and patient access to this therapy. PROVYDE (ONIVYDE Access Center) offers a variety of reimbursement support services for healthcare providers and financial assistance services for patients. For more information, please call 1-844-ONIVYDE or visit www.ONIVYDE.com.

Baxalta Incorporated (NYSE: BXLT) is responsible for the development and commercialization of ONIVYDE outside of the United States and Taiwan under the exclusive licensing agreement that Merrimack and Baxalta entered into in September 2014. In May 2015, the European Medicines Agency (EMA) accepted for review Baxalta’s marketing authorization application (MAA) for ONIVYDE based on the same clinical results.

"We are excited that ONIVYDE (nal-IRI) will now be available to people living with metastatic pancreatic cancer in the U.S. after they progress from gemcitabine-based therapy," said David Meek, Executive Vice President and President of Oncology at Baxalta. "Looking ahead, Baxalta continues to work toward marketing authorization in Europe with the goal of providing nal-IRI to patients in more countries around the world in need of new options."

PharmaEngine, Inc. (Taipei, Taiwan) holds the rights to commercialize ONIVYDE in Taiwan. PharmaEngine filed a New Drug Application (NDA) with the Taiwan FDA in May 2015.

About the NAPOLI-1 Study

The NAPOLI-1 study was a randomized, open label Phase 3 study in patients with metastatic adenocarcinoma of the pancreas who received prior gemcitabine-based therapy, and was the largest Phase 3 study in this setting to date. The study evaluated ONIVYDE in combination with 5-FU and leucovorin administered every two weeks and as a monotherapy administered every three weeks. Each ONIVYDE containing arm was compared to a control arm of 5-FU and leucovorin. A total of 417 patients were randomized across the three arms. The primary endpoint of the study was overall survival. The ONIVYDE combination regimen demonstrated a significant increase in median overall survival versus 5-FU and leucovorin alone: 6.1 months vs 4.2 months (p=0.014, unstratified HR=0.68, 95% CI: [0.50-0.93]). The monotherapy regimen in this study did not show improvement over the 5-FU and leucovorin arm (HR=1.00, p=0.97 [unstratified log-rank test]). Patients were enrolled at 76 sites in North America, South America, Europe, Asia and Oceania.

About Pancreatic Cancer

Pancreatic cancer is rare and deadly. It accounts for only 3% of all cancer cases2, but is the fourth leading cause of cancer-related death4, leading to a five year survival rate of only 7%1. Each year an estimated 49,000 new cases are diagnosed in the United States1, two-thirds of which are among people aged 65 or older5. There are an estimated 338,000 new cases diagnosed each year worldwide6.

The pancreas is composed of two main cell types: exocrine and endocrine. Exocrine tumors are the most common type of pancreatic cancer, accounting for 96% of all cases1. Adenocarcinoma, a sub-type of exocrine tumors, comprises 95% of all exocrine tumors2.

Because the signs and symptoms of pancreatic cancer are non-specific and may not appear until the disease has spread to other sites, approximately 80% of patients are not candidates for surgery4, instead receiving chemotherapy as the mainstay of their therapy. The majority of these patients receive gemcitabine-based therapy during either adjuvant/neoadjuvant treatment or during first- or second-line therapy for metastatic disease 3. There is no consensus on the standard of care for patients with metastatic pancreatic cancer previously treated with a gemcitabine-based therapy.

About ONIVYDE [pronounced \ ‘on – ih – vide \]

ONIVYDE, also known as MM-398 or "nal-IRI," is a novel encapsulation of irinotecan in a liposomal formulation. The activated form of irinotecan is SN-38, which functions by inhibiting topoisomerase I (an essential enzyme involved in DNA transcription and replication) and promoting cell death. For more information please visit www.ONIVYDE.com.

IMPORTANT SAFETY INFORMATION

INDICATION
ONIVYDE (irinotecan liposome injection) is indicated, in combination with fluorouracil (5-FU) and leucovorin (LV), for the treatment of patients with metastatic adenocarcinoma of the pancreas after disease progression following gemcitabine-based therapy.
Limitation of Use: ONIVYDE is not indicated as a single agent for the treatment of patients with metastatic adenocarcinoma of the pancreas.

