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Baxalta Exceeds Guidance And Delivers Strong Sales And Earnings For First Quarter 2016

The following excerpt is from the company's SEC filing.

Positive momentum continues across broad hematology and immunology portfolio

Key pipeline and strategic achievements drive continued growth and unlock value across rare disease portfolio

R&D and marketing investments position business for future success

BANNOCKBURN, Ill., April 28, 2016

Baxalta Incorporated (NYSE: BXLT), a global biopharmaceutical leader dedicated to delivering transformative therapies to patients with orphan diseases and underserved conditions, today reported strong first quarter 2016 financial results.

Baxaltas strong financial performance continues to highlight the attractive growth prospects that exist across the portfolio, said Ludwig Hantson, chief executive officer and president, Baxalta. As we embark on the next phase of our journey, the outstanding contributions of our team will result in enhanced access to differentiated therapies that improve patient care and promising new treatments that address unmet medical needs.

Financial Results for the First Quarter 2016

In the first quarter, Baxalta generated net income on a GAAP basis of $145 million and earnings of $0.21 per diluted share. These results include net after-tax special items totaling $181 million, or $0.26 per diluted share, primarily for intangible asset amortization, expenses associated with the companys separation from Baxter International (NYSE: BAX) and anticipated merger with Shire plc (LSE: SHP, NASDAQ: SHPG), as well as collaboration and business optimization charges.

On an adjusted basis, excluding special items, Baxalta reported first quarter net income of $326 million, or $0.47 per diluted share, which compares favorably to the companys previously-issued guidance of $0.44 to $0.46 per diluted share. These financial results reflect robust sales, and higher gross margins, providing enhanced flexibility for accelerated investments in research and development, marketing and launch preparedness, and global infrastructure to position the company for future success.

Baxalta Page 1

Sales Momentum Across Differentiated Portfolio

In the first quarter, on a GAAP basis, Baxaltas worldwide revenues of $1.5 billion advanced 14 percent from the prior-year period. Excluding the impact of foreign currency, sales advanced 18 percent.

On a pro forma basis, worldwide revenues increased 10 percent. Excluding the impact of foreign currency, sales advanced 14 percent, exceeding the companys previously-issued guidance of growth in the 8 to 9 percent range. Within the United States, sales of $879 million rose 16 percent; international sales of $669 million increased 3 percent. Excluding foreign currency, international sales increased 11 percent.

By business, global hematology revenues of $843 million increased 8 percent (excluding the impact of foreign currency) as the company continues to focus on enhancing access and elevating standards of care worldwide. Growth was driven by the U.S. introduction of ADYNOVATE [Antihemophilic Factor (Recombinant), PEGylated], an extended circulating half-life recombinant Factor VIII (rFVIII) treatment for hemophilia A, as well as heightened demand for ADVATE [Antihemophilic Factor (Recombinant)] and FEIBA [Anti-Inhibitor Coagulant Complex], an inhibitor treatment. Also contributing to performance was growth of RIXUBIS [Coagulation Factor IX (Recombinant)], a treatment for hemophilia B, and OBIZUR [Antihemophilic Factor (Recombinant), Porcine Sequence], for the treatment of acquired hemophilia A.

Immunology sales of $653 million advanced 13 percent on a pro forma basis (excluding the impact of foreign currency). The company continues to capitalize on its broad and differentiated portfolio of immunoglobulin therapies, including HYQVIA [Immune Globulin Infusion 10% (Human) with Recombinant Human Hyaluronidase], and is driving strong sales of specialty biotherapeutics.

Baxaltas new oncology business recorded sales of $52 million in the quarter. This reflects revenues of ONCASPAR (pegaspargase), a marketed biologic treatment for acute lymphoblastic leukemia (ALL).

First Quarter 2016 Highlights and Key Milestone Achievements

Baxaltas disciplined strategic decisions are accelerating innovation and supporting meaningful pipeline achievements, unlocking value for patients, customers and shareholders.

Baxalta Page 2

Our commitment to serving patients is our inspiration, added Hantson. We have an incredible legacy of developing differentiated therapies. Baxaltas patient-centric approach will continue to enhance the lives of people with orphan diseases and underserved conditions, and create sustainable, long-term value for all of our partners and stakeholders.

