On April 28, 2016 Gilead Sciences, Inc. (Nasdaq: GILD) reported its results of operations for the first quarter ended March 31, 2016 (Press release, Gilead Sciences, APR 28, 2016, View Source [SID:1234511574]).

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The financial results that follow represent a year-over-year comparison of first quarter 2016 to the first quarter 2015. Total revenues were $7.8 billion in 2016 compared to $7.6 billion in 2015. Net income was $3.6 billion or $2.53 per diluted share in 2016 compared to $4.3 billion or $2.76 per diluted share in 2015. Non-GAAP net income, which excludes acquisition-related, up-front collaboration, stock-based compensation and other expenses, was $4.3 billion or $3.03 per diluted share in 2016 compared to $4.6 billion or $2.94 per diluted share in 2015.

Three Months Ended
March 31,
(In millions, except per share amounts) 2016 2015
Product sales $ 7,681 $ 7,405
Royalty, contract and other revenues 113 189
Total revenues $ 7,794 $ 7,594

Net income attributable to Gilead $ 3,566 $ 4,333
Non-GAAP net income attributable to Gilead $ 4,274 $ 4,604

Diluted EPS $ 2.53 $ 2.76
Non-GAAP diluted EPS $ 3.03 $ 2.94

Product Sales

Total product sales for the first quarter of 2016 were $7.7 billion compared to $7.4 billion for the same period in 2015. Product sales for the first quarter of 2016 were $4.4 billion in the U.S., $1.6 billion in Europe, $1.1 billion in Japan and $571 million in other international locations. Product sales for the first quarter of 2015 were $5.2 billion in the U.S., $1.8 billion in Europe and $364 million in other international locations.

Antiviral Product Sales

Antiviral product sales, which include products in our HIV and liver disease areas, were $7.2 billion for the first quarter of 2016 compared to $7.0 billion for the same period in 2015.

In the U.S., antiviral product sales were $4.0 billion for the first quarter of 2016 compared to $4.9 billion in 2015, primarily due to a decline in sales of Harvoni (ledipasvir 90 mg/sofosbuvir 400 mg), partially offset by increases in sales of Sovaldi (sofosbuvir 400 mg), Truvada (emtricitabine and tenofovir disoproxil fumarate) and Genvoya (elvitegravir 150 mg/cobicistat 150 mg/emtricitabine 200 mg/tenofovir alafenamide 10 mg). Genvoya was launched in the U.S. in November 2015.
In Europe, antiviral product sales were $1.6 billion for the first quarter of 2016 compared to $1.7 billion in 2015, primarily due to a decline in sales of Sovaldi.

In Japan, antiviral product sales were $1.1 billion. Sovaldi and Harvoni were launched in Japan in May and September 2015, respectively.
Other Product Sales

Other product sales, which include Letairis (ambrisentan), Ranexa (ranolazine) and AmBisome (amphotericin B liposome for injection), were $498 million for the first quarter of 2016 compared to $417 million for the same period in 2015.

Cost of Goods Sold

Non-GAAP* cost of goods sold increased to $983 million for the first quarter of 2016 compared to $674 million for the same period in 2015, primarily due to a $200 million litigation charge related to our sofosbuvir based product sales.

Operating Expenses

Three Months Ended
March 31,
(In millions) 2016 2015
Non-GAAP* research and development expenses (R&D) $ 769 $ 651
Non-GAAP* selling, general and administrative expenses (SG&A) $ 638 $ 600
* Non-GAAP Cost of Goods Sold, R&D and SG&A expenses exclude acquisition-related, up-front collaboration, stock-based compensation and other expenses

During the first quarter of 2016, compared to the same period in 2015:

Non-GAAP research and development expenses increased primarily due to the progression of Gilead’s clinical studies.
Non-GAAP selling, general and administrative expenses increased primarily due to higher costs to support Gilead’s geographic expansion of its business, partially offset by a decrease in our Branded Prescription Drug fee expense.
Cash, Cash Equivalents and Marketable Securities

As of March 31, 2016, Gilead had $21.3 billion of cash, cash equivalents and marketable securities compared to $26.2 billion as of December 31, 2015. During the first quarter of 2016, we utilized $8.0 billion on stock repurchases and made an upfront license fee payment of $300 million and an equity investment of $425 million related to our license and collaboration agreement with Galapagos NV. Cash flow from operating activities was $3.9 billion for the quarter.