WARNING: SEVERE NEUTROPENIA and SEVERE DIARRHEA
Fatal neutropenic sepsis occurred in 0.8% of patients receiving ONIVYDE. Severe or life-threatening neutropenic fever or sepsis occurred in 3% and severe or life-threatening neutropenia occurred in 20% of patients receiving ONIVYDE in combination with fluorouracil (5-FU) and leucovorin (LV). Withhold ONIVYDE for absolute neutrophil count below 1500/mm3 or neutropenic fever. Monitor blood cell counts periodically during treatment.

Severe diarrhea occurred in 13% of patients receiving ONIVYDE in combination with 5-FU/LV. Do not administer ONIVYDE to patients with bowel obstruction. Withhold ONIVYDE for diarrhea of Grade 2-4 severity. Administer loperamide for late diarrhea of any severity. Administer atropine, if not contraindicated, for early diarrhea of any severity.

CONTRAINDICATION
ONIVYDE is contraindicated in patients who have experienced a severe hypersensitivity reaction to ONIVYDE or irinotecan HCl.

WARNINGS AND PRECAUTIONS

Severe Neutropenia
ONIVYDE can cause severe or life-threatening neutropenia and fatal neutropenic sepsis. In a clinical study, the incidence of fatal neutropenic sepsis was 0.8% among patients receiving ONIVYDE, occurring in 1/117 patients in the ONIVYDE/5-FU/LV arm and 1/147 patients receiving ONIVYDE as a single agent. Severe or life-threatening neutropenia occurred in 20% of patients receiving ONIVYDE/5-FU/LV vs 2% of patients receiving 5-FU/LV. Grade 3/4 neutropenic fever/neutropenic sepsis occurred in 3% of patients receiving ONIVYDE/5-FU/LV, and did not occur in patients receiving 5-FU/LV.

In patients receiving ONIVYDE/5-FU/LV, the incidence of Grade 3/4 neutropenia was higher among Asian (18/33 [55%]) vs White patients (13/73 [18%]). Neutropenic fever/neutropenic sepsis was reported in 6% of Asian vs 1% of White patients.

Severe Diarrhea
ONIVYDE can cause severe and life-threatening diarrhea. Do not administer ONIVYDE to patients with bowel obstruction. Severe and life-threatening late-onset (onset > 24 hours after chemotherapy) and early-onset diarrhea (onset < 24 hours after chemotherapy, sometimes with other symptoms of cholinergic reaction) were observed. An individual patient may experience both early- and late-onset diarrhea.

In a clinical study, Grade 3/4 diarrhea occurred in 13% of patients receiving ONIVYDE/5-FU/LV vs 4% receiving 5-FU/LV. Grade 3/4 late-onset diarrhea occurred in 9% of patients receiving ONIVYDE/5-FU/LV vs 4% in patients receiving 5-FU/LV; the incidences of early-onset diarrhea were 3% and no Grade 3/4 incidences, respectively. Of patients receiving ONIVYDE/5-FU/LV, 34% received loperamide for late-onset diarrhea and 26% received atropine for early-onset diarrhea.

Interstitial Lung Disease (ILD)
Irinotecan HCl can cause severe and fatal ILD. Withhold ONIVYDE in patients with new or progressive dyspnea, cough, and fever, pending diagnostic evaluation. Discontinue ONIVYDE in patients with a confirmed diagnosis of ILD.

Severe Hypersensitivity Reactions
Irinotecan HCl can cause severe hypersensitivity reactions, including anaphylactic reactions. Permanently discontinue ONIVYDE in patients who experience a severe hypersensitivity reaction.

Embryo-Fetal Toxicity
Based on animal data with irinotecan HCl and the mechanism of action of ONIVYDE, ONIVYDE can cause fetal harm when administered to a pregnant woman. Advise pregnant women of the potential risk to a fetus. Advise females of reproductive potential to use effective contraception during and for 1 month after ONIVYDE treatment.

ADVERSE REACTIONS

The most common ( > 20%) adverse reactions in which patients receiving ONIVYDE/5-FU/LV experienced a > 5% higher incidence of any Grade vs the 5-FU/LV arm, were diarrhea (any 59%, 26%; severe 13%, 4%) (early diarrhea [any 30%, 15%; severe 3%, 0%]), late diarrhea [any 43%, 17%; severe 9%, 4%]), fatigue/asthenia (any 56%, 43%; severe 21%, 10%), vomiting (any 52%, 26%; severe 11%, 3%), nausea (any 51%, 34%; severe 8%, 4% ), decreased appetite (any 44%, 32%; severe 4%, 2%), stomatitis (any 32%, 12%; severe 4%, 1%), pyrexia (any 23%, 11%; severe 2%, 1%).

