Qualcomm, Taiwan Reach Settlement in Patent-Licensing Dispute

Qualcomm Inc. notched a victory in its effort to preserve its patent-licensing business, as it reached a settlement with the Taiwanese government that revokes a previous finding against the chip maker and saves the company nearly $700 million in fines.

The settlement comes as world’s dominant supplier of chips for smartphones seeks to chart a new path following a tumultuous year that involved fending off a takeover effort by rival Broadcom Inc. and abandoning its takeover of NXP Semiconductors NV amid trade tensions between…

https://www.wsj.com/articles/qualcomm-taiwan-reach-settlement-in-patent-licensing-dispute-1533872303?mod=rss_Technology

Lydall to Acquire Interface Performance Materials, a Leader in Gasket and Specialty Materials

– Strengthens engineered materials offering, with a leading globally-recognized brand
– Leverages existing manufacturing capabilities and know-how
– Enhances Lydall’s portfolio with meaningful scale and margin profile

MANCHESTER, Conn., Aug. 09, 2018 (GLOBE NEWSWIRE) —  Lydall, Inc. (“Lydall” or the “Company”) (NYSE: LDL), today announced it has entered into an agreement to acquire Interface Performance Materials (“Interface”) for $265 million in cash.  The transaction will further advance Lydall’s engineered materials offering in new markets with similar technologies utilized in our Performance Materials business.  Interface is a leading globally-recognized brand that delivers complete sealing solutions with a comprehensive product portfolio, deep in-house technical capabilities and vertical integration.  The transaction is expected to close in the Third Quarter of 2018, subject to the completion of specified closing conditions, including receipt of customary merger control approval from U.S. authorities.

A leader in the delivery of engineered sealing solutions, Interface partners with OEMs and Tier I manufacturers to serve both original equipment and aftermarket needs in segments such as Agriculture, Construction, Earthmoving, Industrial and Automotive.  Headquartered in Lancaster, Pennsylvania, Interface supports its global sales with manufacturing sites in the U.S., Germany and India.  

Interface’s reported sales and adjusted EBITDA for the fiscal year ended December 31, 2017 were $142 million and $26 million, respectively.  The business is expected to achieve sales of approximately $150 million and adjusted EBITDA of approximately $29 million in the trailing 12 months ending August 31, 2018.  Lydall expects to leverage its business efficiencies, operating discipline and economies of scale to generate an estimated annual cost savings of approximately $4 million by 2020.

The acquisition is expected to be accretive to Lydall’s earnings, net of the effects of purchase accounting approximately six months after closing.  Lydall’s financial results for the Second Quarter 2018 included approximately $1.1 million of expenses related to this transaction, and it is estimated that approximately $3 million of additional non-recurring transaction and integration expenses will be incurred over the second half of 2018 and approximately $1 million in 2019.

As a leader in fiber-based wetlaid production, Lydall will leverage manufacturing expertise with plans to optimize supporting functions throughout the business.  The Interface business will become part of the Performance Materials operating segment with the expectation to complete integration within one year of closing.

The transaction is expected to be financed predominantly from borrowings under the Company’s amended credit facility; the provisions of which are being finalized with our banking partners.

Dale G. Barnhart, Lydall’s President and Chief Executive Officer, commented, “We are extremely excited about yet another transformational acquisition for Lydall.  Interface Performance Materials expands our engineered materials portfolio with favorable margins while further shifting our concentration away from Automotive, which continues to be the focus of our long-term strategy.  Interface is very well known in the industry for providing high-quality solutions and is uniquely positioned with deep in-house expertise for research, design, testing, production and fabrication.”  Barnhart added, “Additionally, the culture, innovation and technology similarities between Interface and our legacy Performance Materials business create a complementary fit and provide opportunities for future growth.  We look forward to welcoming Interface’s employees to the family once the deal closes.”

Victor Swint, President and CEO of Interface Performance Materials, commented, “I am proud of the company we have built and am excited that Interface will have the opportunity to achieve even greater success as part of Lydall.  Lydall’s goals are well aligned with our core values, including commitment to integrity, performance and innovation, and with this transaction, we will continue to deliver best-in-class products and solutions.”  Swint added, “This is a significant next chapter for Interface, and I am incredibly excited about our future with Lydall.”

Lydall, Inc. is a New York Stock Exchange listed company, headquartered in Manchester, Connecticut with global manufacturing operations producing specialty engineered products for the thermal/acoustical and filtration/separation markets.  For more information, visit http://www.lydall.com.  Lydall® is a registered trademark of Lydall, Inc. in the U.S. and other countries. 

Conference Call and Webcast
Lydall will host a conference call on August 10, 2018 at 10:00 a.m. ET to discuss this announcement. Pre-registration for this call, as well as a live webcast can be found at the Company’s website www.lydall.com under the Investor Relations’ Section. The call may be accessed at (888) 338-7142, from within the U.S., or (412) 902-4181, internationally. A recording of the call will be available from 12:00 p.m. ET on August 10, 2018 through 11:59 p.m. ET on August 17, 2018 at (877) 344-7529 from within the U.S., or (412) 317-0088, passcode 10123232. Also, additional information, including a presentation supporting the conference call, can be found on the Company’s website www.lydall.com under the Investor Relations’ Section.

Cautionary Note Concerning Factors That May Affect Future Results
This publication contains “forward-looking statements” within the Private Securities Litigation Reform Act of 1995.  Any statements contained in this publication that are not statements of historical fact, including statements related to the expected timetable for closing the acquisition, including the satisfaction or waiver of closing conditions and the Company’s plans for financing the Acquisition, may be deemed to be forward-looking statements.  All such forward-looking statements are intended to provide management’s current expectations for the future based on current expectations and assumptions relating to the Company’s business, the economy and other future conditions.  Forward-looking statements generally can be identified through the use of words such as “believes,” “anticipates,” “may,” “should,” “will,” “plans,” “projects,” “expects,” “expectations,” “estimates,” “forecasts,” “predicts,” “targets,” “prospects,” “strategy,” “signs,” and other words of similar meaning in connection with the discussions herein.  Because forward-looking statements relate to the future, they are subject to inherent risks, uncertainties and changes in circumstances that are difficult to predict. Such risks and uncertainties include, among others, any delays in receiving required regulatory approvals, the Company’s ability to successfully integrate Interface’s business into its business, the Company’s ability to retain and hire key personnel, the risk that disruption resulting from the Acquisition may adversely affect the Company’s and Interface’s respective businesses and business relationships, including with employees and suppliers, or in satisfying other closing conditions and disruptions in the global credit and financial markets, including diminished liquidity and credit availability, that could have a negative impact on the Company’s completion of the Acquisition.  Accordingly, actual results may differ materially from those contemplated by these forward-looking statements.  Investors, therefore, are cautioned against relying on any of these forward-looking statements.  They are neither statements of historical fact nor guarantees or assurances of future performance.  Additional information regarding factors that may cause actual results to differ materially from these forward-looking statements is available in Lydall’s filings with the Securities and Exchange Commission, including the risks and uncertainties identified in Part II, Item 1A – Risk Factors of Lydall’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 and Part I, Item 1A – Risk Factors of Lydall’s Annual Report on Form 10-K for the year ended December 31, 2017.

These forward-looking statements speak only as of the date of this publication, and Lydall does not assume any obligation to update or revise any forward-looking statement made in this publication or that may from time to time be made by or on behalf of the Company.

http://globenewswire.com/news-release/2018/08/10/1550174/0/en/Lydall-to-Acquire-Interface-Performance-Materials-a-Leader-in-Gasket-and-Specialty-Materials.html

EPIC Companies, LLC Successfully Acquires Ranger Offshore, Inc.

HOUSTON–()–EPIC Companies, LLC (“Epic”) and Ranger Offshore, Inc. (“Ranger”) are excited to announce the business combination of Ranger and Epic. EPIC is now a global, full service marine contractor, able to provide customer solutions worldwide.

EPIC will continue to focus on serving all EPIC and Ranger customers with the same level of quality and safety that has earned our customers’ trust. EPIC will have significantly expanded resources, an improved capital structure, and the ability to take on projects worldwide, with substantial resources in Mexico, the Caribbean, and West Africa, in addition to the U.S. Gulf of Mexico.

We want to thank our vendor and employee partners for working with us through this integration as we build a stronger, more diverse platform, to continue to provide world class services.

“I am excited to offer a new breadth and depth of service to our customers as we combine these two leading organizations into one company. My team and I will continue to focus on providing the highest quality of service through safe and efficient operations, now on a global basis,” said Peter Pintar, CEO of EPIC Companies, LLC.

Bill Lam, previously CEO of Ranger Offshore, added, “I’m pleased to serve as President, Global Construction Services at EPIC and lead our construction business on a worldwide basis. The talent and commitment of our combined team is impressive, and I’m confident we will continue our growth across these markets.”

EPIC Companies is a Texas based, full-service provider to the global decommissioning and construction markets. As the most experienced company in this segment, EPIC Companies is known for their environmental stewardship, customer service, outstanding safety and operational excellence.

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13 universities to experiment with local news collaboration with $430,000 in funding through the Challenge Fund for Innovation in Journalism Education

WASHINGTON, Aug. 09, 2018 (GLOBE NEWSWIRE) — The Online News Association today announced that 10 universities each won $35,000 microgrants for the fourth round of the Challenge Fund for Innovation in Journalism Education. The fund also awarded a $50,000 grand prize to the University of Nevada, Reno, and research prizes of $15,000 each to San Diego State University and West Virginia University.

The projects receiving funding were announced Aug. 8 at the Association for Education in Journalism and Mass Communication (AEJMC) 2018 Conference. This year’s winning projects include experiments in community data journalism, covering the U.S.-Mexico border and delivering news in rural indigenous communities.

The 10 winning universities for this year’s microgrants and their projects include:

  • Emerson College
    Putting FOIA to Work: Using Freedom of Information Act Requests to Engage Communities in Locally Relevant Reporting
  • Howard University
    The News Oasis
  • North Arizona University
    Media Justice: Cultivating a Citizen-Based News Ecosystem for Underserved and Indigenous Communities
  • Northeastern Illinois University
    DACAmentation: Journalism by Dreamers for Dreamers
  • Quinnipiac University
    Three Billboards (+Three Listening Posts) Inside Hamden, Connecticut
  • University of Maryland
    Frozen out: a Community Data Journalism Project
  • University of North Carolina at Chapel Hill
    Ai Journalist
  • University of Texas at El Paso
    Engaging Community Across Borders through Media
  • Wake Forest University
    Reporting Race and Immigration from the Other Side of the Great Divide
  • Washington State University
    Can Community-Guided “Parachute” Journalism Lead to Meaningful Coverage in Rural Areas?

Past microgrant winners competed for additional funding through a research prize or grand prize, representing the projects that best embody the spirit of the challenge.

The University of Nevada, Reno, won the $50,000 grand prize for the 2015 Challenge Fund for Innovation in Journalism Education. The award recognizes the innovative Noticiero Móvil project, which adapts digital reporting tools for an immigration-focused student newsroom.

San Diego State University was awarded the research prize for the 2015 Challenge Fund projects. Their project What’s in the Air is a collaboration on innovative newsgathering about air quality in San Diego.

West Virginia University was awarded the research prize for the 2014 Challenge Fund projects. The award honors the project Stream Lab, exploring a model for beacon-triggered, sensor journalism in West Virginia waterways.

The Challenge Fund was created in 2014 to encourage journalism programs to partner with local news organizations and experiment with new ways of providing news and information. The fund is a partnership between the Ethics and Excellence in Journalism Foundation, Robert R. McCormick Foundation, John S. and James L. Knight Foundation, Democracy Fund, Rita Allen Foundation, The Scripps Howard Foundation and Online News Association. In total, 43 collaborative projects have received over $1.5 million of support through the fund.

The competing entries were judged on their ability to create collaborative, student-produced local news coverage, bridge the professor-professional gap, use innovative techniques and technologies and learn from digital-age news experiments. Winning teams included some combination of students, researchers, media professionals, educators, developers and designers.

About ONA
The Online News Association is the world’s largest association of digital journalists. ONA’s mission is to inspire innovation and excellence among journalists to better serve the public. The membership includes news writers, producers, designers, editors, bloggers, developers, photographers, educators, students and others who produce news for and support digital delivery systems. ONA also hosts the annual Online News Association conference and administers the Online Journalism Awards.

About the Democracy Fund
The Democracy Fund invests in social entrepreneurs working to ensure that our political system is responsive to the public and able to meet the greatest challenges facing our nation. To learn more visit DemocracyFund.org.

About the Ethics and Excellence in Journalism Foundation
Founded by Edith Kinney Gaylord, Ethics and Excellence in Journalism Foundation’s mission is to invest in the future of journalism by building the ethics, skills and opportunities needed to advance principled, probing news and information.

About Knight Foundation
Knight Foundation is a national foundation with strong local roots. We invest in journalism, in the arts, and in the success of cities where brothers John S. and James L. Knight once published newspapers. Our goal is to foster informed and engaged communities, which we believe are essential for a healthy democracy. For more, visit knightfoundation.org.

About the Robert R. McCormick Foundation
The Robert R. McCormick Foundation is committed to fostering communities of educated, informed and engaged citizens. Through philanthropic programs, Cantigny Park and museums, the Foundation helps develop citizen leaders and works to make life better in our communities. The Foundation was established as a charitable trust in 1955, upon the death of Colonel Robert R. McCormick, the longtime editor and publisher of the Chicago Tribune. The Robert R. McCormick Foundation is one of the nation’s largest foundations, with more than $1.4 billion in assets. To learn more, visit McCormickFoundation.org, follow us on Twitter at twitter.com/McCormick_Fdn, or like us on Facebook at facebook.com/McCormickFoundation.

About the Rita Allen Foundation
The Rita Allen Foundation invests in transformative ideas in their earliest stages to leverage their growth and promote breakthrough solutions to significant problems. It enables early-career biomedical scholars to do pioneering research, seeds innovative approaches to fostering informed civic engagement, and develops knowledge and networks to build the effectiveness of the philanthropic sector. Throughout its work, the Foundation embraces collaboration, creativity, learning and leadership.

About the Scripps Howard Foundation
Dedicated to excellence in journalism, the Scripps Howard Foundation educates, empowers and honors extraordinary journalists who illuminate community issues, and partners with impactful organizations to drive change and improve lives. As the philanthropic arm of The E.W. Scripps Company, the Foundation is a leader in industry efforts in journalism education, scholarships, internships, minority recruitment and development, literacy and First Amendment causes. With a special commitment to the regions where Scripps does business, the Foundation helps build thriving communities.

Contact: Karolle Rabarison, karolle@journalists.org

http://globenewswire.com/news-release/2018/08/10/1550173/0/en/13-universities-to-experiment-with-local-news-collaboration-with-430-000-in-funding-through-the-Challenge-Fund-for-Innovation-in-Journalism-Education.html

Qualcomm reaches $89 million antitrust settlement with Taiwan: reports

Qualcomm Inc.
QCOM, -0.12%
has reached a settlement with antitrust regulators in Taiwan to sharply reduce its fine, according to reports Thursday night. Bloomberg News reported Qualcomm will pay about $89 million of a $773 million fine imposed last year after agreeing to negotiate fairly with Taiwanese chip makers, and also to invest about $700 million in Taiwan over the next five years, according to a Reuters reporter.


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Japan’s Economy Revs Up Again After Stalling

TOKYO—Japan returned to solid growth in the April-June quarter, a trend economists said was likely to continue on the back of higher wages and consumer spending unless trade conflicts with the U.S. worsen.

The world’s third-largest economy expanded at an annualized pace of 1.9% in the second quarter of 2018 after a revised 0.9% contraction in the first quarter, which ended the longest stretch of growth in 28 years.

The…

https://www.wsj.com/articles/japans-economy-grew-1-9-in-second-quarter-1533860617?mod=pls_whats_news_us_business_f

Asia Markets: Trade, oil-price worries blow Asian markets lower

Asian stock markets dropped in early trading Friday, as trade and broader geopolitical concerns continue to weigh on over investor sentiment.

Japan’s Nikkei
NIK, -0.53%
  was off 0.5% and barely hanging on to a weekly gain. Tokyo Electron
8035, -3.52%
  was down 3.5% and Nintendo
7974, -2.19%
  was off more than 1%. Inpex
1605, -3.93%
  dropped 3.6% as Brent crude futures
LCOV8, +0.08%
fell to their lowest level in almost a month. That came as the dollar
USDJPY, -0.20%
  remained just above ¥111 following Japan’s better-than-expected second-quarter GDP report — which had little impact on local markets. Yields for 10-year Japanese government bonds were off a half-basis-point at 0.105%.

South Korea’s Kospi
SEU, -0.70%
  opened solidly lower, hit by weakness in Samsung
005930, -3.30%
 , which was off more than 3.5% after its new Galaxy Note 9 device was unveiled but won few fans.

After four days of gains, Hong Kong’s Hang Seng Index
HSI, -0.47%
  was off 0.2%. Property stocks rebounded, with CR Land
1109, +3.21%
  and Country Garden
2007, +2.21%
  bouncing more than 2%. But tech was weak, and Tencent
0700, -0.97%
  fell 0.8%.

As in Hong Kong, Chinese stocks got a lift from the beaten-down real-estate segment. The broader market extended Thursday’s bounce, with the Shanghai Composite
SHCOMP, -0.14%
  up 0.2% and the Shenzhen Composite
399106, +0.29%
  up 0.6%. Energy names continued to retreat on weak oil prices.