Full Year 2016 Guidance

Gilead reiterates its full year 2016 guidance, initially provided on February 2, 2016:

(In millions, except percentages and per share amounts) Provided
February 2, 2016
Net Product Sales $30,000 – $31,000
Non-GAAP*
Product Gross Margin 88% – 90%
R&D expenses $3,200 – $3,500
SG&A expenses $3,300 – $3,600
Effective Tax Rate 18.0% – 20.0%
Diluted EPS Impact Related to Acquisition, Up-front Collaboration, Stock-based Compensation and Other Expenses $1.10 – $1.16
* Non-GAAP Product Gross Margin, R&D and SG&A expenses and effective tax rate exclude acquisition-related, up-front collaboration, stock-based compensation and other expenses.

Corporate Highlights

Announced that Chairman and Chief Executive Officer (CEO) John C. Martin, PhD assumed the role of Executive Chairman of the company. John F. Milligan, PhD, formerly President and Chief Operating Officer, was promoted to President and CEO, effective March 10, 2016, and appointed to the company’s Board of Directors.

Announced that Gilead will provide grants for up to three years to academic institutions, nonprofit organizations and community groups engaged in HIV cure activities. The unrestricted grants are awarded to organizations with a track record of excellence in results-driven research.

Announced that the Board of Directors approved the repurchase of an additional $12 billion of the company’s common stock which commenced upon completion of the company’s existing $15 billion repurchase program authorized in January 2015.
Product & Pipeline Updates announced by Gilead during the First Quarter of 2016 include:

Announced that U.S. Food and Drug Administration (FDA) approved Odefsey (emtricitabine 200 mg/rilpivirine 25 mg/tenofovir alafenamide 25 mg or R/F/TAF) for the treatment of HIV-1 infection in certain patients. Emtricitabine and tenofovir alafenamide are from Gilead while rilpivirine is from Janssen Sciences Ireland UC, one of the Janssen Pharmaceutical Companies of Johnson & Johnson. Odefsey is Gilead’s second TAF-based regimen to receive FDA approval and represents the smallest pill of any single-tablet regimen available today for the treatment of HIV.

Announced that the Committee for Medicinal Products for Human Use, the scientific committee of the European Medicines Agency (EMA), adopted a positive opinion on the company’s Marketing Authorization Application (MAA) for two doses of Descovy (emtricitabine 200 mg/tenofovir alafenamide 25 mg, F/TAF), an investigational fixed-dose combination for the treatment of HIV-1 infection in adults and adolescents (ages 12 years and older with body weight at least 35 kg) in combination with other HIV antiretroviral agents.

Presented data at the 2016 Conference on Retroviruses and Opportunistic Infections, which included the announcement of:
48-week results from a Phase 3 study (Study 1089) evaluating the safety and efficacy of switching virologically suppressed HIV-1 infected adult patients from regimens containing Truvada to regimens containing the investigational fixed-dose combination of emtricitabine and F/TAF. At Week 48, the F/TAF-based regimens were found to be statistically non-inferior to the emtricitabine and tenofovir disoproxil fumarate (F/TDF) -based regimens, based on percentages of patients with HIV-1 RNA levels less than 50 copies/mL. The study also demonstrated statistically significant improvements in renal and bone laboratory parameters among patients receiving F/TAF-based regimens.

Results from a preclinical study conducted in collaboration with researchers at Beth Israel Deaconess Medical Center evaluating a proprietary investigational oral toll-like receptor 7 (TLR7) agonist, GS-9620, and a related molecular analogue, GS-986, as part of an HIV eradication strategy. Data from the study conducted in simian immunodeficiency virus (SIV)-infected virally suppressed rhesus macaques on antiretroviral therapy (ART) demonstrate that TLR7 agonist treatment induced transient plasma SIV RNA blips and reduced SIV DNA. In addition, TLR7 agonist treatment resulted in subsequent prolonged virus suppression in some of the macaques after stopping ART.