Of less common ( < 20%) adverse reactions, patients receiving ONIVYDE/5-FU/LV who experienced Grade 3/4 adverse reactions at a > 2% higher incidence of Grade 3/4 toxicity vs the 5-FU/LV arm, respectively, were sepsis (3%, 1%), neutropenic fever/neutropenic sepsis (3%, 0%), gastroenteritis (3%, 0%), intravenous catheter-related infection (3%, 0%), weight loss (2%, 0%), and dehydration (4%, 2%).

The laboratory abnormalities in which patients receiving ONIVYDE/5-FU/LV experienced a > 5% higher incidence vs the 5-FU/LV arm, were anemia (any 97%, 86%; severe 6%, 5%), lymphopenia (any 81%, 75%; severe 27%, 17%), neutropenia (any 52%, 6%; severe 20%, 2%), thrombocytopenia (any 41%, 33%; severe 2%, 0%), increased alanine aminotransferase (any 51%, 37%; severe 6%, 1%), hypoalbuminemia (any 43%, 30%; severe 2%, 0%), hypomagnesemia (any 35%, 21%; severe 0%, 0%), hypokalemia (any 32%, 19%; severe 2%, 2%), hypocalcemia (any 32%, 20%; severe 1%, 0%), hypophosphatemia (any 29%, 18%; severe 4%, 1%), hyponatremia (any 27%, 12%; severe 5%, 3%), increased creatinine (any 18%, 13%; severe 0%, 0%).
ONIVYDE can cause cholinergic reactions manifesting as rhinitis, increased salivation, flushing, bradycardia, miosis, lacrimation, diaphoresis, and intestinal hyperperistalsis with abdominal cramping and early-onset diarrhea. Grade 1/2 cholinergic symptoms other than early diarrhea occurred in 12 (4.5%) ONIVYDE-treated patients.

Infusion reactions, consisting of rash, urticaria, periorbital edema, or pruritus, occurring on the day of ONIVYDE administration were reported in 3% of patients receiving ONIVYDE or ONIVYDE/5-FU/LV.

The most common serious adverse reactions ( > 2%) of ONIVYDE were diarrhea, vomiting, neutropenic fever or neutropenic sepsis, nausea, pyrexia, sepsis, dehydration, septic shock, pneumonia, acute renal failure, and thrombocytopenia.

DRUG INTERACTIONS
Avoid the use of strong CYP3A4 inducers, if possible, and substitute non-enzyme-inducing therapies > 2 weeks prior to initiation of ONIVYDE. Avoid the use of strong CYP3A4 or UGT1A1 inhibitors, if possible, and discontinue strong CYP3A4 inhibitors > 1 week prior to starting therapy.

USE IN SPECIFIC POPULATIONS
Pregnancy and Reproductive Potential
Advise pregnant women of the potential risk to a fetus. Advise males with female partners of reproductive potential to use effective contraception during and for 4 months after ONIVYDE treatment.

Lactation
Advise nursing women not to breastfeed during and for 1 month after ONIVYDE treatment.

Pediatric
Safety and effectiveness of ONIVYDE have not been established in pediatric patients.

DOSAGE AND ADMINISTRATION
The recommended dose of ONIVYDE is 70 mg/m2 intravenous (IV) infusion over 90 minutes every 2 weeks, administered prior to LV and 5-FU. The recommended starting dose of ONIVYDE in patients known to be homozygous for the UGT1A1*28 allele is 50 mg/m2 administered by IV infusion over 90 minutes. There is no recommended dose of ONIVYDE for patients with serum bilirubin above the upper limit of normal. Premedicate with a corticosteroid and an anti-emetic 30 minutes prior to ONIVYDE. Withhold ONIVYDE for Grade 3/4 adverse reactions. Resume ONIVYDE with reduced dose once adverse reaction recovered to < Grade 1. Discontinue ONIVYDE in patients who experience a severe hypersensitivity reaction and in patients with a confirmed diagnosis of ILD.