Australia’s benchmark index
XJO, -0.04%
  was down fractionally, as energy stocks continued to sag. Oil Search
OSH, -2.69%
  was down 2% and Woodside Petroleum
WPL, -0.91%
  was off 1%. Meanwhile, there was nothing in the Friday’s policy/forecast report from the Reserve Bank of Australia to suggest it’s getting closer to raising interest rates. Stocks in New Zealand
NZ50GR, +0.52%
  were up slightly after the Reserve Bank of New Zealand took a dovish stand on rates the day before, pushing back its rate-hike forecasts by a full year to 2020.

Malaysian stocks
FBMKLCI, +0.24%
  were about flat after having already risen 21 of the past 24 days. Singapore’s Strait Times Index
STI, -1.23%
 , which was closed Thursday for a holiday, dove more than 1%, and Taiwan’s Taiex
Y9999, -0.28%
  was in the red as well.


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This veteran stock market strategist sees no recession — but he’s watching for weakness

Real U.S. GDP rose 4.1% (saar) during the second quarter (Fig. 1). That was good, but not surprisingly good. Actually, given that taxes were cut at the end of last year, it’s surprising that it wasn’t better. In fact, GDP growth was temporarily boosted by exports as US exporters scrambled to beat Trump’s tariffs. Exports of goods and services contributed 1.12 percentage points to the second quarter’s real GDP growth, the most since the fourth quarter of 2013 (Fig. 2).

I like to look at the year-over-year growth rate of real GDP to assess whether the trend growth rate of the economy is changing (Fig. 3). It was up 2.8% year-over-year during the second quarter. That’s not a new high for the current expansion, and remains in the 1.0%-3.8% range it has spanned since 2010. In other words, real GDP growth still may be fluctuating around 2.0%, as it has been doing since 2010.

Consumer spending in real GDP rose 4.0% (saar) during the second quarter, the best since the end of 2014. Again, on a year-over-year basis, the growth rate for the monthly series was 2.8% during June, just about where it has been since late 2015 (Fig. 4). Real capital spending rose solidly by 7.3% (saar) during the second quarter, but the 6.7% year-over-year growth rate was nothing out of the ordinary (Fig. 5).

Could the U.S. economy actually be slowing already despite the fiscal stimulus provided by the tax cuts enacted at the end of last year and the fiscal spending increases passed at the start of this year? If it is, we can blame the Fed for raising interest rates and the Trump administration for imposing tariffs. Both developments have also contributed to a stronger dollar
DXY, -0.04%
 , which may also start to weigh on exports and profits.

I don’t see a recession coming, but I am looking out for signs of weakness. There have been more of them recently, with the obvious exception of the all-important and booming labor market. Now consider the following:

1. Economic surprises downbeat: The big surprise is that the Citigroup Economic Surprise Index (CESI) has dropped from a recent high of 84.5 on December 22, 2017 to -13.9 on Monday (Fig. 6). That doesn’t jibe with the strength in real GDP, particularly during Q2. Then again, the CESI tends to be weak during the first quarter and sometimes during the second quarter, before rebounding during the second half of the year. In any event, it is a trendless cyclical indicator, which means that after it goes down for a while, it goes up for a while.

Notice that the CESI dropped sharply on the weaker-than-expected payroll employment gain of 157,000 during July, reported on Friday. However, it obviously didn’t reflect the significant upward revisions in May (24,000 to 268,000) and June (35,000 to 248,000). Nor did it capture the 389,000 jump in the household measure of employment, led by a stunning 453,000 in full-time jobs.



2. Non-manufacturing-PMI drops:  The non-manufacturing purchasing managers index (NM-PMI) fell from 59.1 in June to 55.7 last month (Fig. 7). That’s the lowest since August 2017. The new orders component dropped from 63.2 to 57.0. I am not alarmed, because the series is quite volatile and the latest readings remain relatively high. Keep in mind that this is another trendless cyclical indicator. It was so good earlier this year that it couldn’t get much better. Instead, it got a little worse, but still remains upbeat.

3. Residential construction flattening:  Private residential investment in real GDP fell 1.1% (saar) during the second quarter and was up just 1.4% year-over-year (Fig. 8). The weakness has been concentrated in multi-family housing construction, which is down 4.9% year-over-year (Fig. 9).

Household formation among homeowners has been increasing in recent quarters, while the number of households who rent has been falling. That should be good for single-family residential investment, though it fell 4.7% (saar) during the second quarter (but was up 3.5% year-over-year), as rising mortgage rates may be starting to curb some enthusiasm for buying a home. That’s not confirmed by mortgage applications for new purchases, which remain near recent cyclical highs (Fig. 10).

Related: The U.S. is about to add even more cities with a median home value of $1 million

4. Auto sales looking toppy:   The 12-month sum of U.S. motor vehicle sales peaked at 17.7 million units during February 2016, falling to 17.3 million units in July 2018 (Fig. 11). While both domestic light truck and imported auto sales remain on uptrends, domestic car sales have crashed to the lowest point since November 2010 (Fig. 12).

I suspect that millennials may be causing both home and auto sales to top out. They are mostly minimalists. Many are single and city-dwellers, renting apartments, which are no longer in short supply after the multifamily housing boom of the last few years. They don’t have much use for a car, let alone a light truck. Instead, they rely on Uber and Lyft or rent bicycles.

The bottom line: the U.S. economy isn’t as weak as the recent signs of slowing suggest. On the other hand, it isn’t as strong as supply-siders had hoped it would be in response to their tax cut, but the jury may still be out on that score.

Ed Yardeni is president of Yardeni Research, Inc., a provider of global investment strategy and asset allocation analyses and recommendations. He is the author of “Predicting the Markets: A Professional Autobiography.” (2018). Follow him on Twitter and LinkedIn.

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What’s Brewing in the Alcoholic Beverages Industry | Technavio

LONDON–()–The alcoholic beverages industry is witnessing an existential dilemma. While the market seems to be all set with a steady growth forecast of close to 4% and increasing demand for liquors such beer, wine and bourbon, it is also being challenged by the rising cost of raw-materials.

Looking for more insights into the alcoholic beverages industry? Read Technavio’s latest report on the alcohol beverages market in the US

Technavio’s research delves into the intricacies of the market to derive some understanding of the volatile patterns evolving within the alcoholic beverages market. This will help players in the alcoholic beverages industry align their strategic decisions to reap the maximum benefit.

Find out the latest trends in the alcoholic beverages industry: Read What’s brewing in the alcoholic beverages industry?

About Technavio

Technavio is a leading global technology research and advisory company. Their research and analysis focuses on emerging market trends and provides actionable insights to help businesses identify market opportunities and develop effective strategies to optimize their market positions.

With over 500 specialized analysts, Technavio’s report library consists of more than 10,000 reports and counting, covering 800 technologies, spanning across 50 countries. Their client base consists of enterprises of all sizes, including more than 100 Fortune 500 companies. This growing client base relies on Technavio’s comprehensive coverage, extensive research, and actionable market insights to identify opportunities in existing and potential markets and assess their competitive positions within changing market scenarios.

If you are interested in more information, please contact our media team at media@technavio.com.

http://www.businesswire.com/news/home/20180809005744/en/What%E2%80%99s-Brewing-Alcoholic-Beverages-Industry-Technavio/?feedref=JjAwJuNHiystnCoBq_hl-bV7DTIYheT0D-1vT4_bKFzt_EW40VMdK6eG-WLfRGUE1fJraLPL1g6AeUGJlCTYs7Oafol48Kkc8KJgZoTHgMu0w8LYSbRdYOj2VdwnuKwa

Celcuity Reports Second Quarter 2018 Financial Results

MINNEAPOLIS–()–Celcuity Inc. (Nasdaq: CELC), a functional cellular analysis company that is discovering new cancer subtypes and commercializing diagnostic tests designed to significantly improve clinical outcomes of cancer patients treated with targeted therapies, announced financial results for the second quarter ended June 30, 2018.

Unless otherwise stated, all comparisons are for the second quarter ended June 30, 2018, compared to the second quarter ended June 30, 2017.

Celcuity reported a net loss of $1.8 million, or $0.18 per share, for the second quarter of 2018, compared to a net loss of $1.8 million, or $0.28 per share, for the second quarter of 2017. Net loss for the first six months of 2018 was $3.8 million, or $0.37 per share, compared to $2.8 million, or $0.43 per share, for the first six months of 2017. Non-GAAP adjusted net loss was $1.5 million, or $0.15 per share, for the second quarter of 2018, compared to non-GAAP adjusted net loss of $1.3 million, or $0.20 per share, for the second quarter of 2017. Non-GAAP adjusted net loss for the first six months of 2018 was $3.2 million, or $0.31 per share, compared to $2.2 million, or $0.33 per share, for the first six months of 2017. Non-GAAP adjusted net loss excludes stock-based compensation expense and non-cash interest expense. Because these items have no impact on the cash position of the Company, management believes Non-GAAP adjusted net loss better enables Celcuity to focus on cash used in operations. For a reconciliation of financial measures in accordance with generally accepted accounting principles of the United States (GAAP) to non-GAAP financial measures in this release, please see the financial tables at the end of this news release.

Net cash used in operating activities for the second quarter of 2018 was $1.4 million. Net cash used in operating activities for the first six months of 2018 was $2.8 million. At June 30, 2018, Celcuity had cash, cash equivalents and investments of $28.5 million, compared to cash, cash equivalents and investments of $31.4 million at December 31, 2017.

“During the second quarter, our R&D teams continued to advance the development of new CELx Signaling Function tests for breast cancer and two new tissue types,” said Chairman and Chief Executive Officer, Brian Sullivan. “In breast cancer, we are evaluating new signaling pathways to add to our current CELx MP Signaling Function test for breast cancer. This test currently analyzes HER1, HER2, HER3, and c-Met signaling activity and diagnoses untreated cell signaling dysfunction in approximately 25% of HER2-negative breast cancer patients. We believe there is an opportunity to increase the total percentage of HER2-negative breast cancer patients diagnosed with untreated signaling dysfunction to 35%-40%.

“To develop CELx tests in new tumor types, we are advancing our cell microenvironment technology and furthering our capability to assess different types of signaling dysfunction. As we have demonstrated in breast cancer, we are working to provide functional analysis of multiple signaling pathways for these other tissue types.

“Each signaling pathway test creates opportunities for Celcuity to collaborate with multiple pharmaceutical companies. We intend to work with these companies to facilitate approvals of their targeted therapeutics to treat the new patient sub-groups our CELx tests identify. We are currently in various stages of discussions with several pharmaceutical companies. We expect any resulting collaborations to involve, as a first step, clinical trials that evaluate the efficacy of our collaboration partners’ therapy or therapies in breast cancer patients who have either hyperactive HER2 signaling tumors or hyperactive and co-activated HER family and c-Met signaling tumors.

“The clinical trial we are fielding in collaboration with Genentech and the NSABP Foundation is continuing to progress. The institutional review board (IRB) approvals at our sites are proceeding as we previously disclosed, and we continue to expect to receive interim results from this trial in mid-2019. The clinical trial that Puma Biotechnology and the NSABP Foundation are fielding is also progressing as previously disclosed. This clinical trial is a Phase II study evaluating Puma Biotechnology’s pan-HER inhibitor, Nerlynx, Genentech’s HER2 antibody, Herceptin, and Bristol-Myers Squibb’s EGFR inhibitor, Erbitux, in metastatic colorectal cancer patients. For this trial, Celcuity will analyze tissue sent us so that Puma can compare the tissue’s HER2 signaling status with the patient’s response to therapy.”

Operating Expenses
Total operating expenses were $1.9 million for the second quarter of 2018, compared to $1.6 million for the second quarter of 2017. Operating expenses for the first six months of 2018 were $4.0 million, compared to $2.6 million for the first six months of 2017.

Research and Development Expenses:
Research and development (R&D) expenses were $1.5 million for the second quarter of 2018, compared to $1.3 million for the second quarter of 2017. R&D expenses for the first six months of 2018 were $3.1 million, compared to $2.2 million for the first six months of 2017. The approximately $0.9 million increase during the first half of fiscal year 2018, compared to the first half of fiscal year 2017, resulted primarily from a $0.4 million increase in compensation related expenses to support development of our CELx platform. In addition, other research and development expenses increased $0.5 million due to clinical validation studies and laboratory supplies to support the CELx platform and operational and business development activities.

General and Administrative Expenses:
General and administrative (G&A) expenses were $0.4 million for the second quarter of 2018, compared to $0.3 million for the second quarter of 2017. G&A expenses for the first six months of 2018 were $0.9 million, compared to $0.4 million for the first six months of 2017. The approximately $0.5 million increase during first half of 2018, compared to the first half of 2017, primarily resulted from a $0.2 million increase in compensation related expenses. Other G&A expenses increased $0.3 million due to professional fees associated with being a public company and director and officer insurance.

Conference Call
Management will host a teleconference call at 4:30 PM Eastern Time today to discuss the results. Anyone interested in participating should dial 1-877-876-9176 referencing confirmation code “Celcuity.” Participants are asked to dial in 5 to 10 minutes prior to the start of the call and inform the operator you would like to join the “Celcuity Conference Call.”

About Celcuity
Celcuity Inc. is a cellular analysis company that is discovering new cancer sub-types and commercializing diagnostic tests designed to significantly improve the clinical outcomes of cancer patients treated with targeted therapies. Celcuity’s proprietary CELx diagnostic platform uses a patient’s living tumor cells to identify the specific abnormal cellular activity driving a patient’s cancer and the targeted therapy that can best treat that patient’s disease. Celcuity is headquartered in Minneapolis, MN. Further information about Celcuity can be found at www.celcuity.com.

Forward-Looking Statements
This press release contains statements that constitute “forward-looking statements.” In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “intends” or “continue,” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. Forward looking statements in this release include, without limitation, expectations with respect to commercializing diagnostic tests, the use of cash, the discovery of additional cancer sub-types, the development of additional CELx signaling function tests, the uses and breadth of application of CELx signaling function tests, whether alone or in collaboration with other tests, collaboration with pharmaceutical companies and the outcomes of such collaboration, the outcome of our clinical trial with NSABP Foundation and Genentech, and the participation of clinical trial sites, including expected use of central internal review board approval of clinical trial protocol, anticipated benefits that our tests may provide to pharmaceutical companies and to the clinical outcomes of cancer patients and plans to expand research and development and operational processes. Forward-looking statements are subject to numerous conditions, many of which are beyond the control of Celcuity, which include, but are not limited to, those set forth in the Risk Factors section in our Annual Report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission on March 15, 2018. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Celcuity undertakes no obligation to update these statements for revisions or changes after the date of this release, except as required by law.

 
Celcuity Inc.
Condensed Balance Sheets
 
   

   June 30,   
2018

   

December 31,
2017

(unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 3,172,782 $ 2,639,789
Investments 18,385,920 21,556,857
Restricted cash 50,000 50,000
Deposits 27,726 27,726
Prepaid assets   154,002   209,708
Total current assets 21,790,430 24,484,080
 
Property and equipment, net 730,449 280,056
 
Long term investments 6,948,606 7,205,374
   
Total Assets $ 29,469,485 $ 31,969,510
 
Liabilities and Stockholders’ Equity:
Current Liabilities:
Accounts payable $ 149,401 $ 71,913
Capital lease obligations 5,706
Accrued expenses   807,783   506,140
Total current liabilities 962,890 578,053
 
Capital lease obligations 23,226
   
Total Liabilities   986,116   578,053
Total Stockholders’ Equity   28,483,369   31,391,457
Total Liabilities and Stockholders’ Equity $ 29,469,485

$

31,969,510

 
 
Celcuity Inc.
Condensed Statements of Operations
(unaudited)
               
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
 
Operating expenses:
 
Research and development $ 1,546,537 $ 1,303,886 $ 3,092,205 $ 2,212,629
General and administrative   382,646     301,820     913,286     386,963  
Total operating expenses   1,929,183     1,605,706     4,005,491     2,599,592  
 
Loss from operations   (1,929,183 )   (1,605,706 )   (4,005,491 )   (2,599,592 )
 
Other income (expense)
Interest expense (186,659 ) (186,686 )
Interest income   112,722     16,150     221,084     22,712  
Other income (expense), net   112,722     (170,509 )   221,084     (163,974 )
 
Net loss before income taxes   (1,816,461 )   (1,776,215 )   (3,784,407 )   (2,763,566 )
Income tax benefits
Net loss $ (1,816,461 ) $ (1,776,215 ) $ (3,784,407 ) $ (2,763,566 )
 
Net loss per share, basic and diluted $ (0.18 ) $ (0.28 ) $ (0.37 ) $ (0.43 )
 
Weighted average common shares outstanding, basic and diluted 10,110,558 6,440,139 10,103,323 6,440,139
 

Cautionary Statement Regarding Non-GAAP Financial Measures

This news release contains references to non-GAAP adjusted net loss and non-GAAP adjusted net loss per share. Management believes these non-GAAP financial measures are useful supplemental measures for planning, monitoring, and evaluating operational performance as they exclude stock-based compensation expense and non-cash interest expense from net loss and net loss per share. Management excludes these items because it does not impact the cash position of the Company, which management believes better enables Celcuity to focus on cash used in operations. However, non-GAAP adjusted net loss and non-GAAP adjusted net loss per share are not recognized measures under GAAP and do not have a standardized meaning prescribed by GAAP. Therefore, non-GAAP adjusted net loss and non-GAAP adjusted net loss per share may not be comparable to similar measures presented by other issuers. Investors are cautioned that non-GAAP adjusted net loss and non-GAAP adjusted net loss per share should not be construed as alternatives to net loss, net loss per share or other statements of operations data (which are determined in accordance with GAAP) as an indicator of Celcuity’s performance or as a measure of liquidity and cash flows. Management’s method of calculating non-GAAP adjusted net loss and non-GAAP adjusted net loss per share may differ materially from the method used by other companies and accordingly, may not be comparable to similarly titled measures used by other companies.