Announced that the company’s Type II variation application for once-daily Truvada in combination with safer sex practices to reduce the risk of sexually acquired HIV-1 infection among uninfected adults at high risk, a strategy known as pre-exposure prophylaxis or PrEP, was fully validated and under evaluation by the EMA.

Announced that the company’s MAA for TAF 25 mg, an investigational, once-daily treatment for adults with chronic hepatitis B virus (HBV) infection, was fully validated and under assessment by the EMA. The company also submitted a new drug application (NDA) to FDA for TAF 25 mg for the treatment for adults with chronic HBV infection.

Announced that FDA approved two supplemental indications for Harvoni for use in chronic hepatitis C patients with advanced liver disease. Harvoni in combination with ribavirin for 12 weeks was approved for use in chronic hepatitis C virus (HCV) genotype 1- or 4-infected liver transplant recipients without cirrhosis or with compensated cirrhosis (Child-Pugh A), and for HCV genotype 1-infected patients with decompensated cirrhosis (Child-Pugh B or C), including those who have undergone liver transplantation. Harvoni is approved for use in HCV genotypes 1, 4, 5 and 6, HCV/HIV-1 coinfection, HCV genotype 1 and 4 liver transplant recipients, and genotype 1-infected patients with decompensated cirrhosis.

Announced that FDA granted priority review to the company’s NDA for an investigational once-daily fixed-dose combination of sofosbuvir and velpatasvir (SOF/VEL), for the treatment of chronic genotype 1-6 HCV infection. FDA has set a target action date under the Prescription Drug User Fee Act of June 28, 2016.

On April 28, 2016 Ipsen (Euronext: IPN; ADR: IPSEY) reported its sales for the first quarter 2016 (Press release, Ipsen, APR 28, 2016, View Source [SID:1234511572]).

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First quarter 2016 unaudited IFRS consolidated sales (in million euros) Q1 2016 Q1 2015 % Change % Change at constant currency Specialty care 288.1 265.7 8.4% 9.7% of which Somatuline 121.7 89.3 36.3% 36.3% of which Decapeptyl 78.2 82.9 -5,6% -4.6% of which Dysport 63.2 68.6 -7.9% -4.2% Primary care* 73.9 84.4 -12.4% -11.0% of which Smecta 29.3 35.9 -18.6% -16,9% of which Forlax 10.0 9.1 10.6% 11.5% of which Tanakan 9.8 10.5 -6.9% -4.1% Group Sales 362.0 350.1 3.4% 4.7% * Drug-related sales (active ingredients and raw materials) are recorded within Primary care sales.

Commenting on the first quarter 2016 performance, Marc de Garidel, Chairman and Chief Executive Officer of Ipsen said: "In the first quarter, the Group continued to benefit from the acceleration of the growth of Somatuline in neuroendocrine tumors, both in the United States and Europe. However, the environment in emerging markets, especially in China, is still adversely affecting the performance of Decapeptyl and the primary care." Marc de Garidel added: "We are fully committed, upon regulatory approval, to preparing the upcoming commercial launches of cabozantinib in advanced renal cell carcinoma in Europe, and Dysport in pediatric lower limb spasticity in the United States."

First quarter 2016 sales highlights
Note: Unless stated otherwise, all variations in sales are stated excluding foreign exchange impacts.

Consolidated Group sales grew 4.7% to €362.0 million.

Sales of Specialty care products reached €288.1 million, up 9.7% year-on-year. Oncology sales grew by 16.3% while neurosciences and endocrinology sales decreased by respectively 3.9% and 1.4%. The relative weight of specialty care continued to increase to reach 79.6% of Group sales, compared to 75.9% the previous year.

Sales of Somatuline reached €121.7 million, up 36.3%, driven by a strong growth in North America following the launch of the new indication of neuroendocrine tumors at the beginning of 2015, and the strong performance in most European countries, notably in Germany, France, Poland, Italy and the UK.

Sales of Dysport reached €63.2 million, down 4.2% year-on-year impacted by unfavorable inventory effects in the aesthetic indication through the Galderma partnership. These effects were partly offset by a very good performance in Russia and to a lesser extent in Germany and the United States with a limited growth in therapeutic sales.

Sales of Decapeptyl reached €78.2 million, down 4.6% year-on-year, mainly impacted by negative inventory effects in the Middle East and Algeria. In China, the product suffered from a high comparison base in the first quarter 2015, and from increased price pressure in some provinces. However, the product registered a good performance in some European countries especially in Russia, the United Kingdom and Belgium.