RedHill Biopharma Announces National Cancer Institute Grant Awarded to Apogee Biotechnology Corp. for YELIVA(TM) (ABC294640) Prostate Cancer Research

On October 22, 2015 RedHill Biopharma Ltd. (NASDAQ:RDHL) (TASE:RDHL) ("RedHill" or the "Company"), an Israeli biopharmaceutical company primarily focused on late clinical-stage, proprietary, orally-administered, small molecule drugs for inflammatory and gastrointestinal diseases, including cancer, reported that the U.S. National Cancer Institute ("NCI") has awarded Apogee Biotechnology Corporation ("Apogee") a $225,000 Small Business Innovation Research Program ("SBIR") grant to support a pre-clinical study with YELIVA (ABC294640) for the treatment of prostate cancer (Press release, RedHill Biopharma, OCT 22, 2015, View Source [SID:1234507765]). In March 2015, RedHill acquired from Apogee the exclusive worldwide rights to YELIVA (ABC294640), a proprietary, first-in-class, orally-administered sphingosine kinase-2 ("SK2") selective inhibitor.

Following prior pre-clinical studies in early-stage and advanced prostate cancer models, the NCI grant is intended to support additional studies with YELIVA (ABC294640) to determine its therapeutic efficacy in in vitro and in vivo models of prostate cancer in combination with radiotherapy. These pre-clinical studies could potentially support future clinical studies with YELIVA (ABC294640) for this important indication with over 200,000 estimated new cases of prostate cancer in the U.S. in 20151.

The previous prostate cancer pre-clinical study, supported by a grant from the Pennsylvania Department of Health, a Prostate Cancer Foundation Young Investigator award, and a Prostate Cancer Foundation Mazzone Challenge award, is described in an article authored by scientists from Apogee and from the Kimmel Cancer Center at Thomas Jefferson University, and was initially published online in Molecular Cancer Research. The article, entitled "Downregulation of Critical Oncogenes by the Selective SK2 Inhibitor ABC294640 Hinders Prostate Cancer Progression" 2, describes the findings of the pre-clinical study, suggesting that oral administration of YELIVA (ABC294640) disrupts multiple oncogenic signaling pathways that are deregulated in prostate cancer, including significant inhibition of tumor growth, proliferation and cell cycle progression. In particular, the article noted that YELIVA (ABC294640) inhibited, in vitro, several very resistant types of prostate cancer. The authors of the article conclude that their pre-clinical findings support the hypotheses that SK2 activity is required for prostate cancer growth and that YELIVA (ABC294640) could represent a new pharmacological agent for the treatment of aggressive prostate cancer.

A Phase I/II clinical study was recently initiated in the U.S. evaluating YELIVA (ABC294640) in patients with refractory/relapsed diffuse large B-cell lymphoma (DLBCL), primarily in patients with HIV-related DLBCL. The study is being conducted at the Louisiana State University Health Sciences Center (LSUHSC) in New Orleans and is supported by a grant awarded to Apogee from the NCI Small Business Technology Transfer (STTR) program.

A Phase II study of YELIVA (ABC294640) for the treatment of refractory or relapsed multiple myeloma is planned to be initiated by early 2016. The study will be conducted at Duke University Medical Center and has received Institutional Review Board (IRB) approval from Duke University (DUHS IRB). The study is supported by a $2 million grant awarded to Apogee, in conjunction with Duke University, from the NCI SBIR Program.

A third Phase II clinical study is planned to evaluate YELIVA (ABC294640) as a radioprotectant to prevent mucositis in cancer patients undergoing therapeutic radiotherapy. This study is planned to be funded directly by RedHill, which is also funding the data management and providing the drug for the NCI-supported studies.

The ongoing and planned Phase II studies follow numerous successful pre-clinical studies conducted with YELIVA (ABC294640) in GI, inflammation, radioprotection and oncology models, as well as a Phase Ib study in patients with advanced solid tumors, supported by grants awarded to Apogee from the National Cancer Institute (NCI) and the FDA’s Office of Orphan Products Development (OOPD).

The Phase I/II clinical study in patients with refractory/relapsed diffuse large B-cell lymphoma and the Phase Ib clinical study in cancer patients with advanced solid tumors are registered on www.ClinicalTrials.gov, a web-based service by the U.S. National Institute of Health which provides public access to information on publicly and privately supported clinical studies.