 
Celcuity Inc.
Reconciliation of GAAP Net Loss to Non-GAAP Adjusted Net Loss and
GAAP Net Loss Per Share to Non-GAAP Adjusted Net Loss Per Share
(Unaudited)
               
Three Months Ended
June 30,
Six Months Ended
June 30,
2018 2017 2018 2017
 
GAAP net loss $ (1,816,461 ) $ (1,776,215 ) $ (3,784,407 ) $ (2,763,566 )
Adjustments:
Stock-based compensation
Research and development 175,864 197,921 337,535 294,189 (1)
General and administrative 100,420 128,627 275,229 128,627 (2)
Non-cash interest expense       186,659         186,686   (3)
 
Non-GAAP adjusted net loss $ (1,540,177 ) $ (1,263,008 ) $ (3,171,644 ) $ (2,154,065 )
 
 
GAAP net loss per share – basic and diluted $ (0.18 ) $ (0.28 ) $ (0.37 ) $ (0.43 )
Adjustment to net loss (as detailed above)   0.03     0.08     0.06     0.10  
Non-GAAP adjusted net loss per share $ (0.15 ) $ (0.20 ) $ (0.31 ) $ (0.33 )
 
Weighted average common shares outstanding, basic and diluted 10,110,558 6,440,139 10,103,323 6,440,139
 

(1)

 

To reflect a non-cash charge to operating expense for Research and Development stock-based

compensation.

(2)

To reflect a non-cash charge to operating expense for General and Administrative stock-based

compensation.

(3)

To reflect a non-cash charge to other expense for non-cash amortization of debt discount and debt

financing costs and accrued interest related to the issuance of our unsecured convertible promissory

notes. All principal and accrued interest under the unsecured convertible promissory notes converted

into common stock of Celcuity immediately following Celcuity’s initial public offering.

 

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Spectrum Pharmaceuticals Reports Second Quarter 2018 Financial Results and Pipeline Update

HENDERSON, Nev.–()–Spectrum Pharmaceuticals, Inc. (NasdaqGS: SPPI), a biotechnology company with fully integrated commercial and drug development operations with a primary focus in hematology and oncology, announced today financial results for the three-month period ended June 30, 2018.

“The second quarter marked significant progress and data milestones for our two lead programs poziotinib and ROLONTIS, moving us closer to our ultimate goal of delivering targeted and novel therapies to cancer patients,” said Joe Turgeon, President and Chief Executive Officer of Spectrum Pharmaceuticals. “We have strong momentum going into the second half of the year as we aggressively broaden our poziotinib clinical program and continue to gain additional regulatory clarity.”

Clinical Program Overview:

Poziotinib, an irreversible tyrosine kinase inhibitor targeting EGFR and HER2 mutations:

  • Updated data from the MD Anderson Phase 2 trial in non-small cell lung cancer with exon 20 mutations will be presented at the World Conference on Lung Cancer in Toronto on September 24. Updated data will include EGFR and HER2 patients with exon 20 mutations. The abstract will be released online on September 5.
  • Spectrum recently had a meeting with the FDA regarding poziotinib to gain clarity on the regulatory pathway. Based on that conversation, Spectrum views the current poziotinib phase 2 study as the pivotal registrational trial needed for the Agency’s review.
  • Data published in Nature Medicine from the first 11 NSCLC patients with EGFR exon 20 mutations receiving poziotinib in MD Anderson’s Phase 2 clinical trial demonstrated a confirmed objective response rate of 64 percent. The median progression-free survival had not been reached, with a median follow up of 6.6 months. The safety profile was consistent with what has been previously described for poziotinib and other TKIs with the two most common adverse events being known EGFR inhibitor-related toxicities: skin rash and diarrhea.
  • Data presented at AACR demonstrated that HER2 exon 20 mutations were prevalent across multiple solid tumors.

ROLONTIS (eflapegrastim), a novel long-acting GCSF:

  • Spectrum plans to conduct a pre-BLA meeting in the third quarter to ensure alignment with the FDA in preparation for a planned BLA filing in the fourth quarter of 2018.
  • Top line data from RECOVER, the second Phase 3 ROLONTIS study, demonstrated that the study met the primary efficacy endpoint of non-inferiority in the duration of severe neutropenia (DSN) between ROLONTIS and pegfilgrastim. Both Phase 3 ROLONTIS clinical trials, ADVANCE and RECOVER which studied more than 600 patients combined, have met the primary efficacy endpoint. Additional RECOVER data will be released at a future medical meeting.
  • ADVANCE data released as part of ASCO 2018 demonstrated that ROLONTIS was non-inferior to pegfilgrastim in the reduction of duration of severe neutropenia (DSN) in all four cycles of the study. Mean DSN±SD was 0.19±0.478 days for ROLONTIS and 0.34±0.668 days for pegfilgrastim, demonstrating non-inferiority with 95 percent confidence interval (CI) of DSN: [-0.260, -0.035]; p<0.0001) in Cycle 1. There were no statistically significant differences in all secondary endpoints in Cycle 1. The adverse event profiles were similar across groups. The most common treatment emergent adverse events in both treatment arms were fatigue, nausea, neutropenia, and lymphopenia.
  • In an oral presentation at MASCC 2018, data from the ADVANCE Phase 3 study demonstrated an absolute risk reduction of severe neutropenia of 8.5 percent (95% CI: 0.2%, 16.2%) versus pegfilgrastim in Cycle 1. Absolute risk reduction was defined as the difference in percentage of patients experiencing no severe neutropenia (ROLONTIS 84.2 percent; pegfilgrastim 75.7 percent).

Financial Guidance

Spectrum’s 2018 revenue guidance remains between $95 to $115 million. Additionally, Spectrum anticipates current cash and marketable securities will be sufficient to fund operations into 2020.

Three-Month Period Ended June 30, 2018 (All numbers are approximate)

GAAP Results

Total product sales were $23.8 million in the second quarter of 2018. Product sales in the second quarter included: FOLOTYN® (pralatrexate injection) net sales of $11.7 million, EVOMELA® (melphalan) for injection net sales of $5.8 million, BELEODAQ® (belinostat) for injection net sales of $2.7 million, ZEVALIN® (ibritumomab tiuxetan) net sales of $1.6 million, MARQIBO® (vinCRIStine sulfate LIPOSOME injection) net sales of $1.1 million, and FUSILEV® (levoleucovorin) net sales of $0.8 million.

Spectrum recorded net income of $13.7 million, or $0.13 income per basic share and $0.13 per diluted share in the three-month period ended June 30, 2018, compared to net loss of $(20.9) million, or $(0.27) loss per basic and diluted share in the comparable period in 2017. Total research and development expenses were $21.5 million in the quarter, as compared to $15.2 million in the same period in 2017. Selling, general and administrative expenses were $23.5 million in the quarter, compared to $17.4 million in the same period in 2017.

Non-GAAP Results

Spectrum recorded non-GAAP net loss of $(21.6) million, or $(0.21) loss per basic and diluted share in the three-month period ended June 30, 2018, compared to non-GAAP net loss of $(8.6) million, or $(0.11) loss per basic and diluted share in the comparable period in 2017. Non-GAAP research and development expenses were $20.1 million, as compared to $14.6 million in the same period of 2017. Non-GAAP selling, general and administrative expenses were $19.6 million, as compared to $14.5 million in the same period in 2017.

Conference Call

Thursday, August 9, 2018 @ 4:30 p.m. Eastern/1:30 p.m. Pacific

        Domestic:    

(877) 837-3910

        Conference ID# 9084737
 
International:

(973) 796-5077

Conference ID# 9084737

This conference call will also be webcast. Listeners may access the webcast, which will be available on the investor relations page of Spectrum Pharmaceuticals’ website: www.sppirx.com on August 9, 2018 at 4:30 p.m. Eastern/1:30 p.m. Pacific.

About Spectrum Pharmaceuticals, Inc.

Spectrum Pharmaceuticals is a leading biotechnology company focused on acquiring, developing, and commercializing drug products, with a primary focus in hematology and oncology. Spectrum currently markets six hematology/oncology drugs, and has an advanced stage pipeline that has the potential to transform the company. Spectrum’s strong track record for in-licensing and acquiring differentiated drugs, and expertise in clinical development have generated a robust, diversified, and growing pipeline of product candidates in advanced-stage Phase 2 and Phase 3 studies. More information on Spectrum is available at www.sppirx.com.

Forward-looking statement – This press release may contain forward-looking statements regarding future events and the future performance of Spectrum Pharmaceuticals that involve risks and uncertainties that could cause actual results to differ materially. These statements are based on management’s current beliefs and expectations. These statements include, but are not limited to, statements that relate to Spectrum’s business and its future, including certain company milestones, Spectrum’s ability to identify, acquire, develop and commercialize a broad and diverse pipeline of late-stage clinical and commercial products, the timing and results of FDA decisions, and any statements that relate to the intent, belief, plans or expectations of Spectrum or its management, or that are not a statement of historical fact. Risks that could cause actual results to differ include the possibility that Spectrum’s existing and new drug candidates may not prove safe or effective, the possibility that our existing and new applications to the FDA and other regulatory agencies may not receive approval in a timely manner or at all, the possibility that our existing and new drug candidates, if approved, may not be more effective, safer or more cost efficient than competing drugs, the possibility that our efforts to acquire or in-license and develop additional drug candidates may fail, our dependence on third parties for clinical trials, manufacturing, distribution and quality control and other risks that are described in further detail in the company’s reports filed with the Securities and Exchange Commission. The company does not plan to update any such forward-looking statements and expressly disclaims any duty to update the information contained in this press release except as required by law.

SPECTRUM PHARMACEUTICALS, INC.®, FUSILEV®, FOLOTYN®, ZEVALIN®, MARQIBO®, BELEODAQ®, EVOMELA®, and ROLONTIS® are registered trademarks of Spectrum Pharmaceuticals, Inc. and its affiliates. REDEFINING CANCER CARE™ and the Spectrum Pharmaceuticals’ logos are trademarks owned by Spectrum Pharmaceuticals, Inc. Any other trademarks are the property of their respective owners.

© 2018 Spectrum Pharmaceuticals, Inc. All Rights Reserved

SPECTRUM PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
 
  Three Months Ended   Six Months Ended
June 30, June 30,
  2018       2017     2018       2017  
Revenues:
Product sales, net $ 23,753 $ 31,156 $ 51,863 $ 57,001
License fees and service revenue   415     3,145     2,799     6,401  
Total revenues $ 24,168   $ 34,301   $ 54,662   $ 63,402  
Operating costs and expenses:
Cost of sales (excludes amortization of intangible assets) 6,606 11,303 13,420 19,439
Cost of service revenue 2,118 4,221
Selling, general and administrative 23,451 17,421 47,556 36,525
Research and development 21,488 15,167 39,382 29,945
Amortization of intangible assets   6,934     6,901     13,880     13,790  
Total operating costs and expenses   58,479     52,910     114,238     103,920  
Loss from operations   (34,311 )   (18,609 )   (59,576 )   (40,518 )
Other income (expense):
Interest expense, net (242 ) (2,131 ) (472 ) (4,182 )
Change in fair value of contingent consideration related to acquisitions (192 ) (97 ) (483 ) (294 )
Other income, net   48,492     240     58,463     650  
Total other income (expense)   48,058     (1,988 )   57,508     (3,826 )
Income (loss) before income taxes 13,747 (20,597 ) (2,068 ) (44,344 )
Provision for income taxes   (3 )   (255 )   (6 )   (54 )
Net income (loss) $ 13,744   $ (20,852 ) $ (2,074 ) $ (44,398 )
Net income (loss) per share:
Basic $ 0.13   $ (0.27 ) $ (0.02 ) $ (0.57 )
Diluted $ 0.13   $ (0.27 ) $ (0.02 ) $ (0.57 )
Weighted average shares outstanding:
Basic   102,597,059     78,576,260     101,747,416     78,366,610  
Diluted   112,617,150     78,576,260     101,747,416     78,366,610  
 
SPECTRUM PHARMACEUTICALS, INC.
Condensed Consolidated Balance Sheets
(In thousands, expect per share and par value amounts)
(Unaudited)
 
  June 30,   December 31,
  2018     2017  
ASSETS
Current assets:
Cash and cash equivalents $ 174,371 $ 227,323
Marketable securities 95,287 248
Accounts receivable, net of allowance for doubtful accounts of $70 and $71, respectively 27,658 32,260
Other receivables 2,915 2,133
Inventories 4,520 5,715
Prepaid expenses and other assets   4,769     10,067  
Total current assets 309,520 277,746
Property and equipment, net of accumulated depreciation 523 589
Intangible assets, net of accumulated amortization 123,214 137,159
Goodwill 18,106 18,162
Other assets   13,159     53,783  
Total assets $ 464,522   $ 487,439  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued liabilities $ 49,886 $ 58,117
Accrued payroll and benefits 4,946 9,261
Deferred revenue 3,872
FOLOTYN development liability 211 275
Convertible senior notes   39,427     38,224  
Total current liabilities 94,470 109,749
FOLOTYN development liability, less current portion 11,980 12,111
Deferred revenue, less current portion 315
Acquisition-related contingent obligations 6,755 6,272
Deferred tax liabilities 1,447 1,438
Other long-term liabilities   5,751     6,215  
Total liabilities 120,403 136,100
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding
Common stock, $0.001 par value; 300,000,000 shares authorized; 105,130,603 and 100,742,735 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively 103 100
Additional paid-in capital 829,052 837,347
Accumulated other comprehensive (loss) income (3,088 ) 15,999
Accumulated deficit   (481,948 )   (502,107 )
Total stockholders’ equity   344,119     351,339  
Total liabilities and stockholders’ equity $ 464,522   $ 487,439  

Non-GAAP Financial Measures

In this press release, Spectrum reports certain historical and expected non-GAAP results. Non-GAAP financial measures are reconciled to the most directly comparable GAAP financial measure in the tables of this press release and the accompanying footnotes. The non-GAAP financial measures contained herein are a supplement to the corresponding financial measures prepared in accordance with generally accepted accounting principles (GAAP). The non-GAAP financial measures presented exclude the items summarized in the below table. Management believes that adjustments for these items assist investors in making comparisons of period-to-period operating results and that these items are not indicative of the company’s on-going core operating performance.

Management uses non-GAAP net income (loss) in its evaluation of the company’s core after-tax results of operations and trends between fiscal periods and believes that these measures are important components of its internal performance measurement process. Management believes that providing these non-GAAP financial measures allows investors to view the company’s financial results in the way that management views the financial results.

The non-GAAP financial measures presented herein have certain limitations in that they do not reflect all of the costs associated with the operations of the company’s business as determined in accordance with GAAP. Therefore, investors should consider non-GAAP financial measures in addition to, and not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. The non-GAAP financial measures presented by the company may be different from the non-GAAP financial measures used by other companies.

SPECTRUM PHARMACEUTICALS, INC.
Reconciliation of Non-GAAP Adjustments for Condensed Consolidated Statements of Operations

(In thousands, expect per share amounts)

 
    Three Months Ended   Six Months Ended
June 30, June 30,
  2018       2017     2018       2017  
(1) GAAP product sales, net & license fees and service revenue $ 24,168 $ 34,301 $ 54,662 $ 63,402
Non-GAAP adjustments to product sales, net & license fees and service revenue:           (2,001 )    
Non-GAAP product sales, net & license fees and service revenue $ 24,168   $ 34,301   $ 52,661   $ 63,402  
(2) GAAP selling, general and administrative expenses $ 23,451 $ 17,421 $ 47,556 $ 36,525
Non-GAAP adjustments to SG&A:
Stock-based compensation (3,832 ) (2,888 ) (7,522 ) (6,126 )
Depreciation expense   (61 )   (76 )   (108 )   (166 )
Non-GAAP selling, general and administrative $ 19,558   $ 14,457   $ 39,926   $ 30,233  
(3) GAAP research and development $ 21,488 $ 15,167 $ 39,382 $ 29,945
Non-GAAP adjustments to R&D:
Stock-based compensation (902 ) (599 ) (1,689 ) (1,081 )
Depreciation expense (2 ) (2 ) (5 ) (5 )
Other R&D milestone payments   (500 )       (500 )    
Non-GAAP research and development $ 20,084   $ 14,566   $ 37,188   $ 28,859  
(4) GAAP net income (loss) $ 13,744 $ (20,852 ) $ (2,074 ) $ (44,398 )
Non-GAAP adjustments to net income (loss):
Adjustments to product sales, net & license fees and service revenue, SG&A, and R&D as noted above 5,297 3,565 7,823 7,378
Amortization of intangible assets 6,934 6,901 13,880 13,790
Adjustments to other (expense) income (47,596 ) 1,525 (56,847 ) 3,098
Adjustments to provision for income taxes   3     255     6     54  
Non-GAAP net loss $ (21,618 ) $ (8,606 ) $ (37,212 ) $ (20,078 )
(5) GAAP income (loss) per share (Basic) $ 0.13   $ (0.27 ) $ (0.02 ) $ (0.57 )
GAAP income (loss) per share (Diluted) $ 0.13   $ (0.27 ) $ (0.02 ) $ (0.57 )
Non-GAAP loss per share (Basic and Diluted) $ (0.21 ) $ (0.11 ) $ (0.37 ) $ (0.26 )
Weighted average shares outstanding:
Basic   102,597,059     78,576,260     101,747,416     78,366,610  
Diluted   112,617,150     78,576,260     101,747,416     78,366,610  

(1) Non-GAAP product sales, net & license fees and service revenue: These amounts reflect adjustments to reverse revenue recognition for upfront revenue from out-licenses and revenue from milestone achievement(s) that do not consistently recur. The resulting non-GAAP revenue solely consists of our (i) product sales, (ii) percentage-based royalties from our licensees’ sales, and (iii) on-going service revenue. We believe this measure of non-GAAP revenue is more indicative of the period-over-period success of our core ongoing product sales and service revenue.