Primary care sales reached €73.9 million, down 11.0% year-on-year. International sales declined 13.7%, while sales were down 3.6% in France. Over the period, primary care sales represented 20.4% of total Group sales, compared to 24.1% the previous year.

Sales of Smecta reached €29.3 million, down 16.9% year-on-year, affected by inventory effects in China related to the change in business model in a slower market.

Sales of Forlax reached €10.0 million, up 11.5%, driven by supply sales to the Group’s partners in charge of marketing the generic versions of the product.

Sales of Tanakan reached €9.8 million, down 4.1% year-on-year, penalized by a market slowdown in France and in Russia.

2016 financial objectives
The Group confirms its financial targets for 2016:
Specialty care sales growth year-on-year in excess of 10.0%;

Slight primary care sales growth year-on-year;

Core operating margin of around 21%, including the impact from the investment required to prepare the commercial launch of cabozantinib for the treatment of advanced renal cell carcinoma in Europe.

Sales objectives are set at constant currency.

On April 28, 2016 Amgen (NASDAQ:AMGN) reported financial results for the first quarter of 2016 (Press release, Amgen, APR 28, 2016, View Source [SID:1234511563]).

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Key results include:

Total revenues increased 10 percent versus the first quarter of 2015 to $5,527 million, with 7 percent product sales growth driven by Enbrel (etanercept), Prolia (denosumab), Aranesp (darbepoetin alfa), Neulasta (pegfilgrastim), Kyprolis (carfilzomib) and XGEVA (denosumab).

Adjusted EPS grew 17 percent versus the first quarter of 2015 to $2.90 driven by higher revenues and higher operating margins.
Adjusted operating income increased 17 percent to $2,859 million and adjusted operating margin improved by 4.4 percentage points to 54.6 percent.

GAAP EPS were $2.50 compared to $2.11 and GAAP operating income was $2,402 million compared to $2,022 million.
Free cash flow was $1.8 billion compared to $1.4 billion in the first quarter of 2015 driven by higher revenues and higher operating income.

"We are off to a strong start in 2016 delivering results for the year and laying groundwork for our long-term growth with innovative new product launches globally," said Robert A. Bradway, chairman and chief executive officer.

$MILLIONS, EXCEPT EPS AND PERCENTAGES

Q1’16

Q1’15

YOY Δ

Total Revenues

$ 5,527

$ 5,033

10%
Adjusted Operating Income

$ 2,859

$ 2,449

17%
Adjusted Net Income

$ 2,203

$ 1,911

15%
Adjusted EPS

$ 2.90

$ 2.48

17%

GAAP Operating Income

$ 2,402

$ 2,022

19%
GAAP Net Income

$ 1,900

$ 1,623

17%
GAAP EPS

$ 2.50

$ 2.11

18%

REFERENCES IN THIS RELEASE TO "ADJUSTED" MEASURES, MEASURES PRESENTED "ON AN ADJUSTED BASIS" AND TO FREE CASH FLOW REFER TO NON-GAAP FINANCIAL MEASURES. THESE ADJUSTMENTS AND OTHER ITEMS ARE PRESENTED ON THE ATTACHED RECONCILIATIONS.

Product Sales Performance

Total product sales increased 7 percent for the first quarter of 2016 versus the first quarter of 2015. The increase was driven by ENBREL, Prolia, Aranesp, Neulasta, Kyprolis and XGEVA.
ENBREL sales increased 24 percent driven by net selling price and declining inventory levels in the prior year period, offset partially by the impact of competition.
Neulasta sales increased 4 percent driven by both higher unit demand and net selling price in the United States (U.S.).
Aranesp sales increased 11 percent. Unit demand grew due to a shift by some U.S. dialysis customers from EPOGEN (epoetin alfa) to Aranesp. Unit demand growth was offset partially by unfavorable changes in net selling price.
XGEVA sales increased 11 percent driven by higher unit demand.
Sensipar/Mimpara (cinacalcet) sales increased 10 percent driven by net selling price and higher unit demand, offset partially by unfavorable changes in inventory levels.
Prolia sales increased 29 percent driven by higher unit demand.
EPOGEN sales decreased 44 percent driven by the impact of competition and, to a lesser extent, a shift by some U.S. dialysis customers to Aranesp.
NEUPOGEN (filgrastim) sales decreased 13 percent driven by the impact of competition in the U.S.
Kyprolis sales increased 43 percent driven by higher unit demand.
Vectibix (panitumumab) sales increased 18 percent driven by higher unit demand.
Nplate (romiplostim) sales increased 12 percent driven by higher unit demand.
BLINCYTO (blinatumomab) sales increased 80 percent driven by higher unit demand.
PRODUCT SALES DETAIL BY PRODUCT AND GEOGRAPHIC REGION