About YELIVA (ABC294640):

YELIVA (ABC294640) is a proprietary, first-in-class, orally-administered, sphingosine kinase-2 (SK2) selective inhibitor with anti-cancer and anti-inflammatory activities, targeting multiple oncology, inflammatory and gastrointestinal indications. By inhibiting the SK2 enzyme, YELIVA (ABC294640) blocks the synthesis of sphingosine 1-phosphate (S1P), a lipid signaling molecule that promotes cancer growth and pathological inflammation. SK2 is an innovative molecular target for anti-cancer therapy because of its critical role in catalyzing the formation of S1P, which is known to regulate cell proliferation and activation of inflammatory pathways. YELIVA (ABC294640) was originally developed by U.S.-based Apogee Biotechnology Corp. and completed multiple successful pre-clinical studies in oncology, inflammation, GI, and radioprotection models, as well as the ABC-101 Phase Ib clinical study in cancer patients with advanced solid tumors. A Phase I/II clinical study evaluating YELIVA (ABC294640) in patients with refractory/relapsed diffuse large B-cell lymphoma (DLBCL) has been initiated in the U.S. The development of YELIVA (ABC294640) was funded to date primarily by grants and contracts from U.S. federal and state government agencies to Apogee Biotechnology Corp., including the U.S. National Cancer Institute, the U.S. Department of Health and Human Services’ Biomedical Advanced Research and Development Authority (BARDA), the U.S. Department of Defense and the FDA Office of Orphan Products Development.

MacroGenics and Merck to Collaborate on Immuno-Oncology Study Evaluating Margetuximab in Combination with KEYTRUDA(R) (pembrolizumab) for Advanced Gastric Cancer

On October 22, 2015 MacroGenics, Inc. (Nasdaq: MGNX), a clinical-stage biopharmaceutical company focused on discovering and developing innovative monoclonal antibody-based therapeutics for the treatment of cancer, autoimmune disorders and infectious diseases, and Merck (NYSE: MRK), known as MSD outside the United States and Canada, reported a collaboration to evaluate the combination of MacroGenics’ anti-HER2 product candidate, margetuximab, with Merck’s anti-PD-1 therapy, KEYTRUDA (pembrolizumab), in a Phase 1b/2 clinical trial in patients with advanced gastric cancer (Press release, MacroGenics, OCT 22, 2015, View Source [SID:1234507764]).

Margetuximab is an Fc-optimized monoclonal antibody that targets the human epidermal growth factor receptor 2, or HER2, which is an antigen critical for the growth of many types of tumors, including breast and gastroesophageal cancers. KEYTRUDA is a humanized monoclonal antibody that blocks the interaction between PD-1 and its ligands, PD-L1 and PD-L2.

"The combination of our proprietary Fc-optimized anti-HER2 antibody, with expected enhanced immune-mediated killing properties, and the anti-PD-1 antibody KEYTRUDA, is intended to exploit potentially complementary biology," said Scott Koenig, M.D., Ph.D., President and CEO of MacroGenics. "Treatment options for patients with advanced HER2-positive gastric cancer are extremely limited. The combination of mechanisms engaged by margetuximab and KEYTRUDA could provide an important alternative for patients who do not respond to currently available regimens."

"Today, there is a great opportunity and need to bring forward new scientific breakthroughs for the treatment of gastric cancer," said Dr. Eric Rubin, vice president and therapeutic area head, oncology early-stage development, Merck Research Laboratories. "Evaluating the potential of combination therapies through strategic collaborations in difficult-to-treat tumor types continues to be an important part of our immuno-oncology clinical development program for KEYTRUDA."

The Phase 1b/2 multicenter, open-label clinical trial will be conducted in two parts. The Phase 1b portion is designed to determine the safety and tolerability of margetuximab in combination with KEYTRUDA in patients with advanced gastric cancer, while the Phase 2 portion will evaluate the anti-tumor activity of margetuximab in combination with KEYTRUDA in patients with advanced HER2-positive gastric cancer. Trial startup activities are underway and MacroGenics expects to begin enrolling patients by the first quarter of 2016. The agreement includes a provision where the parties may extend the collaboration to include a potential Phase 3 clinical trial.

The agreement is between MacroGenics and Merck, through a subsidiary. Additional details were not disclosed.

About Gastric Cancer

Gastric cancer, also called stomach cancer, is a type of cancer that begins in the stomach. Most gastric cancers are adenocarcinomas, which develop from the cells of the innermost lining (mucosa) of the stomach. Among others, risk factors for gastric cancer include gender, age, ethnicity, geography and bacterial infection with Helicobacter pylori. More than 70 percent of gastric cancer cases occur in developing countries, with half of all cases occurring in Eastern Asia (predominately China). Worldwide, gastric cancer is the fifth most common type of cancer and the third leading cause of cancer death.