(2) Non-GAAP selling, general and administrative: These amounts reflect adjustments to reverse allocated operating expenses for certain non-cash items (including stock-based compensation and depreciation). We believe the resulting non-GAAP SG&A value is more indicative of the period-over-period success of our administrative expense control, and more reflective of our normalized SG&A expense trends.

(3) Non-GAAP research and development: These amounts reflect adjustments to reverse allocated operating expenses for certain non-cash items (including stock-based compensation and depreciation), as well as non-recurring R&D milestone achievements that we record to expense for our in-licenses. We believe the resulting non-GAAP R&D value is more reflective of our true R&D expense trends.

(4) Non-GAAP net loss: These amounts reflect all non-GAAP adjustments described in (1) through (3) above, plus other non-cash and/or non-recurring items, including: (i) adjustments to reverse sales milestone achievements; (ii) adjustments to reverse operating expenses for non-cash amortization and impairment of intangible assets (the reversal of these non-cash expenses allows for a clearer representation of the period-over-period success of our overall financial results and future working capital requirements); (iii) adjustments to reverse the impact of income taxes; (iv) adjustments to reverse the impact of mark-to-market contingent consideration (although our contingent consideration results from prior acquisitions and is a part of our business strategy, these adjustments through earnings typically result from variables other than our current commercial activity or other operating performance measures that are a focus of our management), (v) reversal of foreign exchange gains and losses (non-cash), (vi) reversal of debt discount accretion expense (non-cash) for our convertible notes, and (vii) reversal of the mark-to-market adjustment on our equity securities.

(5) Non-GAAP loss per share: These amounts reflect all non-GAAP adjustments in (1) through (4) above to present our overall non-GAAP financial results for each period on a per-share basis.

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The LGL Group, Inc. Reports Q2 2018 Financial Results

ORLANDO, Fla.–()–The LGL Group, Inc. (NYSE American: LGL) (the “Company” or “LGL”), announced its financial results for the three and six months ended June 30, 2018.

Summary of Q2 2018 Financial Results:

  • Revenues of $6.2 million, up 5.1% compared to Q2 2017 of $5.9 million
  • Net income of $0.10 per share, compared to $0.01 for the prior year quarter
  • Order backlog improved 33.1% to $14.5 million at June 30, 2018 from $10.9 million at June 30, 2017
  • Adjusted EBITDA was $616,000, or $0.13 per share on a diluted basis, compared to $234,000, or $0.09 per share for Q2 2017

Commenting on the Company’s Q2 2018 results, Executive Chairman and CEO, Michael J. Ferrantino, Sr. stated, “I am pleased to report that both revenues and backlog increased, and our book to bill ratio continued to be very positive. We experienced growth of 5.7% in revenues over the prior year quarter, while at the same time backlog increased over 33%, exceeding $14 million at the end of the quarter. This strong performance in sales and revenues, combined with our continued profitability, validates our strategy of developing higher margin, market-driven, highly engineered assemblies in the defense and aerospace markets.”

Mr. Ferrantino continued, “We have demonstrated our commitment and are continuing to work in pursuit of shareholder value. With our available funds, as well as our much improved operations we continue to look, both inside and outside our industry, where our management expertise will facilitate rapid top and bottom-line growth.”

In closing, Mr. Ferrantino added, “The Company is off to a great start and is positioned to perform well in 2018. We are looking forward to continuing to provide value to our dedicated employees, customers, and shareholders, and would like to thank you all for your support.”

About The LGL Group, Inc.

The LGL Group, Inc., through its two principal subsidiaries MtronPTI and PTF, designs, manufactures and markets highly-engineered electronic components used to control the frequency or timing of signals in electronic circuits, and designs high performance frequency and time reference standards that form the basis for timing and synchronization in various applications.

Headquartered in Orlando, Florida, the Company has additional design and manufacturing facilities in Yankton, South Dakota, Wakefield, Massachusetts and Noida, India, with local sales offices in Hong Kong, Sacramento, California and Austin, Texas.

For more information on the Company and its products and services, contact James Tivy at The LGL Group, Inc., 2525 Shader Rd., Orlando, Florida 32804, (407) 298-2000, or visit www.lglgroup.com and www.mtronpti.com.

Caution Concerning Forward Looking Statements

This press release may contain forward-looking statements made in reliance upon the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21 E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include all statements that do not relate solely to historical or current facts, and can be identified by the use of words such as “may,” “will,” “expect,” “project,” “estimate,” “anticipate,” “plan,” “believe,” “potential,” “should,” “continue” or the negative versions of those words or other comparable words. These forward-looking statements are not guarantees of future actions or performance. These forward-looking statements are based on information currently available to us and our current plans or expectations, and are subject to a number of uncertainties and risks that could significantly affect current plans, anticipated actions and our future financial condition and results. Certain of these risks and uncertainties are described in greater detail in our filings with the Securities and Exchange Commission. We are under no obligation to (and expressly disclaim any such obligation to) update or alter our forward-looking statements, whether as a result of new information, future events or otherwise.

 

THE LGL GROUP, INC.

Consolidated Statements of Operations
(Unaudited)
 

(Dollars in Thousands, Except Shares and Per Share Amounts)

         
For the Three Months Ended June 30, 2018 2017
REVENUES $ 6,157 $ 5,859
Costs and expenses:
Manufacturing cost of sales 3,594 3,992
Engineering, selling and administrative   2,074     1,823  
OPERATING INCOME 489 44
Total other income, net   61     1  
INCOME BEFORE INCOME TAXES 550 45
Income tax provision   (78 )   (25 )
NET INCOME $ 472   $ 20  
 
Weighted average number of shares used in basic EPS calculation   4,698,393     2,675,466  
Weighted average number of shares used in diluted EPS calculation   4,804,165     2,687,775  
BASIC AND DILUTED NET INCOME PER COMMON SHARE $ 0.10   $ 0.01  
 
For the Six Months Ended June 30,       2018     2017
REVENUES $ 12,102 $ 11,483
Costs and expenses:

Manufacturing cost of sales

7,310 7,550
Engineering, selling and administrative   4,145     3,781  
OPERATING INCOME 647 152
Total other income, net   97     7  
INCOME BEFORE INCOME TAXES 744 159
Income tax provision   (79 )   (28 )
NET INCOME $ 665   $ 131  
 
Weighted average number of shares used in basic EPS calculation   4,697,415     2,675,466  
Weighted average number of shares used in diluted EPS calculation   4,804,621     2,688,128  
BASIC AND DILUTED NET INCOME PER COMMON SHARE $ 0.14   $ 0.05  
 
 
THE LGL GROUP, INC.
Consolidated Balance Sheets
(Unaudited)
 

(Dollars in Thousands)

         
June 30, 2018 December 31, 2017
ASSETS
Cash and cash equivalents $ 1,565 $ 13,250
Marketable securities 15,664 3,803
Accounts receivable, net 3,880 3,393
Inventories, net 4,302 3,875
Prepaid expenses and other current assets   168   229
Total Current Assets 25,579 24,550
Property, plant, and equipment, net 2,170 2,179
Intangible assets, net 515 552
Deferred income taxes, net 155 173
Other assets, net     101
Total Assets $ 28,419 $ 27,555
LIABILITIES AND STOCKHOLDERS’ EQUITY
Total Current Liabilities 2,819 2,627
Total Stockholders’ Equity   25,600   24,928
Total Liabilities and Stockholders’ Equity $ 28,419 $ 27,555
 

Reconciliations of GAAP to Non-GAAP Measures

To supplement our consolidated financial statements presented on a GAAP (generally accepted accounting principles) basis, the Company uses certain non-GAAP measures, including Adjusted EBITDA, which we define as net income adjusted to exclude depreciation and amortization expense, interest income (expense), provision (benefit) for income taxes, stock-based compensation expense, investment income and other items we believe are discrete events which have a significant impact on comparable GAAP measures and could distort an evaluation of our normal operating performance. These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of the underlying operational results and trends and our marketplace performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net earnings or diluted earnings per share prepared in accordance with generally accepted accounting principles in the United States.

 

Reconciliation of GAAP Net Income Before Income Taxes to Non-GAAP Adjusted EBITDA:

         
For the Three Months Ended June 30, 2018 2017
(000’s, except shares and per share amounts)
Net income before income taxes $ 550 $ 45
Interest (income) expense 6 5
Depreciation and amortization 127 176
Non-cash stock compensation 6 8
Investment Income   (73 )  
Adjusted EBITDA $ 616   $ 234
 
Basic per share information:
Weighted average shares outstanding   4,698,393     2,675,466
Adjusted EBITDA per share $ 0.13   $ 0.09
 
Diluted per share information:
Weighted average shares outstanding   4,804,165     2,687,775
Adjusted EBITDA per share $ 0.13   $ 0.09
 
For the Six Months Ended June 30, 2018   2017
(000’s, except shares and per share amounts)
Net income before income taxes $ 744 $ 159
Interest (income) expense (6 ) 11
Depreciation and amortization 249 363
Non-cash stock compensation 13 15
Investment income (104 )
Recovery of note receivable   (4 )  
Adjusted EBITDA $ 892   $ 548
 
Basic per share information:
Weighted average shares outstanding   4,697,415     2,675,466
Adjusted EBITDA per share $ 0.19   $ 0.20
 
Diluted per share information:
Weighted average shares outstanding   4,804,621     2,688,128
Adjusted EBITDA per share $ 0.19   $ 0.20

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Cigna Reiterates Continued Support for Proposed Merger with Express Scripts

BLOOMFIELD, Conn.–()–Cigna Corporation (NYSE: CI) (“Cigna” or the “Company”) issued the following letter to stockholders in response to the second letter released by Carl C. Icahn about the Company’s proposed merger with Express Scripts Holding Company (NASDAQ: ESRX) (“Express Scripts”).

Dear Cigna Shareholders:

This morning Carl Icahn released a second letter in opposition of our combination with Express Scripts. Given Mr. Icahn continues to spread innuendos and false information about the transaction, our Board of Directors and management team wants to set the record straight once again for our shareholders.

Cigna, over the past 8 years of regulatory and competitive disruption, has a proven track record of delivering outstanding value for clients, customers and shareholders – including 384% cumulative total shareholder returns from December 31, 2009 through June 30, 2018. Our combination with Express Scripts represents a strategically and financially attractive path to continue to drive value for clients and customers in close coordination with our physician partners and, as a result, deliver outstanding value to our shareholders.

Our combination will lower costs and improve quality – a goal around which everyone should be aligned. Cigna has been clear about the expectation that cost improvements from the combination will flow directly to clients and customers, while administrative cost savings will flow to our shareholders – creating value for all stakeholders. We also disagree in the strongest possible terms with Mr. Icahn’s assertions that the failure of the combination would advance the greater good of society. Cigna and Express Scripts have always taken our societal responsibilities extremely seriously, and have provided extensive illustrative materials of the benefits we believe this combination would bring. We have not seen a single compelling piece of evidence advanced by Mr. Icahn to the contrary.

Our combination with Express Scripts will be transformational in the industry by combining two leading health care services companies that together will have the capabilities, financial flexibility, reach and expansion opportunities to create significant and immediate value for clients, customers and shareholders. Specifically, as a combined company we expect to:

  • Achieve a strategic goal (as previously communicated) to slow the rate of increase of drug and medical spending to a level that is more in line with the average increases of other goods in services in the U.S. (i.e., CPI) by 2021 for the benefit of our clients and customers.
  • Deliver mid-teens accretion in the first full year after closingand generate greater than $600 million in retained synergies annually – as a result, Cigna has raised its 2021 EPS target to $20 – $21 vs. prior guidance of $18. This does not take into account the additional savings that we will be able to generate for the benefit of our clients and customers.
  • Generate free cash flow of greater than $6 billion in 2021, allowing for rapid deleveraging and exceptional strategic and financial flexibility in a highly dynamic marketplace.

This is just naming a few of the expected benefits of the combination. All of this will result in a flexible, innovative and strategic platform that has the ability to win in more regulatory and competitive scenarios than either company could ever do on a stand-alone basis.

Turning back to Mr. Icahn, it is clear he has no apparent interest in understanding the underlying logic of our proposed deal with Express Scripts, the current healthcare regulatory environment or the unsustainable rise in drug costs in the U.S. We believe that his last-minute, ill-founded campaign is motivated by a desire to profit off of his stated “substantial short position” in Express Scripts by leveraging his recently acquired 0.56% ownership stake in Cigna, despite the value destruction that would result for other Cigna shareholders.

Mr. Icahn’s letter also misstates numerous facts about Cigna, Express Scripts and the proposed transaction. The facts are:

1.  

Cigna’s Board and Senior Leadership. Mr. Icahn’s unfounded assertion regarding Cigna’s Board and senior leadership is false. Our Board and our senior leadership team are and have always been 100% supportive of and committed to our combination with Express Scripts. We remain committed to closing the transaction by year-end 2018.

 
2.

Rebates. Mr. Icahn’s assertion that the value of our combination with Express Scripts will be materially impaired if rebates are eliminated is false. The elimination of rebates does not pose a material threat to the value of our combination with Express Scripts. Additionally on Tuesday, HHS made an announcement that creates even new opportunities for PBM capabilities to be used to improve affordability and outcomes in Medicare Part B.

 

As we disclosed yesterday, rebates are applicable to less than 10% of Express Scripts’ claims and it retains approximately $400 million of rebate dollars on a pre-tax basis. Furthermore, Express Scripts is a pharmacy services company that provides services well beyond PBM services as it:

  • Employs over 3,000 health care professionals to close gaps in care (e.g., improve adherence and reduce waste);
  • Helps those who struggle with complex diseases like cancer, HIV, mental illness and other conditions that require the holistic specialized care model only Express Scripts provides;
  • Has a specialty pharmacy, Accredo®, which helps bring together a patient’s pharmacy, medical and home-based services to drive better outcomes;
  • Has 10 innovative, industry-leading SafeGuardRx programs to improve care and value for customers through a suite of solutions that target therapy classes that pose clinical challenges for customers and a significant budget threat to their clients (e.g., inflammatory conditions, diabetes);
  • Redefined patient benefit management through its acquisition of eviCore in 2017, an innovative evidence-based medical benefit management services company that provides, among other things, utilization management services for health plans and employers; and
  • Saved $32 billion for its clients in 2017 through its costs savings programs, excluding any value derived from rebates and retail discounts.
 

As a result, there are a number of ways it gets paid for its services – all of which are at the option of the client.  Whatever amount Mr. Icahn’s companies are paying to Express Scripts, they are doing so because Express Scripts is delivering value in a variety of ways and Mr. Icahn’s companies are willing to pay for that value.

 

Our physician partners recognize this value as well.  We have received overwhelmingly positive feedback from them that they see our combination with Express Scripts as an opportunity to improve affordability and quality for their patients, who are our customers.

 
3.

Amazon. Mr. Icahn’s assertion that Amazon’s entry into mail order pharmacy is a reason not to pursue a combination with Express Scripts is ill-informed. Amazon recently announced its plans to acquire PillPack, an in-network pharmacy that contracts with pharmacy benefit managers, including Express Scripts, as stated on PillPack’s website.

 
Express Scripts operates the largest mail order pharmacy that dispenses over 330 million adjusted prescriptions annually. It delivers outstanding quality and service results, is part of a clinically integrated set of services and is supported by a number of proprietary patents.
 
We do not view PillPack’s current business model as a direct competitor to PBMs, which offer greater value-add capabilities beyond mail order pharmacy. We see mail order pharmacy as just one of the capabilities that Express Scripts brings to bear and is not where we see the greatest value-add for the combination.
 
When the broad range of capabilities of Express Scripts (including its data and data management tools) are combined with Cigna’s health engagement, clinical tools and deep physician partnerships, we will have:
  • Unrivaled Predictive Capabilities. Over 80 million Americans (roughly 25% of the population) are currently healthy but with a meaningful health risk. Together, Cigna and Express Scripts will have combined medical/pharmacy information for over 100 million customers and flexible technology to share insights from that data in an actionable way – including the ability to predict health and treatment adherence risks. Having the capability to assist individuals to lower health risks that they do not even know exist will improve quality of life and lower costs.
  • Seamless Coordinated Care and Treatment. We will deepen relationships with physicians (through our 500+ collaborative accountable care organizations); pharmacists (through our pharmacy networks); and drug manufacturers (through our supply chain management) and be able to coordinate pharmacy, medical and behavioral healthcare and treatment – even for the most complex cases. Additionally, together we will employ over 7,000 clinical professional, including Accredo’s 500 home infusion nurses, working to improve the health of our over 100 million customers.
  • Aligned Incentives. We will have the tools, information and reach to lead the value-based and outcomes-based reward structure across the healthcare spectrum and will be rewarded based on the value we generate for the benefit of clients and customers. As Cigna has done in the medical arena, the combined company will lead a transition to value based and aligned incentive arrangements in the pharmacy space as well – all with the goal of improving quality and value.