$Millions, except percentages

Q1’16

Q1’15

YOY Δ


US
ROW
TOTAL

TOTAL

TOTAL

Enbrel

$1,326
$59
$1,385

$1,116

24%
Neulasta

996
187
1,183

1,134

4%
Aranesp

261
271
532

480

11%
XGEVA

271
107
378

340

11%
Sensipar / Mimpara

278
89
367

334

10%
Prolia

221
131
352

272

29%
EPOGEN

300
0
300

534

(44%)
NEUPOGEN

150
63
213

246

(13%)
Kyprolis

129
25
154

108

43%
Vectibix

56
88
144

122

18%
Nplate

86
55
141

126

12%
BLINCYTO
21
6
27

15

80%
Repatha
14
2
16

0

*
Other**

10
37
47

47

0%

Total product sales

$4,119
$1,120
$5,239

$4,874

7%

* Not meaningful

** Other includes MN Pharma, Bergamo, IMLYGIC and Corlanor

Operating Expense, Operating Margin and Tax Rate Analysis, on an Adjusted Basis

Cost of Sales margin improved by 1.6 percentage points driven by manufacturing efficiencies, higher net selling price and lower royalties.
Research & Development (R&D) expenses were flat.
Selling, General & Administrative (SG&A) expenses increased 11 percent driven by investments in new product launches.
Operating Expenses increased 3 percent, with all expense categories reflecting savings from our transformation and process improvement efforts.
Operating Margin improved by 4.4 percentage points to 54.6 percent.
Tax Rate increased 1.9 percentage points due to changes in the geographic mix of earnings and the prior year benefit of a state tax audit settlement, offset partially by the benefit in the first quarter of 2016 of adopting the new Accounting Standard Update 2016-09, Improvements to Employee Share-Based Payment Accounting.
$MILLIONS, EXCEPT PERCENTAGES

On an Adjusted Basis
Q1’16

Q1’15

YOY Δ

Cost of Sales*
$707

$735

(4%)

% of sales
13.5%

15.1%

(1.6) pts.
Research & Development
$858

$856

0%

% of sales
16.4%

17.6%

(1.2) pts.
Selling, General & Administrative
$1,103

$993

11%

% of sales
21.1%

20.4%

0.7 pts.
TOTAL Operating Expenses
$2,668

$2,584

3%

Operating Margin

operating income as a % of sales
54.6%

50.2%

4.4 pts.

Tax Rate*
18.9%

17.0%

1.9 pts.

pts: percentage points

*
Impact of Puerto Rico excise tax is included in Cost of Sales and Tax Rate. Excluding Puerto Rico excise tax, Cost of Sales would be 1.7 pts. and 1.9 pts. lower for 2016 and 2015, respectively; and the Tax Rate would be 2.4 pts. and 2.8 pts. higher for 2016 and 2015, respectively.


Cash Flow and Balance Sheet

The Company generated $1.8 billion of free cash flow in the first quarter of 2016 versus $1.4 billion in the first quarter of 2015 driven by higher revenues and higher operating income.
The Company’s second quarter 2016 dividend of $1.00 per share declared on March 2, 2016, will be paid on June 8, 2016, to all stockholders of record as of May 17, 2016.
During the first quarter, the Company repurchased 4.7 million shares of common stock at a total cost of $690 million. At the end of the first quarter, the Company had $4.2 billion remaining under its stock repurchase authorization.
$BILLIONS, EXCEPT SHARES

