Bio-Rad Q2 Revenues Jump 14 Percent

Bio-Rad Laboratories reported after the close of the market Tuesday that its second quarter revenues increased 14 percent year over year, driven by growth in both its Life Science and Clinical Diagnostics businesses.

For the three months ended June 30, Bio-Rad tallied net sales of $575.9 million compared to $504.7 million in Q2 2017, beating analysts’ consensus estimate of $548.4 million. On a currency-neutral basis, Q2 sales increased 11 percent year over year, the company said.

Life Science segment sales were $217.8 million, up 21 percent year over year, or 19 percent on a currency-neutral basis. Life Science growth was driven by cell biology, process media, digital PCR, and food safety products.

On a conference call to discuss the company’s earnings, Bio-Rad Executive Vice President and CFO Christine Tsingos noted that process media was a particularly bright spot, but it benefitted from an easy comparison to the prior-year quarter. Excluding this, currency-neutral growth in the Life Sciences segment was still 14 percent year over year.

Clinical Diagnostics segment sales grew 10 percent to $354.0 million, or 6.5 percent on a currency-neutral basis. Growth in this segment was driven by blood typing, quality control, and immunology product lines. In particular, Tsingos said on the call, the company saw a significant increase in blood typing instrument sales.

Bio-Rad’s Q2 net income was $268.0 million, or $8.87 per share, compared to $5.0 million, or $.17 per share, in the year-ago period. Net income in Q2 2018 was significantly and favorably impacted by the recognition on the income statement of changes in the fair market value of equity securities of $286.4 million in the quarter primarily related to the holdings of the firm’s investment in Sartorius, the result of new accounting standards that became effective in 2018.

Adjusted EPS was $1.64, besting the Wall Street expectation of $1.27.

Bio-Rad’s Q2 R&D spending fell 24 percent to $47.5 million from $62.6 million, while its SG&A expenses dropped 1 percent to $210.4 from $212.5 million.

Bio-Rad finished the quarter with $403.0 million in cash and cash equivalents and $420.8 million in short-term investments.

Tsingos said during the call that given the strong performance in the first half of the year, Bio-Rad is raising its full-year guidance to 4 percent to 4.5 percent currency-neutral revenue growth from a previous guidance of 3.5 percent to 4.5 percent growth.

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RA Pharmaceuticals price target raised to $28 from $18 at Raymond James

https://bit.ly/2nkNtt9

CVS CEO Merlo: Don’t blame us for high drug prices

• CVS Health CEO Larry Merlo defends the pharmacy benefit management business on a call with Wall Street analysts.
• CVS says it returns about 98 percent of rebates to its customers.
• President Donald Trump spent a large chunk of his speech announcing his blueprint to lower drug prices attacking middlemen, who he said “won’t be so rich anymore.”
• Pfizer CEO Ian Read last week told Wall Street analysts he believes the Trump administration may eliminate rebates altogether.

CEO Larry Merlo defended the pharmacy benefit management business, saying the idea that rebates are correlated with higher drug prices is “entirely false.”

CVS said Wednesday it returns about 98 percent of rebates to its customers. It expects to keep about $300 million this year, representing about 3 percent of its annual adjusted earnings per share.

Pharmacy benefit managers, including CVS Caremark, control which drugs are covered and negotiate discounts, known as rebates, on branded drugs with manufacturers. Rebates can help manufacturers secure access on drug formularies.

They’re a favorite target of drugmakers, who say these middlemen want higher list prices, or advertised prices, so they can negotiate bigger rebates and squeeze higher profits from them. The argument has struck a chord with the Trump administration, which has questioned the system.

“Drug manufacturers want you to believe that increasing drug prices are a result of them happy to pay rebates and that PBMs are retaining these rebates. And this is simply not true. If list prices were the result of a manufacturer’s need to address rebates then you would expect rebates and list prices to be highly correlated,” Merlo told Wall Street analysts Wednesday on a call discussing its second-quarter financial results.

Instead, Merlo said CVS’ data showed list price, or the advertised price of a drug, increases faster for drugs with smaller rebates than it is for treatments with substantial rebates. When drugs don’t face any competition, manufacturers have less incentive to compete on price, Merlo said. Therefore, rebates are used more when drugmakers need to compete with each other for formulary placement. Even when rebates are negotiated, PBMs say they pass the bulk of them to clients.

Rebates have come under even more scrutiny lately with the Trump administration repeatedly questioning this system and even vowing to re-examine it. Health and Human Services Secretary Alex Azartold CNBC in June that “we may need to move toward a system without rebates, where PBMs and drug companies just negotiate fixed-price contracts

President Donald Trump spent a large chunk of his speech announcing his blueprint to lower drug prices attacking middlemen, who he said “won’t be so rich anymore.” Pfizer CEO Ian Read last week told Wall Street analysts he believes the Trump administration may eliminate rebates altogether.