Complementing the companys strong financial performance in the first quarter are a number of recent achievements:

Expanding the ADYNOVATE label and geographic reach with approval in Japan for the treatment of pediatric, adolescent and adult patients with hemophilia A and for use during surgery; submission in the U.S. of supplemental Biologics License Applications (sBLAs) to the FDA for the treatment of children under the age of 12 with hemophilia A and for use in surgical settings; and the filing of a Marketing Authorization Application (MAA) to the European Medicines Agency (EMA) for approval under the name, ADYNOVI.

Developing further options for direct factor replacement treatment with the initiation of the Phase 1 first-in-human clinical trial of BAX 826, a second extended half-life treatment based on ADVATE that uses proprietary polysialic acid (PSA) technology and targets weekly dosing for patients with hemophilia A.

Undertaking efforts to expand global access and indications for HYQVIA including recent regulatory approval in Australia. In addition, the company has received orphan drug designation from the FDA for the treatment of chronic inflammatory demyelinating polyneuropathy (CIDP), a neurological disorder characterized by progressive weakness and impaired sensory function in the legs and arms, and a Phase 3 clinical trial is underway.

Leveraging the companys global development, manufacturing and commercial capabilities to make leading biologics more accessible for patients including BAX 2200 (CHS-0214), a proposed biosimilar of Enbrel

(etanercept), which met its primary endpoint in a confirmatory, double-blind, randomized, controlled, two-part clinical study. This ongoing study is evaluating the efficacy and safety of BAX 2200 compared to Enbrel

in patients with moderate-to-severe rheumatoid arthritis that is inadequately controlled with methotrexate alone.

Accelerating treatment for patients with significant unmet medical needs with Health Canadas Priority Review of the New Drug Submission (NDS) for irinotecan liposome injection, also known as nal-IRI, for the treatment of patients with metastatic adenocarcinoma of the pancreas previously treated with gemcitabine-based therapy. The expedited review is expected to be conducted in the second half of 2016.

Baxalta Page 3

Accelerating innovation in growing immuno-oncology portfolio with announcement of global collaboration with Precision BioSciences, a genome editing company, to develop a broad series of allogeneic chimeric antigen receptor (CAR) T cell therapies directed toward areas of major unmet need in multiple cancers. The companies will develop CAR T therapies for up to six unique targets, with the first program expected to enter clinical studies in late 2017.

Additional Information

Given the proposed merger agreement with Shire plc announced on January 11, 2016, Baxalta will not be hosting an investor conference call to discuss financial results. In addition, the company will not be providing financial guidance for the second quarter or full-year 2016, and previously-issued guidance for Baxalta as a standalone entity is no longer applicable.

The transaction is subject to customary closing conditions, including regulatory approvals in several jurisdictions and approval by both Baxaltas and Shires stockholders. The special meeting of stockholders to adopt the merger agreement with Shire will be held on May 27, 2016, at 7:00 a.m. Central Time, for Baxalta stockholders of record as of the close of business on April 11, 2016. The special meeting will be held at Baxaltas corporate headquarters, located at 1200 Lakeside Drive, Bannockburn, Illinois 60015. The transaction is expected to close shortly after the special meeting takes place, assuming stockholder approval is received by both companies.

Complementary information related to Baxaltas first quarter 2016 financial results may be accessed by visiting the Baxalta corporate website at investor.baxalta.com.

About Baxalta

Baxalta Incorporated (NYSE: BXLT) is a global biopharmaceutical leader developing, manufacturing and commercializing therapies for orphan diseases and underserved conditions in hematology, immunology and oncology. Driven by passion to make a meaningful impact on patients lives, Baxaltas broad and diverse pipeline includes biologics with novel mechanisms and advanced technology platforms such as gene therapy. Launched in 2015 following separation from Baxter International, Baxaltas heritage in biopharmaceuticals spans decades. Baxaltas therapies are available in more than 100 countries and it has advanced biological manufacturing operations across 12 facilities, including state-of-the-art recombinant production and plasma fractionation. Headquartered in Northern Illinois, with its Global Innovation Center in Cambridge, Mass., Baxalta employs 17,000 employees worldwide.