Finally, social responsibility is something that Cigna takes very seriously. In May 2016, we set a goal to reduce the use of prescription opioids among its members by 25% in three years. A full year ahead of its schedule, Cigna recently announced that, working with its physician partners, it has achieved that goal. Now, we have turned our attention to a new challenge. We will collaborate with employers, customers, prescribing clinicians, pharmacists and community-based organizations to reduce the number of opioid overdoses by 25% among our commercial customers by December 2021. The combined company will have more end-to-end insights and information, as well as additional reach to drive further alignment in ways that matter.

Our combination with Express Scripts is much more than the rhetoric and misinformation that Mr. Icahn would have our shareholders believe. It simply cannot be boiled down to rebates or Amazon or any other red herring issue that Mr. Icahn wants to seek to use as a scare tactic to support his own personal agenda.

For these reasons, Cigna’s Board and senior leadership continue to believe that the proposed merger with Express Scripts is in the best interest of shareholders and continue to recommend that Cigna shareholders vote “FOR” the Express Scripts transaction.

If you have any questions, or need assistance in voting
your shares, please call our proxy solicitor:

INNISFREE M&A INCORPORATED
TOLL-FREE, at 1 (877) 750-9498 (from the US and Canada)
or +1 (412) 232-3651 (from other locations).

FORWARD LOOKING STATEMENTS

Information included or incorporated by reference in this communication, and information which may be contained in other filings with the Securities and Exchange Commission (the “SEC”) and press releases or other public statements, contains or may contain forward-looking statements. These forward-looking statements include, among other things, statements of plans, objectives, expectations (financial or otherwise) or intentions, including statements concerning the potential future performance of Cigna, Express Scripts, or the combined company, the potential for new laws or regulations, or any impact of any such new laws or regulations, including on the business of Cigna, Express Scripts or the combined company, the ability to achieve the anticipated benefits of the proposed merger, on the expected timeline or at all, the timeline for deleveraging the combined company, and the ability to consummate the proposed merger, on the anticipated timeline or at all, and other statements regarding the parties’ future beliefs, expectations, plans, intentions, financial condition or performance. You may identify forward-looking statements by the use of words such as “believe,” “expect,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “may,” “should,” “will” or other words or expressions of similar meaning, although not all forward-looking statements contain such terms.

Forward-looking statements, including as they relate to Express Scripts or Cigna, the management of either such company, the transaction or any expected benefits of the transaction, involve risks and uncertainties. Actual results may differ significantly from those projected or suggested in any forward-looking statements. Express Scripts and Cigna do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Any number of factors could cause actual results to differ materially from those contemplated by any forward-looking statements, including, but not limited to, the risks associated with the following:

  • the inability of Express Scripts and Cigna to obtain stockholder or regulatory approvals required for the merger or the requirement to accept conditions that could reduce the anticipated benefits of the merger as a condition to obtaining regulatory approvals;
  • the possibility that the anticipated benefits from the merger cannot be realized in full, or at all or may take longer to realize than expected;
  • a longer time than anticipated to consummate the proposed merger;
  • problems regarding the successful integration of the businesses of Express Scripts and Cigna;
  • unexpected costs regarding the proposed merger;
  • diversion of management’s attention from ongoing business operations and opportunities;
  • potential litigation associated with the proposed merger;
  • the ability to retain key personnel;
  • the availability of financing;
  • effects on the businesses as a result of uncertainty surrounding the proposed merger;
  • the ability of the combined company to achieve financial, strategic and operational plans and initiatives;
  • the ability of the combined company to predict and manage medical costs and price effectively and develop and maintain good relationships with physicians, hospitals and other health care providers;
  • the impact of modifications to the combined company’s operations and processes;
  • the ability of the combined company to identify potential strategic acquisitions or transactions and realize the expected benefits of such transactions;
  • the substantial level of government regulation over the combined company’s business and the potential effects of new laws or regulations or changes in existing laws or regulations;
  • the outcome of litigation relating to the businesses of Express Scripts and Cigna, regulatory audits, investigations, actions and/or guaranty fund assessments;
  • uncertainties surrounding participation in government-sponsored programs such as Medicare;
  • the effectiveness and security of the combined company’s information technology and other business systems;
  • unfavorable industry, economic or political conditions, including foreign currency movements;
  • acts of war, terrorism, natural disasters or pandemics; and
  • the industry may be subject to future risks that are described in SEC reports filed by Express Scripts and Cigna.

You should carefully consider these and other relevant factors, including those risk factors in this communication and other risks and uncertainties that affect the businesses of Express Scripts and Cigna described in their respective filings with the SEC, when reviewing any forward-looking statement. These factors are noted for investors as permitted under the Private Securities Litigation Reform Act of 1995. Investors should understand it is impossible to predict or identify all such factors or risks. As such, you should not consider either foregoing lists, or the risks identified in SEC filings, to be a complete discussion of all potential risks or uncertainties, and should not place undue reliance on forward-looking statements.

IMPORTANT INFORMATION ABOUT THE TRANSACTION AND WHERE TO FIND IT

This communication does not constitute an offer to sell or solicitation of an offer to buy any securities. In connection with the proposed transaction, the newly formed company which will become the holding company following the transaction (“Holdco”) filed with the SEC a registration statement on Form S-4. The registration statement on Form S-4 includes a joint proxy statement of Cigna and Express Scripts that also constitutes a prospectus of Holdco. The registration statement was declared effective by the SEC on July 16, 2018, and Cigna and Express Scripts commenced mailing the definitive joint proxy statement/prospectus to the respective stockholders of Cigna and Express Scripts on or about July 17, 2018. Cigna and Express Scripts also plan to file other relevant documents with the SEC regarding the proposed transaction. This document is not a substitute for the registration statement or the joint proxy statement/prospectus or any other document which Cigna, Express Scripts or Holdco may file with the SEC. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT, JOINT PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS THAT ARE FILED OR MAY BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION. You may obtain a free copy of the registration statement on Form S-4 and the definitive joint proxy statement/prospectus and other relevant documents filed by Holdco, Cigna and Express Scripts with the SEC at the SEC’s website at www.sec.gov. Copies of documents filed with the SEC by Cigna will be available free of charge on Cigna’s website at www.Cigna.com or by contacting Cigna’s Investor Relations Department at (215) 761-4198. Copies of documents filed with the SEC by Express Scripts will be available free of charge on Express Scripts’ website at www.express-scripts.com or by contacting Express Scripts’ Investor Relations Department at (314) 810-3115.

PARTICIPANTS IN THE SOLICITATION

Cigna (and, in some instances, Holdco) and Express Scripts and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction under the rules of the SEC. Investors may obtain information regarding the names, affiliations and interests of directors and executive officers of Cigna (and, in some instances, Holdco) in Cigna’s Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on February 28, 2018, and its definitive proxy statement for its 2018 Annual Meeting, which was filed with the SEC on March 16, 2018. Investors may obtain information regarding the names, affiliations and interests of Express Scripts’ directors and executive officers in Express Scripts’ Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on February 27, 2018, and its proxy statement for its 2018 Annual Meeting, which was filed with the SEC on March 29, 2018. You may obtain free copies of these documents at the SEC’s website at www.sec.gov, at Cigna’s website at www.Cigna.com or by contacting Cigna’s Investor Relations Department at (215) 761-4198. Copies of documents filed with the SEC by Express Scripts will be available free of charge on Express Scripts’ website at www.express-scripts.com or by contacting Express Scripts’ Investor Relations Department at (314) 810-3115. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, is contained in the joint proxy statement/prospectus and other relevant materials filed or to be filed with the SEC regarding the proposed transaction. Investors should read the joint proxy statement/prospectus carefully and in its entirety before making any voting or investment decisions.

NO OFFER OR SOLICITATION

This communication is for informational purposes only and not intended to and does not constitute an offer to subscribe for, buy or sell, the solicitation of an offer to subscribe for, buy or sell or an invitation to subscribe for, buy or sell any securities or the solicitation of any vote or approval in any jurisdiction pursuant to or in connection with the proposed transaction or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of applicable law. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended, and otherwise in accordance with applicable law.

Permission to use quotes was not sought or obtained.

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Rimini Street Announces Fiscal Second Quarter 2018 Financial Results

LAS VEGAS–()–Rimini Street, Inc. (Nasdaq: RMNI), a global provider of enterprise software products and services, and the leading third-party support provider for Oracle and SAP software products, today announced financial results for its second quarter ended June 30, 2018.

“We believe the recently completed refinancing of our credit facility with a $140 million private placement equity transaction removes the constraints to our revenue growth by eliminating covenants on sales and marketing spend,” stated Seth A. Ravin, Rimini Street co-founder and CEO. “Completion of the refinancing allows us to aggressively invest in global sales, marketing and service delivery capacity and capabilities in order to drive future revenue. Based on our 13 year track record of sales performance, we expect these investments to lead to growth and improved operating leverage in 2019 and beyond.”

“Revenue for the second quarter of 2018 came in above our guidance range and was driven by growth across all geographies,” stated Tom Sabol, Rimini Street CFO. “We also made significant progress in our goal to reduce our cost of capital with the refinancing of our credit facility by providing us an expected reduction in debt-related costs of approximately $95 million over the next three years. In addition, the refinancing extended the expected maturity until July 2023, when the convertible preferred equity may be redeemed by the holders in full, unless it has been previously converted into common stock.”

Second Quarter 2018 Financial Highlights

  • Revenue was $62.6 million for the second quarter of 2018, an increase of 20% compared to $52.0 million for the second quarter of 2017, and included approximately $1.2 million of non-subscription revenue recognized in the quarter.
  • Annualized Subscription Revenue was approximately $246 million for the second quarter of 2018, an increase of 18% compared to $208 million in the second quarter of 2017.
  • Active Clients as of June 30, 2018 were 1,622, an increase of 21% compared to 1,335 as of June 30, 2017.
  • Revenue Retention Rate was 93.2% for the trailing 12-months ended June 30, 2018 compared to 93.8% for the comparable period ended June 30, 2017.
  • Gross Margin was 58.4% for the second quarter of 2018 compared to 62.5% for the second quarter of 2017, reflecting investments to support new product and service offering launches, costs for the Company’s biannual global service delivery training event held in May 2018, and costs related to a new 10-year employee service award benefit.
  • Operating Loss was $6.0 million for the second quarter of 2018 compared to Operating Income of $7.5 million for the second quarter of 2017. The change was the result of increased litigation costs and planned increased spending on sales and marketing.
  • Non-GAAP Operating Income was $4.2 million for the second quarter of 2018 compared to Non-GAAP Operating Income of $8.1 million for the second quarter of 2017.
  • Net Loss for the second quarter of 2018 was $25.4 million, or a loss of $0.43 per basic share, compared to a Net Loss of $25.9 million, or a loss of $1.05 per basic share for the second quarter of 2017.
  • Non-GAAP Net Loss for the second quarter of 2018 was $7.8 million compared to a Non-GAAP Net Loss of $16.9 million for the second quarter of 2017.
  • Operating Cash Flow for the second quarter of 2018 was $8.5 million, compared to Operating Cash Flow of $28.5 million for the second quarter of 2017, which included an insurance settlement of $19.3 million.
  • Adjusted EBITDA for the second quarter of 2018 was $3.8 million compared to $8.9 million for the second quarter of 2017.
  • Reduced the Company’s credit facility obligation by $21.0 million with proceeds refunded and received from Oracle for certain court awards that had been previously paid by the Company, and that were subsequently overturned in Rimini Street’s favor on appeal.
  • Entered into a $140 million equity financing agreement on June 18, 2018, which subsequently closed on July 19, 2018, and resulted in repayment of all remaining outstanding obligations under the credit facility totaling $132.8 million, consisting of principal, make-whole applicable premium, interest and fees. Following repayment, the credit facility was terminated.

Reconciliations of the non-GAAP financial measures provided in this press release to their most directly comparable GAAP financial measures are provided in the financial tables included at the end of this press release. An explanation of these measures and how they are calculated is also included under the heading “About Non-GAAP Financial Measures and Certain Key Metrics.”

Second Quarter 2018 Company Highlights

  • Announced the extension of Rimini Street’s proven, award-winning support model and global capabilities to SaaS products with support services for Salesforce Sales Cloud and Service Cloud products.
  • Expanded the Company’s family of Extensibility Solutions with the launch of Rimini Street Mobility and Rimini Street Analytics. These products join the Rimini Street Advanced Database Security product launched in 2017. The products help organizations to quickly and cost-effectively modernize their current enterprise software with the latest desired features and capabilities, future-proof technical platforms against yet-unknown technology changes, and secure systems against a constantly evolving threat environment.
  • Closed more than 7,300 support cases across 44 countries, and once again achieved an average client satisfaction rating on the Company’s support delivery of 4.8 out of 5.0 (where 5.0 is “excellent”).
  • Presented at 12 CIO and IT and procurement leader events worldwide, including Gartner CIO & IT Executive Summit in Canada and IDC CIO Summit in South Korea.
  • For the fifth time, named one of the Bay Area Top Workplaces by the Bay Area News Group for work environment, communication policies, employee benefits and corporate culture.
  • Honored with six Stevie® Awards, including Company of the Year, Customer Service Department of the Year, and Customer Service Executive of the Year, in the 16th Annual American Business Awards®.
  • Received an updated accreditation for the UK government’s procurement system and selected as a third-party support provider under the UK government’s Technology Services 2 (TS2) Framework for IT support procurement.
  • Added to the US Russell 2000® Index.

Revenue Guidance

The Company is providing third quarter 2018 revenue guidance to be in the range of approximately $61.0 million to $63.0 million, and updating full year 2018 revenue guidance to be in the range of approximately $240 million to $250 million.

Webcast and Conference Call Information

Rimini Street will host a conference call and webcast to discuss the second quarter 2018 results at 5:00 p.m. Eastern Time / 2:00 p.m. Pacific Time on August 9, 2018. A live webcast of the event will be available on Rimini Street’s Investor Relations site at https://investors.riministreet.com/events-and-presentations/upcoming-and-past-events. Dial-in participants can access the conference call by dialing (855) 213-3942 in the U.S. and Canada and enter the code 7489219. A replay of the webcast will be available for at least 90 days following the event.

Company’s Use of Non-GAAP Financial Measures

This press release contains certain “non-GAAP financial measures.” Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles. These non-GAAP financial measures supplement, and are not intended to represent a measure of operating performance in accordance with disclosures required by generally accepted accounting principles, or GAAP. Non-GAAP financial measures should be considered in addition to, and not as a substitute for or superior to, financial measures determined in accordance with GAAP. A reconciliation of GAAP to non-GAAP results is included in the financial tables included elsewhere in this press release. Presented under the heading “About Non-GAAP Financial Measures and Certain Key Metrics” is a description and explanation of our non-GAAP financial measures.

About Rimini Street, Inc.

Rimini Street, Inc. (Nasdaq: RMNI) is a global provider of enterprise software products and services, and the leading third-party support provider for Oracle and SAP software products. The Company has redefined enterprise software support services since 2005 with an innovative, award-winning program that enables licensees of IBM, Microsoft, Oracle, Salesforce, SAP and other enterprise software vendors to save up to 90 percent on total maintenance costs. Clients can remain on their current software release without any required upgrades for a minimum of 15 years. Over 1,620 global Fortune 500, midmarket, public sector and other organizations from a broad range of industries currently rely on Rimini Street as their trusted, third-party support provider. To learn more, please visit http://www.riministreet.com/, follow @riministreet on Twitter and find Rimini Street on Facebook and LinkedIn. (IR-RMNI)

Forward-Looking Statements

Certain statements included in this communication are not historical facts but are forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are accompanied by words such as “may,” “should,” “would,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “seem,” “seek,” “continue,” “future,” “will,” “expect,” “outlook” or other similar words, phrases or expressions. These forward-looking statements include, but are not limited to, statements regarding our expectations as to benefits of the financing transaction described herein, including projections of expected cash savings over the next three years and accelerated growth, future events, future opportunities and growth initiatives. These statements are based on various assumptions and on the current expectations of management and are not predictions of actual performance, nor are these statements of historical facts. These statements are subject to a number of risks and uncertainties regarding Rimini Street’s business, and actual results may differ materially. These risks and uncertainties include, but are not limited to, continued inclusion in the Russell 2000 Index in the future, changes in the business environment in which Rimini Street operates, including inflation and interest rates, and general financial, economic, regulatory and political conditions affecting the industry in which Rimini Street operates; adverse litigation developments or in the government inquiry; the final amount and timing of any refunds from Oracle related to our litigation; our ability to raise additional equity or debt financing on favorable terms; the terms and impact of our newly issued 13.00% Series A Preferred Stock; changes in taxes, laws and regulations; competitive product and pricing activity; difficulties of managing growth profitably; the success of our recently introduced products and services, including Rimini Street Mobility, Rimini Street Analytics, Rimini Street Advanced Database Security, and services for Salesforce Sales Cloud and Service Cloud products; the loss of one or more members of Rimini Street’s management team; uncertainty as to the long-term value of Rimini Street’s equity securities, including its common stock and its Preferred Stock; and those discussed under the heading “Risk Factors” in Rimini Street’s Quarterly Report on 10-Q filed on August 9, 2018, which disclosures amend and restate the disclosures appearing under the heading “Risk Factors” in Rimini Street’s Annual Report on Form 10-K filed on March 15, 2018, and as updated from time to time by Rimini Street’s future Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings by Rimini Street with the Securities and Exchange Commission. In addition, forward-looking statements provide Rimini Street’s expectations, plans or forecasts of future events and views as of the date of this communication. Rimini Street anticipates that subsequent events and developments will cause Rimini Street’s assessments to change. However, while Rimini Street may elect to update these forward-looking statements at some point in the future, Rimini Street specifically disclaims any obligation to do so, except as required by law. These forward-looking statements should not be relied upon as representing Rimini Street’s assessments as of any date subsequent to the date of this communication.