About Margetuximab

Margetuximab is an Fc-optimized monoclonal antibody that targets the human epidermal growth factor receptor 2, or HER2, an antigen critical for the growth of many types of tumors, including breast and gastroesophageal cancers. Using its Fc-optimization platform, MacroGenics has designed the Fc region of margetuximab to enhance the killing of tumor cells through an Fc-dependent mechanism, including antibody dependent cell-mediated cytotoxicity, or ADCC. MacroGenics has initiated dosing of patients in SOPHIA, a Phase 3 pivotal study evaluating margetuximab plus chemotherapy against trastuzumab plus chemotherapy in third-line HER2-positive metastatic breast cancer patients. The purpose of the SOPHIA study is to determine whether patients treated with margetuximab plus chemotherapy have longer progression-free and overall survival than patients treated with trastuzumab plus chemotherapy. For more information about this trial, please visit www.sophiastudy.com or www.clinicaltrials.gov.

About KEYTRUDA (pembrolizumab) Injection 100 mg

KEYTRUDA is a humanized monoclonal antibody that works by increasing the ability of the body’s immune system to help detect and fight tumor cells. KEYTRUDA blocks the interaction between PD-1 and its ligands, PD-L1 and PD-L2, and may affect both tumor cells and healthy cells. KEYTRUDA is indicated for the treatment of patients with unresectable or metastatic melanoma and disease progression following ipilimumab and, if BRAF V600 mutation positive, a BRAF inhibitor. KEYTRUDA is also indicated for the treatment of patients with metastatic non-small cell lung cancer (NSCLC) whose tumors express PD-L1 as determined by an FDA-approved test with disease progression on or after platinum-containing chemotherapy. Patients with EGFR or ALK genomic tumor aberrations should have disease progression on FDA-approved therapy for these aberrations prior to receiving KEYTRUDA. These indications are approved under accelerated approval based on tumor response rate and durability of response. An improvement in survival or disease-related symptoms has not yet been established. Continued approval for this indication may be contingent upon verification and description of clinical benefit in the confirmatory trials.

Selected Important Safety Information for KEYTRUDA in Melanoma Trial

Pneumonitis occurred in 12 (2.9%) of 411 patients, including Grade 2 or 3 cases in 8 (1.9%) and 1 (0.2%) patients, respectively, receiving KEYTRUDA. Monitor patients for signs and symptoms of pneumonitis. Evaluate suspected pneumonitis with radiographic imaging. Administer corticosteroids for Grade 2 or greater pneumonitis. Withhold KEYTRUDA for Grade 2; permanently discontinue KEYTRUDA for Grade 3 or 4 pneumonitis.

Colitis (including microscopic colitis) occurred in 4 (1%) of 411 patients, including Grade 2 or 3 cases in 1 (0.2%) and 2 (0.5%) patients, respectively, receiving KEYTRUDA. Monitor patients for signs and symptoms of colitis. Administer corticosteroids for Grade 2 or greater colitis. Withhold KEYTRUDA for Grade 2 or 3; permanently discontinue KEYTRUDA for Grade 4 colitis.

Hepatitis (including autoimmune hepatitis) occurred in 2 (0.5%) of 411 patients, including a Grade 4 case in 1 (0.2%) patient, receiving KEYTRUDA. Monitor patients for changes in liver function. Administer corticosteroids for Grade 2 or greater hepatitis and, based on severity of liver enzyme elevations, withhold or discontinue KEYTRUDA.

Hypophysitis occurred in 2 (0.5%) of 411 patients, including a Grade 2 case in 1 and a Grade 4 case in 1 (0.2% each) patient, receiving KEYTRUDA. Monitor patients for signs and symptoms of hypophysitis (including hypopituitarism and adrenal insufficiency). Administer corticosteroids for Grade 2 or greater hypophysitis. Withhold KEYTRUDA for Grade 2; withhold or discontinue for Grade 3; and permanently discontinue KEYTRUDA for Grade 4 hypophysitis.

Hyperthyroidism occurred in 5 (1.2%) of 411 patients, including Grade 2 or 3 cases in 2 (0.5%) and 1 (0.2%) patients, respectively, receiving KEYTRUDA. Hypothyroidism occurred in 34 (8.3%) of 411 patients, including a Grade 3 case in 1 (0.2%) patient, receiving KEYTRUDA. Thyroid disorders can occur at any time during treatment. Monitor patients for changes in thyroid function (at the start of treatment, periodically during treatment, and as indicated based on clinical evaluation) and for clinical signs and symptoms of thyroid disorders. Administer corticosteroids for Grade 3 or greater hyperthyroidism. Withhold KEYTRUDA for Grade 3; permanently discontinue KEYTRUDA for Grade 4 hyperthyroidism. Isolated hypothyroidism may be managed with replacement therapy without treatment interruption and without corticosteroids.