Q1’16

Q1’15

YOY Δ

Operating Cash Flow
$1.9

$1.5

$0.4
Capital Expenditures
0.2

0.1

0.0
Free Cash Flow
1.8

1.4

0.4
Dividends Paid
0.8

0.6

0.2
Share Repurchase
0.7

0.5

0.2
Avg. Diluted Shares (millions)
760

770

(10)

Cash and Investments
34.7

27.1

7.6
Debt Outstanding
34.3

30.2

4.1
Stockholders’ Equity
28.7

26.5

2.2

Note: Numbers may not add due to rounding

2016 Guidance
For the full year 2016, the Company now expects:

Total revenues in the range of $22.2 billion to $22.6 billion and adjusted EPS in the range of $10.85 to $11.20. Previously, the Company expected total revenues in the range of $22.0 billion to $22.5 billion and adjusted EPS in the range of $10.60 to $11.00.
Adjusted tax rate in the range of 19 percent to 20 percent.
Capital expenditures to be approximately $700 million.
FIRST QUARTER PRODUCT AND PIPELINE UPDATE
Key 2016 development milestones:

Clinical Program
Indication
Milestone
Repatha (evolocumab)
Hyperlipidemia
Phase 3 coronary imaging data expected H2
Phase 3 CV outcomes data expected H2*
Kyprolis
Relapsed multiple myeloma
EU regulatory review (ENDEAVOR)
Parsabiv (etelcalcetide)†
Secondary hyperparathyroidism
Global regulatory reviews
XGEVA
Prevention of SREs in multiple myeloma
Phase 3 data expected H2*
AMG 334
Migraine Prophylaxis
Phase 2b chronic migraine data expected mid-year
Phase 3 episodic migraine data expected H2
ABP 215
(biosimilar bevacizumab)
Oncology
Global regulatory submissions expected
ABP 501
(biosimilar adalimumab)
Inflammatory diseases
Global regulatory reviews
ABP 980
(biosimilar trastuzumab)
Breast Cancer
Phase 3 data expected H2
*EVENT DRIVEN STUDY; †TRADE NAME PROVISIONALLY APPROVED BY FDA; CV = CARDIOVASCULAR

The Company provided the following updates on selected product and pipeline programs:

Repatha

In February, a Phase 3 study evaluating Repatha in patients with high cholesterol who cannot tolerate statins met the co-primary endpoints: the mean percent reductions from baseline in low-density lipoprotein cholesterol (LDL-C) at weeks 22 and 24, and the percent reduction from baseline in LDL-C at week 24.
BLINCYTO

In March, a supplemental Biologics License Application (sBLA) was submitted to the U.S. Food and Drug Administration (FDA) for the treatment of pediatric and adolescent patients with Philadelphia chromosome-negative relapsed or refractory B-cell precursor acute lymphoblastic leukemia (ALL).
In February, a Phase 3 open-label study evaluating the efficacy of BLINCYTO versus standard of care in adult patients with Philadelphia chromosome-negative relapsed or refractory B-cell precursor ALL met the primary endpoint of improved overall survival at a prespecified interim analysis.
IMLYGIC (talimogene laherparepvec)

In February, enrollment initiated for a Phase 3 study evaluating IMLYGIC in combination with KEYTRUDA (pembrolizumab) in patients with unresectable metastatic melanoma.
XGEVA

In March, enrollment completed for a Phase 3 event-driven study evaluating XGEVA compared with zoledronic acid for the prevention of skeletal-related events in patients with newly diagnosed multiple myeloma. Data from the study are expected in H2 2016.
ENBREL

In March, an sBLA for the treatment of pediatric patients with chronic severe plaque psoriasis was accepted for review by FDA.
Romosozumab

In March, a Phase 3 study evaluating romosozumab in men with osteoporosis met the primary endpoint by increasing bone mineral density at the lumbar spine at 12 months.
In February, a Phase 3 study evaluating romosozumab in postmenopausal women with osteoporosis met the co-primary endpoints by reducing the incidence of new vertebral fracture through months 12 and 24. The study also met a secondary endpoint by reducing the incidence of clinical fractures through 12 months.
AMG 334

Data from a Phase 2b study in patients with chronic migraine are expected mid-year 2016.
Data from two Phase 3 studies in patients with episodic migraine are expected in H2 2016.
Romosozumab is developed in collaboration with UCB globally, as well as Astellas in Japan
AMG 334 is developed in collaboration with Novartis
KEYTRUDA is a registered trademark of Merck Sharp & Dohme Corp., a subsidiary of Merck & Co., Inc.