Salesforce, Service Cloud, Sales Cloud and others are trademarks of salesforce.com, inc.

© 2018 Rimini Street, Inc. All rights reserved. “Rimini Street” is a registered trademark of Rimini Street, Inc. in the United States and other countries, and Rimini Street, the Rimini Street logo, and combinations thereof, and other marks marked by TM are trademarks of Rimini Street, Inc. All other trademarks remain the property of their respective owners, and unless otherwise specified, Rimini Street claims no affiliation, endorsement, or association with any such trademark holder or other companies referenced herein.

   
Rimini Street, Inc.
Unaudited Condensed Consolidated Balance Sheets
(In thousands, except per share amounts)
 

June 30,

December 31,

ASSETS

2018

2017

Current assets:
Cash and cash equivalents $ 24,853 $ 21,950
Restricted cash 10,634 18,077
Accounts receivable, net of allowance of $293 and $51, respectively 63,416 63,525
Prepaid expenses and other   8,706     8,560  
 
Total current assets 107,609 112,112
 
Long-term assets:

Property and equipment, net of accumulated depreciation and amortization of $7,805 and $6,947, respectively

3,899 4,255
Deferred debt issuance costs, net 2,834 3,520
Deferred offering costs 2,831 500
Deposits and other 1,387 1,065
Deferred income taxes, net   940     719  
 

Total assets

$ 119,500   $ 122,171  
 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current maturities of long-term debt $ 3,677 $ 15,500
Accounts payable 12,416 10,137
Accrued compensation, benefits and commissions 18,420 18,154
Other accrued liabilities 28,509 22,920
Deferred insurance settlement 8,033
Liability for embedded derivatives 7,800 1,600
Deferred revenue   167,879     152,390  
 

Total current liabilities

238,701 228,734
 
Long-term liabilities:
Long-term debt, net of current maturities 72,364 66,613
Deferred revenue 32,506 29,182
Other long-term liabilities   5,825     7,943  
 

Total liabilities

  349,396     332,472  
 
Stockholders’ deficit:

Preferred stock, $0.0001 par value per share. Authorized 100,000 shares; no shares issued and outstanding

Common stock; $0.0001 par value. Authorized 1,000,000 shares; issued and outstanding 60,005 and 59,314 shares as of June 30, 2018 and December 31, 2017, respectively

6 6
Additional paid-in capital 97,663 94,967
Accumulated other comprehensive loss (1,219 ) (867 )
Accumulated deficit   (326,346 )   (304,407 )

Total stockholders’ deficit

  (229,896 )   (210,301 )

Total liabilities and stockholders’ deficit

$ 119,500   $ 122,171  
 
Rimini Street, Inc.
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
   
Three Months Ended
June 30,

2018

2017

 
Net revenue $ 62,649 $ 52,048
Cost of revenue   26,084     19,537  
 
Gross profit   36,565     32,511  
 
Operating expenses:
Sales and marketing 23,097 15,801
General and administrative 10,324 8,928
Litigation costs and related recoveries:
Professional fees and other defense costs of litigation 9,113 3,426
Insurance recoveries, net       (3,125 )
 
Total operating expenses   42,534     25,030  
 
Operating income (loss) (5,969 ) 7,481
 
Non-operating expenses:
Interest expense (9,323 ) (14,541 )
Other debt financing expenses (1,339 ) (10,859 )
Loss from change in fair value of redeemable warrants (7,648 )
Loss from change in fair value of embedded derivatives (6,700 ) (700 )
Other income (expense), net   (1,568 )   225  
 
Loss before income taxes (24,899 ) (26,042 )
Income tax benefit (expense)   (547 )   183  
 
Net loss $ (25,446 ) $ (25,859 )
 
Net loss per share:
Basic $ (0.43 ) $ (1.05 )
Diluted $ (0.43 ) $ (1.05 )
 
Weighted average number of shares of Common Stock outstanding: (1)
Basic   59,800     24,561  
Diluted   59,800     24,561  
______________
(1)   For the three months ended June 30, 2017, the weighted average number of shares have been restated to give effect to the reverse recapitalization consummated on October 10, 2017.
 
Rimini Street, Inc.
GAAP to Non-GAAP Reconciliations
(In Thousands)
   
Three Months Ended
June 30,

2018

2017

 
Non-GAAP operating income reconciliation:
Operating income (loss) $ (5,969 ) $ 7,481
Non-GAAP adjustments:
Litigation costs, net of related recoveries 9,113 301
Stock-based compensation expense   1,098     353  
 
Non-GAAP operating income $ 4,242   $ 8,135  
 
 
Non-GAAP net loss reconciliation:
Net loss $ (25,446 ) $ (25,859 )
Non-GAAP adjustments:
Litigation costs, net of related recoveries 9,113 301
Write-off of deferred debt financing costs 704
Stock-based compensation expense 1,098 353
Loss from change in fair value of embedded derivatives 6,700 700
Loss from change in fair value of redeemable warrants       7,648  
 
Non-GAAP net loss $ (7,831 ) $ (16,857 )
 
Non-GAAP Adjusted EBITDA reconciliation:
Net loss $ (25,446 ) $ (25,859 )
Non-GAAP adjustments:
Interest expense 9,323 14,541
Income tax expense 547 (183 )
Depreciation and amortization expense   466     496  
 
EBITDA (15,110 ) (11,005 )
Non-GAAP adjustments:
Litigation costs, net of related recoveries 9,113 301
Stock-based compensation expense 1,098 353
Loss from change in fair value of embedded derivatives 6,700 700
Loss from change in fair value of redeemable warrants 7,648
Write-off of deferred debt financing costs 704
Other debt financing expenses   1,339     10,859  
 
Adjusted EBITDA $ 3,844   $ 8,856  
 

About Non-GAAP Financial Measures and Certain Key Metrics

To provide investors and others with additional information regarding Rimini Street’s results, we have disclosed the following non-GAAP financial measures and certain key metrics. We have described below Active Clients, Annualized Subscription Revenue and Revenue Retention Rate, each of which is a key operational metric for our business. In addition, we have disclosed the following non-GAAP financial measures: non-GAAP operating income, non-GAAP net loss, EBITDA, and Adjusted EBITDA. Rimini Street has provided in the tables above a reconciliation of each non-GAAP financial measure used in this earnings release to the most directly comparable GAAP financial measure. Due to a valuation allowance for our deferred tax assets, there were no tax effects associated with any of our non-GAAP adjustments. These non-GAAP financial measures are also described below.

The primary purpose of using non-GAAP measures is to provide supplemental information that management believes may prove useful to investors and to enable investors to evaluate our results in the same way management does. We also present the non-GAAP financial measures because we believe they assist investors in comparing our performance across reporting periods on a consistent basis, as well as comparing our results against the results of other companies, by excluding items that we do not believe are indicative of our core operating performance. Specifically, management uses these non-GAAP measures as measures of operating performance; to prepare our annual operating budget; to allocate resources to enhance the financial performance of our business; to evaluate the effectiveness of our business strategies; to provide consistency and comparability with past financial performance; to facilitate a comparison of our results with those of other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and in communications with our board of directors concerning our financial performance. Investors should be aware however, that not all companies define these non-GAAP measures consistently.

Active Client is a distinct entity that purchases our services to support a specific product, including a company, an educational or government institution, or a business unit of a company. For example, we count as two separate active clients when support for two different products is being provided to the same entity. We believe that our ability to expand our active clients is an indicator of the growth of our business, the success of our sales and marketing activities, and the value that our services bring to our clients.

Annualized Subscription Revenue is the amount of subscription revenue recognized during a quarter and multiplied by four. This gives us an indication of the revenue that can be earned in the following 12-month period from our existing client base assuming no cancellations or price changes occur during that period. Subscription revenue excludes any non-recurring revenue, which had been insignificant until the fiscal second quarter of 2018.

Revenue Retention Rate is the actual subscription revenue (dollar-based) recognized over a 12-month period from customers that were clients on the day prior to the start of such 12-month period, divided by our Annualized Subscription Revenue as of the day prior to the start of the 12-month period.

Non-GAAP Operating Income is operating income (loss) adjusted to exclude: litigation costs, net of related appeal awards and insurance recoveries, and stock-based compensation expense. These exclusions are discussed in further detail below.

Non-GAAP Net Loss is net loss adjusted to exclude: litigation costs, net of related appeal awards and insurance recoveries, post judgment interest on litigation appeal awards, stock-based compensation expense, and gains or losses on changes in fair value of embedded derivatives and redeemable warrants. These exclusions are discussed in further detail below.

We exclude the following items from our non-GAAP financial measures, as applicable, for the periods presented:

Litigation Costs and related recoveries: Litigation costs, the associated insurance recoveries, adjustments to the deferred settlement liability, litigation appeal awards and post judgment interest relate to outside costs and recoveries for our litigation activities. These costs and related recoveries reflect the ongoing litigation we are involved with, and do not relate to the day-to-day operations or our core business of serving our clients.

Write-off of Deferred Debt Financing Costs: Costs related to potential debt financing transactions are capitalized until we determine if the transaction will result in a new debt agreement. When we determine that these efforts are unsuccessful, the costs are written-off and classified as other non-operating expenses. Since these amounts are associated with our debt financing structure, we exclude them since they do not relate to our day-to-day operations or our core business of serving our clients.

Stock-Based Compensation Expense: Our compensation strategy includes the use of stock-based compensation to attract and retain employees. This strategy is principally aimed at aligning the employee interests with those of our stockholders and to achieve long-term employee retention, rather than to motivate or reward operational performance for any particular period. As a result, stock-based compensation expense varies for reasons that are generally unrelated to operational decisions and performance in any particular period.

Loss (Gain) on Changes in Fair Value of Embedded Derivatives and Redeemable Warrants: Our former credit facility, which was terminated on July 19, 2018, included features that were determined to be embedded derivatives requiring bifurcation and accounting as separate financial instruments. Until October 2017, we also had redeemable warrants that were required to be carried at fair market value with changes in fair value resulting in gains and losses in our statement of operations. We have excluded the gains and losses related to the changes in fair value of embedded derivatives and redeemable warrants given the nature of the fair value requirements. We are not able to manage these amounts as part of our business operations nor are the costs core to servicing our clients and have excluded them.

Other Debt Financing Expenses: Other debt financing expenses include non-cash write-offs and amortization of debt discounts and issuance costs under our former credit facility, and collateral monitoring and other fees payable in cash related to the credit facility. Since these amounts related to our debt financing structure, we exclude them since they do not relate to the day-to-day operations or our core business of serving our clients.

EBITDA is net loss adjusted to exclude: interest expense, income tax expense, and depreciation and amortization expense.

Adjusted EBITDA is EBITDA adjusted to exclude: litigation costs, net of related appeal and insurance recoveries, post judgment interest on litigation appeal awards, stock-based compensation expense, gains or losses on changes in the fair value of embedded derivatives and redeemable warrants, write-off of deferred debt financing costs, and other debt financing expenses, as discussed above.

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ASV Holdings, Inc. Reports Second Quarter 2018 Results

GRAND RAPIDS, Minn.–()–ASV Holdings, Inc. (Nasdaq: ASV), a leading provider of rubber-tracked compact track loaders and wheeled skid steer loaders in the compact construction equipment market, today announced Second Quarter and year-to-date 2018 results.

For the three months ended June 30, 2018, the Company reported Net Sales of $31.9 million and Net Income of $0.3 million or $0.03 per share compared to Net Sales of $34.2 million and Net Income of $1.8 million or $0.20 per share for the three months ended June 30, 2017.

Second Quarter 2018 Highlights

  • $31.9 million in Net Sales represented a year-over-year decrease of 6.7% from $34.2 million in the second quarter of 2017.
  • Machine sales revenues to North American distribution grew 9% compared to second quarter 2017.
  • Total machine sales revenues increased year-over-year by 4.8% to $23.0 million.
  • Second quarter 2018 net income of $0.3 million or $0.03 per share, compared to second quarter 2017 adjusted pro forma income of $0.8 million or $0.08 per share.
  • Second quarter 2018 gross profit percent adversely impacted 130 basis points by increased material costs.
  • EBITDA of $2.1 million or 6.6% of sales compared to $3.3 million or 9.6% of sales for the second quarter of 2017.
  • Adjusted EBITDA* of $2.2 million or 6.9% of sales compared to second quarter 2017 pro forma adjusted EBITDA of $3.2 million or 9.4% of sales.
  • Added 17 dealer / rental locations in the quarter.

*The Glossary at the end of this press release contains further details regarding reconciliation of GAAP items and Adjusted and Pro-forma items.

Chairman and Chief Executive Officer, Andrew Rooke commented, “In the second quarter, we continued to make good progress with adding new dealers and penetrating into the rental market with sales, which are among our top corporate objectives in scaling the business. Our North American dealer rental locations now stand at 265 and our sales into rental locations accounted for approximately 15% of machine sales in the quarter. Second quarter financial results, while below plan and impacted by several market headwinds, were highlighted by positive operating cash flow of over $600,000, we generated over $2 million in EBITDA and achieved 3 cents in EPS. Although machine sales increased in the second quarter, our results reflected a year-over-year quarterly decline in sales. This was principally due to lower undercarriage sales to our largest customer. In the second quarter of 2017, this customer’s undercarriage purchases totaled 40% of their full year shipments, and thus the comparison to that quarter shows an overall decline in $2.7 million lower year-over-year sales for the 2018 quarter. Sharp increases in material costs had a negative impact on our sales, margins, and bottom-line, with the run rate of higher steel prices resulting in approximately $2.5 million in higher costs, on an annualized basis.

“Typical of a cyclical recovery, the higher level of demand for industrial equipment has resulted in disruption within the supply chain and lengthened lead times, most notably for engines, which along with the rising steel costs, present challenges to sourcing and deliveries during the balance of the year. These challenges impact our entire industry and we are aggressively working to overcome these headwinds with initiatives that will largely offset their impact, from price surcharges introduced in May of this year, to cost and sourcing improvements which are already yielding results. We believe that industry wide market pricing will in time move upwards in recognition of the new cost base for steel, which will enable a margin recovery going forward. In addition, we are on pace to recognize an estimated $1 million in annual savings from relocating our parts distribution business back to Grand Rapids, as we expected. We are confident in the continued strength of the industries we serve and there remains plenty of work to do in the quarters ahead to reach our longer-term sales growth and margin targets.”

Missi How, Chief Financial Officer, added, “While temporary spikes in input costs and component availability have presented some challenges, we remain focused on managing what is in our control and pursuing opportunities to grow the bottom line. Inventory levels have increased as we have been receiving in long lead time production components to support future builds, and in addition, we have increased our finished machine inventory to fulfill backlog requirements and support expected future activity levels. Managing working capital is still a priority and we were pleased that even with this step up of inventory, our net working capital as a percent of sales of 23.5% was well within our target range. We expect to continue to generate cash and maintain reasonable working capital levels throughout the remainder of 2018.”

Outlook:

Given the first half performance and uncertainties in the supply chain which are lengthening lead times and impacting customer buying decisions, ASV’s 2018 sales are likely to be restricted to show only high single digit growth for this year and remain subject to how the pricing environment evolves and markets adjust to the business environment.

Conference Call:

Management will host a conference call at 4:30 PM Eastern Time today to discuss the results with the investment community. Anyone interested in participating in the call should dial 1- 866-548-4713 if calling within the United States or 323-794-2093 if calling internationally. A replay will be available until 11:59 PM ET August 16, 2018 which can be accessed by dialing 844-512-2921 if calling within the United States or 412-317-6671 if calling internationally. Please use passcode 5362178 to access this replay. The call will additionally be broadcast live and archived for 90 days over the internet with accompanying slides, accessible at the investor relations portion of the Company’s corporate website, www.asvi.com in the “Investors” section.

About ASV Holdings, Inc.

ASV Holdings, Inc. is a designer and manufacturer of compact construction equipment. Its patented Posi-Track rubber tracked, multi-level suspension undercarriage system provides a competitive market differentiator for its Compact Track Loader (CTL) product line with brand attributes of power, performance and serviceability. It’s wheeled Skid Steer Loaders (SSLs) also share the common brand attributes. Equipment is sold through an independent dealer network throughout North America, Australia, and New Zealand. The company also sells OEM equipment and aftermarket parts. ASV owns and operates a 238,000 square-foot production facility in Grand Rapids, MN.

Forward-Looking Statements and non-GAAP Information

This release contains forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “intends” or “continue,” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. Forward-looking statements in this release include, without limitation: (1) projections of revenue, earnings, capital structure and other financial items, (2) statements of our plans and objectives, (3) statements regarding the capabilities and capacities of our business operations, (4) statements of expected future economic conditions and the effect on us and on dealers or OEM customers, (5) expected benefits of our cost reduction measures, and (6) assumptions underlying statements regarding us or our business.

Our actual results may differ from information contained in these forward looking-statements for many reasons, including those described in the section entitled “Risk Factors” in our Form 10K for the year ended December 31, 2017, which are available on our EDGAR page at www.sec.gov. These statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. We discuss many of these risks in greater detail under the heading “Risk Factors” and elsewhere in the Form 10K. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, after the date of this release, we are under no duty to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise.

We obtained the industry, market and competitive position data in this release from our own internal estimates and research as well as from industry and general publications and research surveys and studies conducted by third parties. While we believe that each of these studies and publications is reliable, we have not independently verified market and industry data from third-party sources. While we believe our internal company research is reliable and the market definitions we use are appropriate, neither such research nor these definitions have been verified by any independent source.