Type 1 diabetes mellitus, including diabetic ketoacidosis, has occurred in patients receiving KEYTRUDA. Monitor patients for hyperglycemia and other signs and symptoms of diabetes. Administer insulin for type 1 diabetes, and withhold KEYTRUDA in cases of severe hyperglycemia until metabolic control is achieved.

Nephritis occurred in 3 (0.7%) patients, consisting of one case of Grade 2 autoimmune nephritis (0.2%) and two cases of interstitial nephritis with renal failure (0.5%), one Grade 3 and one Grade 4. Monitor patients for changes in renal function. Administer corticosteroids for Grade 2 or greater nephritis. Withhold KEYTRUDA for Grade 2; permanently discontinue KEYTRUDA for Grade 3 or 4 nephritis.

Other clinically important immune-mediated adverse reactions can occur. The following clinically significant immune-mediated adverse reactions occurred in patients treated with KEYTRUDA: exfoliative dermatitis, uveitis, arthritis, myositis, pancreatitis, hemolytic anemia, partial seizures arising in a patient with inflammatory foci in brain parenchyma, severe dermatitis including bullous pemphigoid, myasthenic syndrome, optic neuritis, and rhabdomyolysis.

For suspected immune-mediated adverse reactions, ensure adequate evaluation to confirm etiology or exclude other causes. Based on the severity of the adverse reaction, withhold KEYTRUDA and administer corticosteroids. Upon improvement of the adverse reaction to Grade 1 or less, initiate corticosteroid taper and continue to taper over at least 1 month. Restart KEYTRUDA if the adverse reaction remains at Grade 1 or less. Permanently discontinue KEYTRUDA for any severe or Grade 3 immune-mediated adverse reaction that recurs and for any life-threatening immune-mediated adverse reaction.

Infusion-related reactions, including severe and life-threatening reactions, have occurred in patients receiving KEYTRUDA. Monitor patients for signs and symptoms of infusion-related reactions including rigors, chills, wheezing, pruritus, flushing, rash, hypotension, hypoxemia, and fever. For severe or life-threatening reactions, stop infusion and permanently discontinue KEYTRUDA.

Based on its mechanism of action, KEYTRUDA may cause fetal harm when administered to a pregnant woman. If used during pregnancy, or if the patient becomes pregnant during treatment, apprise the patient of the potential hazard to a fetus. Advise females of reproductive potential to use highly effective contraception during treatment and for 4 months after the last dose of KEYTRUDA.

KEYTRUDA was discontinued for adverse reactions in 9% of 411 patients. Adverse reactions, reported in at least two patients, that led to discontinuation of KEYTRUDA were: pneumonitis, renal failure, and pain. Serious adverse reactions occurred in 36% of patients. The most frequent serious adverse reactions, reported in 2% or more of patients, were renal failure, dyspnea, pneumonia, and cellulitis.

The most common adverse reactions (reported in at least 20% of patients) were fatigue (47%), cough (30%), nausea (30%), pruritus (30%), rash (29%), decreased appetite (26%), constipation (21%), arthralgia (20%), and diarrhea (20%).

No formal pharmacokinetic drug interaction studies have been conducted with KEYTRUDA.

It is not known whether KEYTRUDA is excreted in human milk. Because many drugs are excreted in human milk, instruct women to discontinue nursing during treatment with KEYTRUDA.

Safety and effectiveness of KEYTRUDA have not been established in pediatric patients.

Selected Safety Information for KEYTRUDA (pembrolizumab) in NSCLC Trial

Pneumonitis occurred in 19 (3.5%) of 550 patients, including Grade 2 (1.1%), 3 (1.3%), 4 (0.4%), or 5 (0.2%) pneumonitis in patients receiving KEYTRUDA. Monitor patients for signs and symptoms of pneumonitis. Evaluate suspected pneumonitis with radiographic imaging. Administer corticosteroids for Grade 2 or greater pneumonitis. Withhold KEYTRUDA for Grade 2; permanently discontinue KEYTRUDA for Grade 3 or 4 or recurrent Grade 2 pneumonitis.

Colitis occurred in 4 (0.7%) of 550 patients, including Grade 2 (0.2%) or 3 (0.4%) colitis in patients receiving KEYTRUDA. Monitor patients for signs and symptoms of colitis. Administer corticosteroids for Grade 2 or greater colitis. Withhold KEYTRUDA for Grade 2 or 3; permanently discontinue KEYTRUDA for Grade 4 colitis.