Non-GAAP Financial Measures
In this news release, management has presented its operating results for the first quarters of 2016 and 2015 in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and on an adjusted (or non-GAAP) basis. In addition, management has presented its full year 2016 EPS and tax rate guidance in accordance with GAAP and on an adjusted (or non-GAAP) basis. These non-GAAP financial measures are computed by excluding certain items related to acquisitions, restructuring and certain other items from the related GAAP financial measures. Management has also presented Free Cash Flow (FCF), which is a non-GAAP financial measure, for the first quarters of 2016 and 2015. FCF is computed by subtracting capital expenditures from operating cash flow, each as determined in accordance with GAAP. Reconciliations for these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the news release.

The Company believes that its presentation of non-GAAP financial measures provides useful supplementary information to and facilitates additional analysis by investors. The Company uses certain non-GAAP financial measures to enhance an investor’s overall understanding of the financial performance and prospects for the future of the Company’s core business activities by facilitating comparisons of results of core business operations among current, past and future periods. In addition, the Company believes that excluding the non-cash amortization of intangible assets, including developed product technology rights, acquired in business combinations treats those assets as if the Company had developed them internally in the past, and thus provides a supplemental measure of profitability in which the Company’s acquired intellectual property is treated in a comparable manner to its internally developed intellectual property. The Company believes that FCF provides a further measure of the Company’s liquidity.

The Company uses the non-GAAP financial measures set forth in the news release in connection with its own budgeting and financial planning. The non-GAAP financial measures are in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

On April 28, 2016 United Therapeutics Corporation (NASDAQ: UTHR) reported its financial results for the first quarter ended March 31, 2016 (Press release, United Therapeutics, APR 28, 2016, View Source [SID:1234511548]).

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"Our total revenues increased as compared to the same period in the prior year, which shows that our medicines are continuing to reach an increasing number of patients suffering from pulmonary arterial hypertension (PAH) and other life threatening diseases," said Martine Rothblatt, Ph.D., United Therapeutics’ Chairman and Co-Chief Executive Officer. "Within our PAH product franchise, Orenitram continues to be prescribed to a growing number of patients and this momentum underscores our belief in the increasing clinical support for the use of our orally-administered prostacyclin analogues."

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

Three Months Ended
March 31,

Selected
Percentage

2016

2015

Changes

Revenues

$
369.0

$
327.5

12.7
%
Net income (loss)

$
235.5

$
(16.6)

NM
(2)
Non-GAAP earnings(1)

$
147.3

$
135.0

9.1
%
Net income (loss), per diluted share

$
4.84

$
(0.36)

NM
(2)
Non-GAAP earnings, per diluted share(1)

$
3.02

$
2.55

18.4
%

(1) See definition of non-GAAP earnings, a non-GAAP financial measure, and a reconciliation of net income to non-GAAP earnings
below.
(2) Calculation is not meaningful.

Financial Results for the Three Months Ended March 31, 2016
Revenues
The table below summarizes the components of total revenues (dollars in millions):

Three Months Ended
March 31,

Percentage

2016

2015

Change

Net product sales:

Remodulin

$
139.8

$
146.3

(4.4)
%
Tyvaso


102.2

113.4

(9.9)
%
Adcirca


72.6

45.3

60.3
%
Orenitram


40.2

20.9

92.3
%
Unituxin


14.2

—

N/A

Other

—

1.6

(100.0)
%
Total revenues


$
369.0

$
327.5

12.7
%


Revenues for the three months ended March 31, 2016 increased by $41.5 million compared to the same period in 2015. The growth in revenues primarily resulted from: (1) a $27.3 million increase in Adcirca net product sales; (2) a $19.3 million increase in Orenitram net product sales; and (3) a $14.2 million increase in Unituxin net product sales. These revenue increases were partially offset by: (1) an $11.2 million decrease in Tyvaso net product sales; and (2) a $6.5 million decrease in Remodulin net product sales.