We from time to time refer to various non-GAAP financial measures in this release. We believe that this information is useful to understanding our operating results by excluding certain items that may not be indicative of our core operating results and business outlook. Reference to these non-GAAP financial measures should not be considered as a substitute for, or superior to, results that are presented in a manner consistent with GAAP. Rather, the non-GAAP financial information should be considered in addition to results that are presented in a manner consistent with GAAP. A reconciliation of non-GAAP financial measures referred to in this release is provided in the tables at the conclusion of this release.

 
ASV Holdings, Inc.
Condensed Statements of Operations
(In thousands, except par value and per share data)
 
    For the Three Months     For the Six Months
Ended June 30, Ended June 30,
2018     2017 2018     2017
Unaudited Unaudited Unaudited Unaudited
Net sales $ 31,860 $ 34,240 $ 61,729 $ 62,250
 
Cost of goods sold   27,603     28,940     53,531     52,590  
 
Gross profit 4,257 5,300 8,198 9,660
 
Research and development costs 451 521 922 1,058
Selling, general and administrative expense   2,934     2,770     6,341     5,483  
 
Operating income 872 2,009 935 3,119
 
Other income (expense)
Interest expense (464 ) (887 ) (922 ) (1,765 )
Other income (expense)       1     7     1  
 
Total other expense   (464 )   (886 )   (915 )   (1,764 )
 
Income before taxes 408 1,123 20 1,355
 
Income tax expense (benefit)   89     (629 )   8     (629 )
 
Net income $ 319   $ 1,752   $ 12   $ 1,984  
 
Earnings per share:
Basic net income per share $ 0.03 $ 0.20 $ 0.00 $ 0.24
Diluted net income per share $ 0.03 $ 0.20 $ 0.00 $ 0.24
 
Weighted average common shares outstanding:
Basic weighted average common shares outstanding 9,823 8,870 9,820 8,435
Diluted weighted average common shares outstanding 9,823 8,870 9,820 8,435
 
Pro forma (C corporation basis):
Pro forma tax expense N/A $ 404 N/A $ 488
Pro forma net income N/A $ 719 N/A $ 867
 
Pro forma earnings per share:
Basic net income per share N/A $ 0.08 N/A $ 0.10
Diluted net income per share N/A $ 0.08 N/A $ 0.10
 
 
ASV Holdings, Inc.
Balance Sheets
(In thousands, except par value)
 
   

    June 30,    

    December 31,
2018 2017
Unaudited
ASSETS
CURRENT ASSETS
Cash $ 4 $ 3
Trade receivables, net 15,076 18,276
Receivables from affiliates 28 76
Inventory, net 30,698 26,691
Prepaid income tax 913 896
Prepaid expenses and other   660   591
Total current assets 47,379 46,533
 
NON-CURRENT ASSETS
Property, plant and equipment, net 13,250 13,797
Intangible assets, net 22,004 23,277
Goodwill 30,579 30,579
Other long-term assets 274 311
Deferred tax asset   624   624
Total assets $ 114,110 $ 115,121
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Notes payable – current portion $ 2,012 $ 2,000
Trade accounts payable 15,084 15,174
Payables to affiliates 784 1,063
Accrued compensation and benefits 1,315 1,483
Accrued warranties 1,654 1,869
Accrued product liability- short term 321 778
Accrued other   896   1,039
Total current liabilities 22,066 23,406
 
NON-CURRENT LIABILITIES
Revolving loan facility 13,231 12,511
Notes payable – long term, net 12,105 12,664
Other long-term liabilities   704   739
Total liabilities 48,106 49,320
 
STOCKHOLDERS’ EQUITY
Preferred stock, $0.001 par value, 5,000 authorized, none outstanding at June 30, 2018 and December 31, 2017, respectively
Common stock, $0.001 par value, 50,000 authorized, 9,834 and 9,806 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively 10 10
Additional paid-in capital 65,625 65,434
Retained earnings   369   357
Total Stockholders’ Equity   66,004   65,801
 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 114,110 $ 115,121
 
 
ASV Holdings, Inc.
Statements of Cash Flows
(In thousands)
 
    For the Six Months Ended June 30,
2018     2017
Unaudited Unaudited
OPERATING ACTIVITIES
Net income $ 12 $ 1,984

Adjustments to reconcile to net income to net cash provided by operating activities:

Depreciation 1,129 1,161
Amortization 1,273 1,273
Share-based compensation 251 135
Deferred income tax (benefit) (926 )
Loss on sale of fixed assets 1 46
Amortization of deferred finance cost 71 112
Loss on debt extinguishment 83
Bad debt expense 23 1
Changes in operating assets and liabilities
Trade receivables 3,177 (4,197 )
Net trade receivables/payables from affiliates (231 ) 527
Inventory (4,089 ) 6,008
Prepaid income tax (17 )
Prepaid expenses (69 ) (287 )
Trade accounts payable (90 ) 891
Accrued expenses (967 ) (1,431 )
Tax payable 297
Other long-term liabilities   (40 )   271  
 
Net cash provided by operating activities   434     5,948  
 
INVESTING ACTIVITIES
Decrease in restricted cash 535
Purchase of property and equipment   (501 )   (182 )
 
Net cash (used in) provided by investing activities   (501 )   353  
 
FINANCING ACTIVITIES
Principal payments on long-term debt (1,001 ) (1,288 )
Proceeds from long-term note 425
Debt issuance costs incurred (9 )
Proceeds from issuance of common stock, net of offering costs 10,405
Net payments on debt (10,405 )
Shares repurchased for income tax withholding on share-based compensation (76 )
Net borrowings (payments) on revolving credit facilities   720     (5,571 )
 
Net cash provided by (used in) financing activities   68     (6,868 )
 
NET CHANGE IN CASH   1     (567 )
 
Cash at beginning of period   3     572  
 
Cash at end of period $ 4   $ 5  
 

Supplemental Information

Cautionary Statement Regarding Non-GAAP Measures

This release contains references to “EBITDA” and “Adjusted EBITDA.” EBITDA is defined for the purposes of this release as net income or loss before interest, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA plus stock-based compensation, less the gain or loss related to non-recurring events. Management believes that EBITDA and Adjusted EBITDA are useful supplemental measures of our operating performance and provide meaningful measures of overall corporate performance exclusive of our capital structure and the method and timing of expenditures associated with building and placing our products. EBITDA is also presented because management believes that it is frequently used by investment analysts, investors and other interested parties as a measure of financial performance. Adjusted EBITDA is also presented because management believes that it provides a measure of our recurring core business.

However, EBITDA and Adjusted EBITDA are not recognized earnings measures under generally accepted accounting principles of the United States (“U.S. GAAP”) and do not have a standardized meaning prescribed by U.S. GAAP. Therefore, EBITDA and Adjusted EBITDA may not be comparable to similar measures presented by other issuers. Investors are cautioned that EBITDA and Adjusted EBITDA should not be construed as alternatives to net income or loss or other income statement data (which are determined in accordance with U.S. GAAP) as an indicator of our performance or as a measure of liquidity and cash flows. Management’s method of calculating EBITDA and Adjusted EBITDA may differ materially from the method used by other companies and accordingly, may not be comparable to similarly titled measures used by other companies.

 
Reconciliation of EBITDA to Adjusted EBITDA (in millions except percentages)
 
    For the Quarter Ended June 30,
2018     2017
Net income $0.3 $1.8
 
Interest expense 0.5 0.9
 
Tax 0.1 (0.6)
 
Depreciation & amortization 1.2 1.2
EBITDA (1) $2.1 $3.3
% of Sales 6.6% 9.6%
 
EBITDA $2.1 $3.3
 
Stock compensation and transaction related compensation costs (2) 0.1 0.1
Adjusted EBITDA (3) $2.2 $3.4
Adjusted EBITDA as % of net revenues 6.9% 8.5%
Pro-forma adjustment for public company costs** (0.2)
Pro-forma Adjusted EBITDA (4) $2.2 $3.2
% of Sales 6.9% 9.4%
 
**   The Company converted to a C corporation in May 2017, so the three months ended June 30, 2017 include a pro forma adjustment for approximately $0.2 million of public company costs not included in EBITDA relating to the period April 1, 2017 to May 17, 2017.
 
(1) EBITDA is defined as income or loss before interest, income taxes, depreciation and amortization. EBITDA is not a recognized measure under U.S. GAAP and does not have a standardized meaning prescribed by U.S. GAAP. Therefore, EBITDA may not be comparable to similar measures presented by other companies. The table above reconciles net income to EBITDA. See “—Cautionary Statements Regarding Non-GAAP Measures” for further information regarding EBITDA.
 
(2) Stock compensation and IPO transaction related compensation costs.
 
(3) Adjusted EBITDA is defined as EBITDA less the gain or loss related to non-recurring events. Adjusted EBITDA is not a recognized measure under U.S. GAAP and does not have a standardized meaning prescribed by U.S. GAAP. Therefore, Adjusted EBITDA may not be comparable to similar measures presented by other companies. The table above reconciles EBITDA to Adjusted EBITDA. See “—Cautionary Statements Regarding Non-GAAP Measures” for further information regarding EBITDA.
 
(4)

2017 Pro Forma Adjusted EBITDA is defined as Adjusted EBITDA less public company costs.

 
 
Reconciliation of GAAP Net Income to Adjusted Pro Forma Net Income (in millions except shares and EPS)
   
For the Quarter Ended June 30,
2018     2017
Net income as reported $0.3 $1.8
 
Tax benefit from conversion to C corporation (1) (0.9 )
 
Debt issuance cost written off on debt repayment from IPO proceeds net of tax 0.1
Pro-forma adjustment for public company costs net of tax at 26.41% (2) (0.2 )
Adjusted pro forma net income $0.3 $0.8  
 
Weighted average diluted shares outstanding 9,823,000 8,870,000
Basic and Diluted (loss) earnings per share as reported $0.03 $0.20
Total EPS Effect $0.00 ($0.12 )
Adjusted (pro forma) earnings (loss) per share $0.03 $0.08
 
(1)  

The tax benefit was generated from a tax credit of $0.9 million arising from the establishment of a deferred tax asset on conversion of the Company from a Minnesota limited liability company to a Delaware corporation immediately prior to the IPO in May 2017.

(2) Pro forma adjustments for public company costs: The Company converted from a LLC to a corporation on May 11, 2017. The pro forma adjustment reflects the run rate of actual public company costs incurred in 2017 as if the company had been a corporation for the whole of the period April 1, 2017 to June 30, 2017.
 

Net working capital as a % of annualized last quarter’s sales is the sum of accounts receivable and inventory less accounts payable divided by the last quarter’s sales annualized (x4).

             
      June 30, 2018     December 31, 2017
Accounts receivable     15,104     18,352
Inventory     30,698     26,691
Accounts payable     (15,868)     (16,237)
Net working capital    

$29,934

   

$28,806

Last quarters annualized sales (LQS)     127,440     121,820
Net working capital % of LQS    

23.5%

   

23.6%

       

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Top Contenders in the Gaming Industry | Technavio

LONDON–()–Increased globalization resulting in converged platforms and business models across different regions has led to the phenomenal growth of the gaming industry. Technavio’s latest article brings you up to speed on all the developments in the world of eSports.

Looking for more insights into the gaming industry? Read Technavio’s latest report on the global gaming market

Technavio’s research steers you through the business aspects of the battle royale genre, which is the current favorite among gamers. It also provides key insights with respect to the popularity of games such as PlayerUnknown’s Battlegrounds (PUBG) and Fortnite Battle Royale to establish a benchmark, which can be used to explore new opportunities in the gaming market.

To understand factors contributing to the immense growth of the eSports market read: Battle Royale Games Top the Gaming Industry Leaderboard

About Technavio

Technavio is a leading global technology research and advisory company. Their research and analysis focuses on emerging market trends and provides actionable insights to help businesses identify market opportunities and develop effective strategies to optimize their market positions.

With over 500 specialized analysts, Technavio’s report library consists of more than 10,000 reports and counting, covering 800 technologies, spanning across 50 countries. Their client base consists of enterprises of all sizes, including more than 100 Fortune 500 companies. This growing client base relies on Technavio’s comprehensive coverage, extensive research, and actionable market insights to identify opportunities in existing and potential markets and assess their competitive positions within changing market scenarios.

If you are interested in more information, please contact our media team at media@technavio.com.

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OvaScience Reports Second Quarter 2018 Financial Results and Provides Strategic Alternatives Update

WALTHAM, Mass.–()–OvaScienceSM (Nasdaq:OVAS), a company focused on developing novel treatments for women and couples struggling with infertility, today reported financial results for the second quarter ended June 30, 2018 and provided an update on its review of strategic alternatives.

Earlier today we announced a definitive agreement to merge with Millendo Therapeutics, marking the completion of an extensive exploration of strategic alternatives,” said Christopher Kroeger, M.D., Chief Executive Officer of OvaScience. “As a leading orphan endocrine disease company with expert management, the proven ability to progress multiple novel therapies into late-stage development and meaningful catalysts expected across its pipeline in the year ahead, we believe that our combined company has the potential to deliver significant shareholder value, both in the near- and longer-term.”

We are pleased to enter into this merger agreement with OvaScience, which will enable us to execute on our vision of delivering meaningful therapies to patients who are suffering from orphan endocrine diseases,” said Julia Owens, Ph.D., President and Chief Executive Officer of Millendo. “Post-merger, our combined company will be well-funded, with sufficient capital to support the further advancement of our lead assets, livoletide for Prader-Willi syndrome and nevanimibe for classic congenital adrenal hyperplasia and endogenous Cushing’s syndrome.”

About the Proposed Transaction

In August 2018, OvaScience entered into a definitive agreement to merge with Millendo Therapeutics, Inc. Upon closing of the transaction, the combined company will focus on advancing Millendo’s pipeline of distinct and transformative treatments for orphan endocrine diseases.

The combined company’s pipeline will include two clinically-validated molecules with differentiated mechanisms: livoletide (AZP-531), an unacylated ghrelin analogue for the treatment of Prader-Willi syndrome and nevanimibe (ATR-101), an ACAT1 inhibitor for the treatment of classic congenital adrenal hyperplasia and endogenous Cushing’s syndrome. Livoletide demonstrated positive effects in improving hyperphagia and food-seeking behaviors in a Phase 2 study in Prader-Willi syndrome and is expected to advance into a pivotal Phase 2b/3 study in the first quarter of 2019. Nevanimibe demonstrated positive proof-of-concept and a favorable safety profile in an open-label Phase 2 trial in CAH and is expected to advance into a Phase 2b study in the third quarter of 2018.

An investor syndicate that includes New Enterprise Associates, Frazier Healthcare Partners, Roche Venture Fund, Innobio managed by Bpifrance, Osage University Partners, Altitude Life Science Ventures, Adams Street Partners, and Longwood Fund has committed to invest $30 million in the combined company. This financing is expected to close before or concurrently with the completion of the merger. The total cash balance of the combined company following the closing of the merger and the financing is expected to be at least $70 million.

On a pro forma basis and based upon the number of shares of OvaScience common stock to be issued in the merger, current OvaScience shareholders will own approximately 20% of the combined company and current Millendo investors will own approximately 80% of the combined company (before accounting for the additional financing transaction). The actual allocation will be subject to adjustment based on OvaScience’s net cash balance at the time of closing and the amount of any additional financing consummated by Millendo at or before the closing of the merger. The merger is expected to close in the fourth quarter of 2018, subject to the approval of OvaScience shareholders at a special shareholder meeting, as well as other customary conditions.

Upon shareholder approval, the combined company is expected to operate under the name Millendo Therapeutics and trade on the Nasdaq Capital Market under the ticker symbol MLND. Julia Owens, Ph.D., Millendo Chief Executive Officer and President, will serve as Chief Executive Officer of the combined company, which will be headquartered in Ann Arbor, Michigan.

Second Quarter 2018 Financial Results

  • Research and development expenses for the quarter ended June 30, 2018, excluding restructuring costs, were $2.4 million, compared to $5.0 million for the same period in 2017. This decrease was primarily driven by a $1.9 million decrease in employee-related costs, including stock based compensation expense, and a $0.7 million decrease in facilities, travel and other costs as a result of OvaScience’s corporate restructuring activities.
  • Selling, general and administrative expenses for the quarter ended June 30, 2018, excluding restructuring costs, were $2.6 million, compared to $10.8 million for the same period in 2017. This decrease was primarily driven by a $5.0 million decrease in employee-related costs, including stock based compensation expense, a $2.6 million decrease in commercial-related activities and a $0.5 million decrease in travel, facilities and other costs as a result of OvaScience’s corporate restructuring activities.
  • Restructuring expenses for the quarter ended June 30, 2018 were $2.9 million, compared to $2.0 million for the same period in 2017. The cash outlays related to the restructurings in the second quarter of 2018 were $0.6 million. OvaScience expects to incur additional cash outlays related to the restructurings of between $0.5 million and $1.0 million during 2018.
  • Net loss for the quarter ended June 30, 2018 was $7.7 million, or $0.22 per share, compared to a net loss of $18.2 million, or $0.51 per share, for the same period in 2017. The net loss for the quarter ended June 30, 2018 includes restructuring charges of $2.9 million, compared to $2.0 million for the same period in 2017. $2.2 million of restructuring charges in the current quarter related to non-cash impairments of fixed assets.

As of June 30, 2018, OvaScience had cash, cash equivalents and short-term investments of $53.6 million, compared to $67.2 million as of December 31, 2017. Gross cash burn in the second quarter of 2018 was $4.7 million.

About OvaScience, Inc.