Hepatitis occurred in patients receiving KEYTRUDA (pembrolizumab). Monitor patients for changes in liver function. Administer corticosteroids for Grade 2 or greater hepatitis and, based on severity of liver enzyme elevations, withhold or discontinue KEYTRUDA.

Hypophysitis occurred in 1 (0.2%) of 550 patients, which was Grade 3 in severity. Monitor patients for signs and symptoms of hypophysitis (including hypopituitarism and adrenal insufficiency). Administer corticosteroids and hormone replacement as indicated. Withhold KEYTRUDA for Grade 2 and withhold or discontinue for Grade 3 or Grade 4 hypophysitis.

Hyperthyroidism occurred in 10 (1.8%) of 550 patients, including Grade 2 (0.7%) or 3 (0.3%). Hypothyroidism occurred in 38 (6.9%) of 550 patients, including Grade 2 (5.5%) or 3 (0.2%). Thyroid disorders can occur at any time during treatment. Monitor patients for changes in thyroid function (at the start of treatment, periodically during treatment, and as indicated based on clinical evaluation) and for clinical signs and symptoms of thyroid disorders. Administer replacement hormones for hypothyroidism and manage hyperthyroidism with thionamides and beta-blockers as appropriate. Withhold or discontinue KEYTRUDA for Grade 3 or Grade 4 hyperthyroidism.

Type 1 diabetes mellitus, including diabetic ketoacidosis, has occurred in patients receiving KEYTRUDA. Monitor patients for hyperglycemia or other signs and symptoms of diabetes. Administer insulin for type 1 diabetes, and withhold KEYTRUDA and administer anti-hyperglycemics in patients with severe hyperglycemia.

Nephritis occurred in patients receiving KEYTRUDA. Monitor patients for changes in renal function. Administer corticosteroids for Grade 2 or greater nephritis. Withhold KEYTRUDA for Grade 2; permanently discontinue KEYTRUDA for Grade 3 or 4 nephritis.

For suspected immune-mediated adverse reactions, ensure adequate evaluation to confirm etiology or exclude other causes. Based on the severity of the adverse reaction, withhold KEYTRUDA and administer corticosteroids. Upon improvement of the adverse reaction to Grade 1 or less, initiate corticosteroid taper and continue to taper over at least 1 month. Resume KEYTRUDA when the adverse reaction remains at Grade 1 or less following steroid taper. Permanently discontinue KEYTRUDA for any severe or Grade 3 immune-mediated adverse reaction that recurs and for any life-threatening immune-mediated adverse reaction.

The following clinically significant, immune-mediated adverse reactions occurred in patients treated with KEYTRUDA: rash, vasculitis, hemolytic anemia, serum sickness, myasthenia gravis, bullous pemphigoid, and Guillain-Barre syndrome.

Infusion-related reactions, including severe and life-threatening reactions, have occurred in patients receiving KEYTRUDA. Monitor patients for signs and symptoms of infusion-related reactions including rigors, chills, wheezing, pruritus, flushing, rash, hypotension, hypoxemia, and fever. For severe or life-threatening reactions, stop infusion and permanently discontinue KEYTRUDA.

Based on its mechanism of action, KEYTRUDA (pembrolizumab) can cause fetal harm when administered to a pregnant woman. If used during pregnancy, or if the patient becomes pregnant during treatment, apprise the patient of the potential hazard to a fetus. Advise females of reproductive potential to use highly effective contraception during treatment and for 4 months after the last dose of KEYTRUDA.

KEYTRUDA was discontinued due to adverse reactions in 14% of patients. Serious adverse reactions occurred in 38% of patients. The most frequent serious adverse reactions reported in 2% or more of patients were pleural effusion, pneumonia, dyspnea, pulmonary embolism, and pneumonitis.

The most common adverse reactions (reported in at least 20% of patients) were fatigue (44%), decreased appetite (25%), dyspnea (23%), and cough (29%).

No formal pharmacokinetic drug interaction studies have been conducted with KEYTRUDA. It is not known whether KEYTRUDA is excreted in human milk. Because many drugs are excreted in human milk, instruct women to discontinue nursing during treatment with KEYTRUDA and for 4 months after the final dose.

Safety and effectiveness of KEYTRUDA have not been established in pediatric patients.