PBMs have tried to deflect attention back to drugmakers, who it says are at fault for even setting high drug prices in the first place. They defend their businesses as a way to actually lower drug prices.

https://cnb.cx/2MtYh36

Ampio hit after FDA comments on clinical trial

Shares of Ampio Pharmaceuticals Inc. AMPE, -69.23% plunged 69% in morning trade Wednesady, to fall back below the $1 threshold for the first time in 10 months, after the biopharmaceutical company said the Food and Drug Administration said a current trial for a treatment of osteoarthritis of the knee did not support a biologics license application (BLA). The FDA said the that as a single trial, the AP-003-A trial on its own does not appear to provide sufficient evidence of effectiveness to support a BLA. The FDA recommended an additional randomized trial. “Despite our belief that the APC-003-C trial design was based on FDA guidance and feedback and consistent with FDA precedent for similar products (in intended use, in origin, and in regulatory pathway), which we reiterated with the FDA multiple times, the FDA does not consider the AP-003-C trial to be an adequate and well-controlled clinical trial,” Ampio said in a statement filed with the Securities and Exchange Commission. The stock has now lost 79% year to date, while the iShares Nasdaq Biotechnology ETF IBB, -0.70%has climbed 10% and the S&P 500 SPX, -0.01% has gained 6.8%.

https://on.mktw.net/2MqNyX1

Vitamin Shoppe digital sales up >36%

Vitamin Shoppe (NYSE:VSI) reports total comparable sales fell 1.1% in Q2.

Digital comparable net sales rose 36.9%.

Gross margin rate up 60 bps to 33.4%, primarily due to improvements in margin from more favorable pricing and promotions and lower costs through vendor partnerships.

SG&A expense rate grew 180 bps to 29.3%, primarily the result of deleverage in store payroll and store operating costs as well as increased health care costs.

Adjusted operating margin rate expanded 130 bps to 4%.

Store count +1 Y/Y to 782.

On May 7, the company completed the sale of Nutri-Force, its manufacturing business.

FY2018 Guidance: Total comp sales: negative low to mid single digits; Gross margin rate: 30.5% to 31%; SG&A expense rate: $340M to $345M; Tax rate: 28%; Capex: ~$30M.

https://bit.ly/2vQUXb5

Samsung commits billions of dollars to building its biologics business

Samsung has already spent billions of dollars in short order to establish one of the largest biologics manufacturing operations in the world. Today it said it will spend billions more.

While short on details, the South Korean conglomerate announced plans to invest $22 billion across business lines it said will propel its growth in the futurer, including artificial intelligence, auto electronics and biopharmaceuticals.

“For biopharmaceuticals, Samsung has seen strong growth from both its contract manufacturing and biosimilar businesses. It will continue to invest heavily in the businesses, including developing and manufacturing biosimilars to combat chronic and difficult-to-cure diseases.”

Its Samsung BioLogics unit established its CDMO and biosimilars business quickly after Samsung decided it was a viable extension of its chemicals business. It has pledged to become the top biologics contract manufacturer in the world and is in the process of completing a third biologics plant at a site in Incheon next to two others—a feat accomplished in seven years.

With completion of the third facility, the company will have total capacity of 362,000 liters and will have invested 3 trillion won ($2.6 billion), in the massive buildup.

The unit has attracted top tier pharma and biotech business but has yet to make a profit. Last month it reported earnings that included a net loss of 9.6 billion won ($8.53 million) in the second quarter. It said the operating profit of Samsung BioLogics increased sharply by 13.7 billion won ($1.2 million) from the previous quarter and that it showed an improvement in its net loss as sales improved from its Samsung Bioepis subsidiary, a joint venture with Biogen to produce biosimilars.

Earlier accounting at the JV, however, has been called into question by Korean regulators. Last month, South Korea’s Securities and Futures Commission found that Samsung BioLogics “violated accounting standards by intentionally omitting information regarding the joint venture agreement with Biogen in its public disclosure.” It said it had referred its finding to prosecutors. Samsung has denied the allegations, saying it complied with all accounting standards.

The disclosures came even as Biogen paid about $700 million to increase its share in the JV to 49.9% from 5.4%. Biogen CEO Michel Vounatsos said in the company’s first-quarter earnings call that the biotech decided to up its stake because of the JV’s success. He said the joint venture’s European biosimilar revenue is tracking at about $500 million per year.

Samsung also hit a milestone last month with the FDA approval of its first finished product, a monoclonal antibody, at the second of the three plants. Samsung did not identify the product or the client. The plant is already approved by the FDA to make drug substances, and Europe has approved the facility to produce two finished products.

https://bit.ly/2npl8lf

ObsEva price target raised to $44 from $30 at H.C. Wainwright

ObsEva price target raised to $44 from $30 at H.C. Wainwright. H.C. Wainwright analyst Raghuram raised his price target for ObsEva (OBSV) to $44 based on the disclosed pricing for AbbVie’s (ABBV) Orilissa, the fgonadotropin-releasing hormone receptor antagonist for endometriosis and uterine fibroids. ObsEva management had previously guided to the cost of GnRH receptor antagonist therapy at $15 per day, about $450 per month, and the proposed monthly cost of Orilissa at $845 “appears to be comfortably above this level,” Selvaraju tells investors in a research note. As such, the analyst elected to revise his pricing assumptions upward for ObsEva’s linzagolix to reflect a daily cost of $25. He keeps a Buy rating on ObsEva shares.

https://bit.ly/2vonbdZ