Expenses

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

Three Months Ended
March 31,

Percentage

2016

2015

Change

Category:

Cost of product sales

$
12.6

$
11.2

12.5
%
Share-based compensation (benefit) expense


(11.9)

9.6

(224.0)
%
Total cost of product sales

$
0.7

$
20.8

(96.6)
%
Share-based compensation. The decrease in share-based compensation of $21.5 million for the three months ended March 31, 2016, as compared to the same period in 2015, corresponded to a 29 percent decrease in the price of our common stock during the three months ended March 31, 2016, compared to a 33 percent increase in the price of our common stock during the same period in 2015.

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

Three Months Ended
March 31,

Percentage

2016

2015

Change

Category:

Research and development expense

$
36.8

$
35.2

4.5
%
Share-based compensation (benefit) expense

(37.2)

75.0

(149.6)
%
Total research and development expense

$
(0.4)

$
110.2

(100.4)
%
Share-based compensation. The decrease in share-based compensation of $112.2 million for the three months ended March 31, 2016, as compared to the same period in 2015, corresponded to a 29 percent decrease in the price of our common stock during the three months ended March 31, 2016, compared to a 33 percent increase in the price of our common stock during the same period in 2015.

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

Three Months Ended
March 31,

Percentage

2016

2015

Change

Category:

General and administrative

$
78.2

$
37.7

107.4
%
Sales and marketing

22.3

23.7

(5.9)
%
Share-based compensation (benefit) expense

(95.5)

149.9

(163.7)
%
Total selling, general and administrative expense


$
5.0

$
211.3

(97.6)
%
General and administrative. The increase in general and administrative expense of $40.5 million for the three months ended March 31, 2016, as compared to the same period in 2015, was primarily attributable to $37.0 million of charitable donations to a non-affiliated, non-profit organization that provides financial assistance to patients with PAH. These donations were made during the first quarter of 2016 and represent the full extent of our funding to this non-affiliated, non-profit organization for 2016. Our donations to the same non-affiliated, non-profit organization in 2015 totaled $17.0 million, all of which were paid during the second quarter of that year. We expense these types of grant payments in the period they are made.

Share-based compensation. The decrease in share-based compensation of $245.4 million for the three months ended March 31, 2016, as compared to the same period in 2015, corresponded to a 29 percent decrease in the price of our common stock during the three months ended March 31, 2016, compared to a 33 percent increase in the price of our common stock during the same period in 2015.

Income Tax Expense

The provision for income tax expense is based on an estimated annual effective tax rate that is subject to adjustment in subsequent quarterly periods if components used to estimate the annual effective tax rate are updated or revised. The estimated annual effective tax rates as of March 31, 2016 and March 31, 2015 were approximately 35 percent and approximately 38 percent, respectively. Our 2016 estimated annual effective tax rate decreased compared to the 2015 estimated annual effective tax rate primarily due to a decrease in non-deductible share-based compensation expense as compared to the prior year, which was driven largely by a decrease in our stock price.

Share Repurchases

In the first quarter of 2016, we repurchased approximately 1.0 million shares of our common stock at a total cost of $123.2 million. These purchases were made pursuant to our $500 million stock repurchase program, which is effective during calendar year 2016.

Non-GAAP Earnings

Non-GAAP earnings is defined as net income, adjusted for the following charges, which are presented net of our annual effective income tax rate, as applicable: (1) interest expense; (2) license fees; (3) depreciation and amortization; (4) impairment charges; and (5) share-based compensation expense (stock option, share tracking award and employee stock purchase plan).

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

Three Months Ended
March 31,

2016

2015

Net income (loss), as reported

$
235.5

$
(16.6)

Adjust for the following charges(1):

Interest expense

0.4

1.3

Depreciation and amortization

5.0

5.1

Share-based compensation (benefit) expense

(93.6)

145.2

Non-GAAP earnings

$
147.3

$
135.0

Non-GAAP earnings per share:

Basic


$
3.24

$
2.89

Diluted


$
3.02

$
2.55

Weighted average number of common shares outstanding:

Basic

45.4

46.7

Diluted

48.7

53.0

(1) Non-GAAP earnings adjustments are presented net of the impact of our estimated effective income tax rates of approximately 35
percent and approximately 38 percent for the three months ended March 31, 2016 and 2015, respectively.