Baxalta Page 4

Forward-Looking Statements

This release includes forward-looking statements concerning expectations and other matters that are dependent upon future events or developments, including statements regarding the expected timing of completion of Baxaltas proposed combination with Shire plc (Shire). Such statements are made of the date that they were first issued and are based on current expectations, beliefs and assumptions of management. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond Baxaltas control and which could cause actual results to differ materially from those in the forward-looking statements, including, but not limited to, the following: satisfaction of regulatory and other requirements; actions of regulatory bodies and other governmental authorities; changes in laws and regulations; product quality, manufacturing or supply issues; patient safety issues; the inability to complete the proposed combination with Shire; any delays related to or the failure to obtain regulatory approvals required for the proposed combination; the occurrence of any event that could give rise to the termination of the merger agreement related to the proposed combination; the amount of the costs, fees, expenses and charges related to the proposed combination; the effect of the proposed combination on Baxaltas client relationships, operating results and business generally, including without limitation the ability to retain key employees; the potential diversion of Baxaltas managements attention resulting from the proposed combination and of the combined companys managements attention resulting from integration issues after the proposed combination; and other risks identified in Baxaltas Securities and Exchange Commission (SEC) filings, all of which are available on Baxaltas website, as well as other risks related to the proposed combination identified in Shires respective filings with the SEC. Baxalta expressly disclaims any intent or obligation to update these forward-looking statements except as required by law.

Baxalta Investor Relations

Mary Kay Ladone, +1-224-940-3371,

mary.kay.ladone@baxalta.com

Lorna Williams, +1-224-940-3511,

lorna.williams@baxalta.com

Baxalta Media Relations

Geoffrey Mogilner, +1-224-940-8619,

geoffrey.mogilner@baxalta.com

Baxalta Page 5

BAXALTA INCORPORATED

GAAP Product Category Sales by U.S. and International

Three Months Ended March 31, 2016 and 2015

(unaudited)

($ in millions)

The below information presents Baxaltas product category net sales on a GAAP basis by U.S. and International. Refer to the following page for product category net sales on a pro forma basis.

Q1 2016

Q1 2015

% Growth @ Actual Rates

% Growth @ Constant Rates

Hemophilia

$ 346

$ 298

$ 644

$ 305

$ 336

$ 641

Inhibitor Therapies

128

199

103

Hematology

$ 417

$ 426

$ 843

$ 368

$ 439

$ 807

Immunoglobulin Therapies

97

453

92

BioTherapeutics

135

200

75

$ 421

$ 232

$ 653

$ 387

$ 167

$ 554

Oncology

$ 41

$ 11

$ 52

Total Baxalta

$ 879

$ 669

$1,548

$ 755

$ 606

$1,361

Baxalta Page 6

Pro Forma Product Category Sales by U.S. and International

The below information presents Baxaltas product category net sales on a pro forma basis by U.S. and International. A reconciliation to GAAP net sales and a description of the pro forma adjustment is also included below.

(11%)

Inhibitor Therapies

Immunoglobulin Therapies

97

Pro Forma BioTherapeutics

117

Pro Forma Immunology

$ 209

$ 596

Pro Forma Total Baxalta

$ 648

$1,403

Pro Forma Net Sales Reconciliation

BioTherapeutics

$ 65

$ 135

$ 200

$ 75

$ 134

Pro forma MSA revenue

42

$ 117

$ 176

In connection with its separation from Baxter International Inc. (Baxter) on July 1, 2015, the company and Baxter entered into a manufacturing and supply agreement whereby Baxalta manufactures and sells certain products to Baxter. The pro forma net sales figures assume that the manufacturing and supply agreement was in effect for the three months ended March 31, 2015 prior to the separation. Net sales related to the manufacturing and supply agreement with Baxter are reported in the companys GAAP net sales figures in periods following the separation and were $41 million for the three months ended March 31, 2016.

Baxalta Page 7

Consolidated and Combined Statements of Income

Three Months Ended March 31, 2016 and 2015

(unaudited)

Three Months Ended

NET SALES

$ 1,548

$ 1,361

COST OF SALES

GROSS MARGIN

% of Net Sales

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

RESEARCH AND DEVELOPMENT EXPENSES

NET INTEREST EXPENSE

OTHER (INCOME) EXPENSE, NET

PRE-TAX INCOME FROM CONTINUING OPERATIONS

INCOME TAX EXPENSE

% of Pre-Tax Income from Continuing Operations

NET INCOME FROM CONTINUING OPERATIONS

INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX

$ 145

BASIC EPS FROM CONTINUING OPERATIONS

$ 0.21

$ 0.39

DILUTED EPS FROM CONTINUING OPERATIONS

$ 0.38

BASIC EPS FROM DISCONTINUED OPERATIONS

$ 0.00

$ 0.02

DILUTED EPS FROM DISCONTINUED OPERATIONS

$ 0.41

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

Diluted

Pro Forma and Non-GAAP Measures

PRO FORMA NET SALES

$ 1,548

$ 1,403

ADJUSTED PRO FORMA OPERATING INCOME

$ 425

$ 409

ADJUSTED PRO FORMA EBITDA

$ 481

$ 461

ADJUSTED PRO FORMA NET INCOME FROM CONTINUING OPERATIONS

$ 326

$ 275

$ 276

ADJUSTED PRO FORMA DILUTED EPS FROM CONTINUING OPERATIONS

$ 0.47

$ 0.40

Consolidated and combined statements of income presented in accordance with generally accepted accounting principles (GAAP) unless otherwise noted.

Operating results and gains and losses related to the sale of the companys vaccines business are classified as discontinued operations.

On July 1, 2015 Baxter distributed approximately 544 million shares of Baxalta Incorporated (Baxalta) common stock and retained an additional 132 million shares. The computation of basic weighted-average shares outstanding for the three months ended March 31, 2015 was calculated using the shares distributed and the shares retained by Baxter on July 1, 2015. The diluted weighted-average number of shares outstanding for the three months ended March 31, 2015 include the dilutive effect of common share equivalents for employee equity awards outstanding as of July 1, 2015.

Refer to pages 9 through 11 for reconciliations of GAAP to pro forma and non-GAAP measures.

Baxalta Page 8

Notes to Consolidated and Combined Statements of Income

Reconciliation of GAAP to Pro Forma and Non-GAAP Measures

Below are reconciliations of the companys non-GAAP financial measures presented on page 8 to their most directly comparable GAAP financial measures.

March 31,

Adjusted Pro Forma Operating Income and Adjusted Pro Forma EBITDA

Pre-tax Income from Continuing Operations - GAAP

$ 172

$ 339

Pro forma adjustments

Special item adjustments

Adjusted Pro Forma Pre-tax Income

$ 403

$ 350

Remove: Net interest expense

Remove: Other (income) expense, net

Adjusted Pro Forma Operating Income

$ 425

$ 409

% of Pro Forma Net Sales

Remove: Depreciation expense

$ 481

$ 461

% of Pro Forma Net Sales

Adjusted Pro Forma Net Income from Continuing Operations and Adjusted Pro Forma Net Income

Net Income from Continuing Operations - GAAP

$ 262

Pro Forma Adjustments

Pre-tax pro forma adjustments

Impact of pro forma adjustments on income tax expense

Special Item Adjustments

Pre-tax special item adjustments

Impact of special item adjustments on income tax expense

Adjusted Pro Forma Net Income from Continuing Operations

$ 326

$ 275

Add: Adjusted income from discontinued operations

$ 276

Adjusted Pro Forma Diluted EPS from Continuing Operations and Adjusted Pro Forma Diluted EPS

Diluted EPS from Continuing Operations - GAAP

$ 0.21

$ 0.38

Impact of pro forma adjustments on diluted EPS from continuing operations

Impact of special item adjustments on diluted EPS from continuing operations

Adjusted Pro Forma Diluted EPS from Continuing Operations

$ 0.47

Add: Adjusted diluted EPS from discontinued operations

Adjusted Pro Forma Diluted EPS

Refer to pages 10 and 11 for descriptions of pro forma and special item adjustments and the impacted statement of income line items.

Baxalta Page 9

Reconciliation of GAAP to Pro Forma and Non-GAAP Measures (continued)

The companys pro forma and special item adjustments by statement of income line item are listed below:

Net Sales - GAAP

$ 1,548

$ 1,361

Manufacturing and supply arrangements with Baxter

Pro Forma Net Sales

$ 1,403

Gross Margin - GAAP

$ 838

$ 790

Pension expense

Depreciation expense

Manufacturing and supply arrangements with Baxter

Pro Forma Gross Margin

$ 794

Business optimization items

Intangible asset amortization expense

Separation- and integration-related costs, net

Adjusted Pro Forma Gross Margin

$ 934

$ 802

% of Pro Forma Net Sales

Selling, General and Administrative Expenses - GAAP

$ 384

$ 283

Supply chain TSA

Pro Forma Selling, General and Administrative Expenses

$ 274

Business optimization items

Adjusted Pro Forma Selling, General and Administrative Expenses

$ 334

$ 239

Research and Development Expenses - GAAP

$ 280

$ 156

Pro Forma Research and Development Expenses

$ 155

Upfront payment to collaboration partner

Adjusted Pro Forma Research and Development Expenses

$ 175

$ 154

Net Interest Expense - GAAP

$ 23

Interest expense

Pro Forma Net Interest Expense

$ 47

Other (Income) Expense, Net - GAAP

$ (21)

$ 12

Adjusted Other (Income) Expense, Net

$ (1)

Refer to page 11 for tickmark explanations

Baxalta Page 10

The companys pro forma and special item adjustments by statement of income line item are listed below (continued):

March 31,

Pre-Tax Income - GAAP

Impact of pro forma adjustments

Impact of special item adjustments

Adjusted Pro Forma Pre-Tax Income

Income Tax Expense - GAAP

$ 27

$ 77

Adjusted Pro Forma Income Tax Expense

$ 75

% of Adjusted Pro Forma Pre-tax Income from Continuing Operations

Income from Discontinued Operations

$ 10

Impact of special item adjustments on discontinued operations

Adjusted Income from Discontinued Operations

Description of pro forma adjustments:

The pro forma adjustments impact periods prior to the July 1, 2015 separation of Baxalta from Baxter. The pro forma adjustments give effect to the separation and related transactions described below as if they had occurred as of January 1, 2014. The pro forma adjustments are for informational purposes only and do not purport to represent what Baxaltas results of operations actually would have been had the separation and related transactions occurred on the dates indicated, or to project Baxaltas financial performance for any future period.

Reflects the effect of the manufacturing and supply agreement that Baxalta and Baxter entered into in connection with the separation. The net sales adjustment reflects additional sales that Baxalta would have recorded in periods prior to the separation for products manufactured and sold to Baxter. The cost of sales adjustment reflects the impact of costs incurred to manufacture these products as well as incremental costs that Baxalta would have recorded for purchases of other products from Baxter under the manufacturing and supply agreement.

Reflects a reduction in operating expenses related to the impact of net retirement obligations transferred to Baxalta as part of the separation.

Reflects a net increase in depreciation expense related to certain assets transferred to Baxalta pursuant to the separation agreement that were not included in the companys historical financial statements.

Reflects a reduction in selling, general and administrative expenses for the difference in costs to be incurred by Baxalta for certain supply chain services provided by Baxter under terms of the transition services agreement as compared to related costs allocated to Baxalta in its historical financial statements.

Reflects interest expense associated with approximately $5 billion of debt issued by Baxalta in advance of the separation. The pro forma adjustment does not include an estimate of the portion that may have been capitalized.

Description of special item adjustments

The companys GAAP results were impacted by costs, and favorable adjustments to previously estimated costs, associated with the companys execution of certain strategies to optimize its organizational structure.

The companys GAAP results included intangible asset amortization expense for both periods presented, including amortization of an inventory fair value step-up during the three months ended March 31, 2016 related to the acquisition of the ONCASPAR portfolio from Sigma-Tau Finanziaria S.p.A.

The companys GAAP results for both periods presented were impacted by costs related to the separation from Baxter and establishing Baxalta as an independent, standalone public company. Results for the three months ended March 31, 2016 were also impacted by integration-related expenses associated with the anticipated merger with Shire plc. Other (income) expense, net during the three months ended March 31, 2016 included a favorable adjustment to an indemnification liability initially recorded upon the separation from Baxter.

The companys GAAP results for the three months ended March 31, 2016 included an R&D charge associated with an upfront payment to a collaboration partner.

The companys GAAP results for the three months ended March 31, 2015 were impacted by a gain resulting from a purchase price adjustment on the sale of discontinued operations.

For more information on the companys use of non-GAAP financial measures in this release, please see the companys Current Report on Form 8-K filed with the SEC on the date of this release.

Baxalta Page 11

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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Other recent filings from the company include the following:

Registration of securities, business combinations - April 28, 2016
Prospectuses and communications, business combinations - April 26, 2016
Registration of securities, business combinations - April 21, 2016
Prospectuses and communications, business combinations - April 19, 2016