OvaScience (Nasdaq:OVAS) is focused on developing novel treatment options for women and couples struggling with infertility. These treatments are based on a proprietary technology platform that leverages the breakthrough discovery of egg precursor cells – immature egg cells found within the outer ovarian cortex. In March 2018, the Company announced preliminary blinded data for its Phase 1 trial of OvaPrime for women with primary ovarian insufficiency and poor ovarian response. This trial was not expected to result in strong signals on secondary endpoints. The Company has since completed additional preclinical studies and based on results from these studies, has scaled back investment in its research and development efforts to focus on evaluating strategic alternatives. For more information, please visit www.ovascience.com.

About Millendo Therapeutics, Inc.

Millendo Therapeutics is focused on developing novel treatments for orphan endocrine diseases. The Company’s objective is to build a leading endocrine company that creates distinct and transformative treatments for a wide range of diseases where there is a significant unmet medical need. The Company is currently advancing livoletide for the treatment of Prader-Willi syndrome and nevanimibe for the treatment of classic congenital adrenal hyperplasia and endogenous Cushing’s syndrome. For more information, please visit www.millendo.com.

Forward-Looking Statements

This press release includes forward-looking statements about the Company’s plans for its business, including statements relating to (i) the Company’s anticipated merger with Millendo Therapeutics, including the timing for completion of that transaction, the need for stockholder approval and the satisfaction of closing conditions, (ii) the anticipated financing to be completed prior to or concurrently with the closing of the merger, (iii) the cash balances of the combined company following the closing of the merger and the financing (iv) the percentage of the Company expected to be owned by OvaScience shareholders after the closing; (v) the ability of the combined company to achieve multiple catalysts across its drug development pipeline following the merger, and (vi) expected restructuring-related cash outlays, including the timing and amount of those outlays. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including risks related to: our ability to obtain regulatory approval or licenses where necessary for our product candidates; our ability to develop our product candidates on the timelines we expect, if at all; our ability to commercialize our product candidates, on the timelines we expect, if at all; risks associated with preclinical, clinical and other studies; development risk; risks associated with dependence on third parties, including our partners; operational risks; the success of our cash conservation efforts; the size of the financing expected to be closed in connection with the merger with Millendo Therapeutics; our ability to remain listed on the Nasdaq Capital Market; risks associated with the completion of the merger; as well as those risks more fully discussed in the “Risk Factors” section of our most recently filed Quarterly Report on Form 10-Q and/or Annual Report on Form 10-K. The forward-looking statements contained in this press release reflect our current views with respect to future events. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements in the future, we specifically disclaim any obligation to do so. These forward-looking statements should not be relied upon as representing our view as of any date subsequent to the date hereof.

No Offer or Solicitation:

This communication shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No public offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

Important Additional Information Will be Filed with the SEC

In connection with the proposed transaction between OvaScience and Millendo, OvaScience intends to file relevant materials with the SEC, including a registration statement that will contain a proxy statement and prospectus. OVASCIENCE URGES INVESTORS AND STOCKHOLDERS TO READ THESE MATERIALS CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT OVASCIENCE, THE PROPOSED TRANSACTION AND RELATED MATTERS. Investors and shareholders will be able to obtain free copies of the proxy statement, prospectus and other documents filed by OvaScience with the SEC (when they become available) through the website maintained by the SEC at www.sec.gov. In addition, investors and shareholders will be able to obtain free copies of the proxy statement, prospectus and other documents filed by OvaScience with the SEC by contacting Investor Relations by mail at OvaScience, Inc., Attn: Investor Relations, 9 Fourth Avenue, Waltham, Massachusetts 02451. Investors and stockholders are urged to read the proxy statement, prospectus and the other relevant materials when they become available before making any voting or investment decision with respect to the proposed transaction.

Participants in the Solicitation

OvaScience and Millendo, and each of their respective directors and executive officers and certain of their other members of management and employees, may be deemed to be participants in the solicitation of proxies in connection with the proposed transaction. Information about OvaScience’s directors and executive officers is included in OvaScience’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 15, 2018, and the proxy statement for OvaScience’s 2018 annual meeting of stockholders, filed with the SEC on April 30, 2018. Additional information regarding these persons and their interests in the transaction will be included in the proxy statement relating to the transaction when it is filed with the SEC. These documents can be obtained free of charge from the sources indicated above.

 
OvaScience, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
  As of

June 30,
2018

 

December 31,
2017

Assets
Current assets:
Cash and cash equivalents $ 24,601 $ 15,703
Short-term investments 29,027 51,500
Prepaid expenses and other current assets   547   1,578
Total current assets 54,175 68,781
Property and equipment, net 403 3,113
Investment in joint venture 142 146
Restricted cash 789 789
Other long-term assets   24   24
Total assets $ 55,533 $ 72,853
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 757 $ 2,242
Accrued expenses and other current liabilities   3,990   5,562
Total current liabilities 4,747 7,804
Other non-current liabilities   576   751
Total liabilities   5,323   8,555
Total stockholders’ equity   50,210   64,298
Total liabilities and stockholders’ equity $ 55,533 $ 72,853
 
 
OvaScience, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)
       
Three Months Ended
June 30,
Six Months Ended
June 30,
2018 2017 2018 2017
 
Revenues $ 81 $ 84 $ 148 $ 147
Costs and expenses:
Cost of revenues 54 274 166 543
Research and development 2,394 4,997 5,015 10,761
Selling, general and administrative 2,645 10,751 6,869 17,880
Restructuring charge   2,892     1,992     3,584     3,480  
Total costs and expenses   7,985     18,014     15,634     32,664  
Loss from operations (7,904 ) (17,930 ) (15,486 ) (32,517 )
Interest income, net 224 186 415 368
Other income/(expense), net (19 ) 25 2 (35 )

Loss from equity method
investment

  (4 )   (454 )   (3 )   (875 )
Loss before income taxes $ (7,703 ) $ (18,173 ) $ (15,072 ) (33,059 )
Income tax expense   0     13     0     22  
Net loss   (7,703 )   (18,186 )   (15,072 )   (33,081 )

Net loss per share—basic and
diluted

$ (0.22 ) $ (0.51 ) $ (0.42 ) $ (0.93 )

Weighted average number of
shares used in net loss per share—
basic and diluted

  35,760     35,664     35,743     35,653  
 

###

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Endologix Reports Second Quarter 2018 Financial Results

IRVINE, Calif.–()–Endologix, Inc. (NASDAQ:ELGX), a developer and marketer of innovative treatments for aortic disorders, today announced financial results for the second quarter ended June 30, 2018.

The Company reported global revenue of $44.7 million in the second quarter of 2018, a decrease of 7.9% from $48.6 million in the second quarter of 2017, as strong growth in AFX® sales in Japan and Ovation® sales in the U.S. were offset by lower U.S. sales of AFX®, and softness in the Latin American market. Gross profit of $29.6 million in the second quarter represented gross margin of 66.2%. Adjusted EBITDA (non-GAAP, defined below) loss totaled $9.3 million for the second quarter of 2018.

John Onopchenko, Chief Executive Officer of Endologix, Inc., commented, “Our second quarter results were in line with our expectations with solid growth from Ovation in the U.S. and AFX® in Japan, offset by slower sales of AFX® in the U.S. market and Nellix® in Europe. Looking at the remainder of this year and beyond, we are taking meaningful and necessary steps to reset our operational, clinical, and financial priorities in order to position the Company for long-term success. Collectively, these initiatives would improve our competitiveness and lower our cost-to-serve. Our key strategic initiatives include strengthening the Company’s leadership team, creating a culture of accountability, focused product and clinical development, rightsizing and investing in customer and market intelligence within our commercial organization, and exiting a number of small international markets.”

“We firmly believe that Endologix has a well differentiated product portfolio delivering superior clinical outcomes, as evidenced by a growing body of clinical data related to our Nellix® and Ovation® products, and we are excited about the opportunities that lie ahead for our pipeline products, including Alto® and ChEVAS,” continued Mr. Onopchenko. “Looking forward, we will continue to build a culture of accountability while using this reset to strengthen our foundation and position the Company for profitable growth.”

Financial Results

Global revenue in the second quarter of 2018 was $44.7 million, a 7.9% decrease from $48.6 million in the second quarter of 2017. U.S. revenue in the second quarter of 2018 was $30.0 million, a 6.0% decrease from U.S. revenue of $31.9 million in the second quarter of 2017. International revenue was $14.8 million, an 11.4% decrease from International revenue of $16.7 million in the second quarter of 2017. On a constant currency basis, second quarter 2018 International revenue decreased 14.1% over the second quarter of 2017.

Gross profit was $29.6 million in the second quarter of 2018, which represents a gross margin of 66.2%. This compares to a gross profit of $32.2 million, or a gross margin of 66.4%, in the second quarter of 2017.

Total operating expenses increased 12.4% to $45.1 million in the second quarter of 2018, compared to $40.1 million in the second quarter of 2017, driven by an increase in general and administrative expenses related primarily to the CEO transition and increased legal expense related to the financing and ongoing litigation.

Net loss for the second quarter of 2018 was $23.9 million, or $(0.28) per share, compared to a net loss of $16.3 million, or $(0.20) per share, a year ago. Adjusted Net Loss (non-GAAP, defined below) totaled $15.6 million, compared to an Adjusted Net Loss of $8.0 million for the second quarter of 2017. Adjusted EBITDA (non-GAAP, defined below) loss totaled $9.3 million for the second quarter of 2018, compared to Adjusted EBITDA loss of $2.3 million for the second quarter of 2017.

Total cash, cash equivalents, and restricted cash were $37.6 million as of June 30, 2018.

Financial Guidance

After a critical evaluation of the market, as well as the current business and related trends, the Company is making significant changes to its strategy, and, as a result, is reducing its previously issued revenue guidance. The Company now anticipates 2018 revenue in the range of $145 million to $155 million, compared to the previous range of $170 million to $180 million. The Company now expects 2018 GAAP loss per share in the range of $(1.04) to $(1.12), compared to the previous range of $(0.89) to $(0.95). These loss per share numbers contemplate the impact of restructuring, but exclude the impact of any financing related accounting adjustments.

Investor Event

The Company’s management will host an investor briefing on October 2, 2018 in New York City after the close of market. Full details will be posted to the “Investors” section of the Company’s website at www.endologix.com in the near future.

Conference Call Information

Endologix’s management will host a conference call today at 4:30 p.m. ET (1:30 p.m. PT) to discuss its second quarter 2018 results.

To participate in the conference call, dial 877-407-9716 (domestic) or 201-493-6779 (international) and refer to the passcode 13681567.

This conference call will also be webcast and can be accessed from the “Investors” section of the Company’s website at www.endologix.com. The webcast replay of the call will be available at the same site approximately one hour after the end of the call.

A recording of the call will also be available from 7:30 p.m. ET (4:30 p.m. PT) on Thursday, August 9, 2018, until 11:59 p.m. ET (8:59 p.m. PT) on Thursday, August 16, 2018. To hear this recording, dial 844-512-2921 (domestic) or 412-317-6671 (international) and enter the passcode 13681567.

About Endologix, Inc.

Endologix, Inc. develops and manufactures minimally invasive treatments for aortic disorders. The Company’s focus is endovascular stent grafts for the treatment of abdominal aortic aneurysms (AAA). AAA is a weakening of the wall of the aorta, the largest artery in the body, resulting in a balloon-like enlargement. Once an AAA develops, it continues to enlarge and, if left untreated, becomes increasingly susceptible to rupture. The overall patient mortality rate for ruptured AAA is approximately 80%, making it a leading cause of death in the U.S. For more information, visit www.endologix.com.

The Nellix® EndoVascular Aneurysm Sealing System has obtained CE Mark in the EU and is only approved as an investigational device in the United States. The Ovation Alto® System is only approved as an investigational device and is not currently approved in any market.

Cautions Regarding Forward-Looking Statements

Except for historical information contained herein, this press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by the use of words such as “anticipate,” “expect,” “could,” “may,” “will,” “believe,” “estimate,” “forecast,” “goal,” “project,” “continue,” “outlook,” “guidance,” “future,” other words of similar meaning and the use of future dates. Forward-looking statements used in this press release relate to Endologix’s steps to reset its operational, clinical, and financial priorities to position it for long-term success, including anticipated improvement in competitiveness and reduced cost-to-serve; key strategic initiatives include strengthening Endologix’s leadership team, focusing product and clinical development, rightsizing and investing in customer and market intelligence, and exiting a number of small international markets; positioning of Endologix’s business for cash flow breakeven in 2020; prospects for Endologix’s pipeline products, including Ovation Alto and ChEVAS; positioning Endologix for profitable growth; Endologix’s reduced 2018 revenue guidance and its anticipated 2018 GAAP loss per share; and the anticipated Investor Event, the accuracy of which are necessarily subject to risks and uncertainties that may cause Endologix’s actual results to differ materially and adversely from the statements contained herein. Some of the potential risks and uncertainties that could cause actual results to differ materially and adversely from anticipated results include, continued market acceptance, endorsement and use of Endologix’s products, the success of clinical trials relating to Endologix’s products, product research and development efforts, uncertainty in the process of obtaining and maintaining regulatory approval for Endologix’s products, Endologix’s ability to protect its intellectual property rights and proprietary technologies, and other economic, business, competitive and regulatory factors. The forward-looking statements contained in this press release speak only as of the date of this press release. Endologix undertakes no obligation to update any forward- looking statements contained in this press release to reflect new information, events or circumstances after the date they are made, or to reflect the occurrence of unanticipated events. Please refer to Endologix’s filings with the Securities and Exchange Commission including its Annual Report on Form 10-K for the year ended December 31, 2017, and its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2018 and June 30, 2018 (once it is filed) for more detailed information regarding these risks and uncertainties and other factors that may cause actual results to differ materially from those expressed or implied.

Discussion of Non-GAAP Financial Measures

Endologix’s management believes that the non-GAAP measures of (1) “Adjusted Net Income (Loss)” and (2) “Adjusted EBITDA” enhance an investor’s overall understanding of Endologix’s financial and operating performance and its future prospects by (i) being more reflective of core operating performance and (ii) being more comparable with financial results over various periods. Endologix’s management uses these financial measures for strategic decision making, forecasting future financial results, and evaluating current period financial and operating performance. The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

“GAAP” is generally accepted accounting principles in the United States.

Adjusted Net Income (Loss) Definition:

(1) “Adjusted Net Income (Loss)” is a non-GAAP measure defined by Endologix as net income (loss) under GAAP, excluding (to the extent relevant in a particular reporting period): (i) the fair value adjustment to the Nellix® acquisition contingent consideration liability; (ii) interest expense; (iii) foreign currency (gains) or losses; (iv) legal settlement costs; (v) contract termination and business acquisition expenses; (vi) business development expenses, including licensing costs related to research and development activities; (vii) restructuring and other transition costs; (viii) fair value adjustment of derivative liabilities; (ix) inventory step-up amortization; and (x) loss on extinguishment of debt. Endologix intends to calculate “Adjusted Net Income (Loss)” in a consistent manner from period to period.

In the three and six months ended June 30, 2018 and 2017, this GAAP adjustment to net loss specifically represents: (i) the fair value adjustment to Nellix® contingent consideration liability; (ii) interest expense; (iii) foreign currency (gains) or losses; (iv) restructuring and other transition costs; and (v) loss on extinguishment of debt.

Adjusted EBITDA Definition:

(2) “Adjusted EBITDA” is a non-GAAP measure defined by Endologix as “Adjusted Net Income (Loss)” excluding income tax (benefit) expense, depreciation and amortization expense, and stock-based compensation expense.

       

ENDOLOGIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

(In thousands, except per share amounts)

 
Three Months Ended Six Months Ended
June 30, June 30,
2018     2017 2018     2017
Revenue
U.S. $ 29,986 $ 31,906 $ 59,361 $ 62,795
International 14,754   16,650   27,663   28,373  
Total Revenue 44,740   48,556   87,024   91,168  
Cost of goods sold 15,136   16,332   29,094   30,302  
Gross profit $ 29,604   $ 32,224   $ 57,930   $ 60,866  
Operating expenses:
Research and development 6,244 5,734 11,743 11,264
Clinical and regulatory affairs 3,728 2,740 7,299 6,575
Marketing and sales 21,116 23,781 42,841 49,681
General and administrative 14,022 7,904 24,391 16,777
Restructuring costs   (29 ) 233   137  
Total operating expenses 45,110   40,130   86,507   84,434  
Loss from operations (15,506 ) (7,906 ) (28,577 ) (23,568 )
Other income (expense) (6,544 ) (5,552 ) (11,985 ) (9,850 )
Change in fair value of contingent consideration related to acquisition (1,800 ) 3,800 (700 ) 2,600
Loss on debt extinguishment   (6,512 ) (2,270 ) (6,512 )
Total other income (expense) (8,344 ) (8,264 ) (14,955 ) (13,762 )
Net loss before income tax expense $ (23,850 ) $ (16,170 ) $ (43,532 ) $ (37,330 )
Income tax expense (26 ) (122 ) (111 ) (276 )
Net loss $ (23,876 ) $ (16,292 ) $ (43,643 ) $ (37,606 )
Other comprehensive income (loss) foreign currency translation (552 ) 781   (679 ) 1,137  
Comprehensive loss $ (24,428 ) $ (15,511 ) $ (44,322 ) $ (36,469 )
 
Basic and diluted net loss per share $ (0.28 ) $ (0.20 ) $ (0.52 ) $ (0.45 )
Shares used in computing basic and diluted net loss per share 84,462   83,247 84,112   83,087
 
               
Non-GAAP Reconciliations:
 
Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
Net Loss to Adjusted Net Loss:
Net loss $ (23,876 ) $ (16,292 ) $ (43,643 ) $ (37,606 )
Fair value adjustment to Nellix contingent consideration liability 1,800 (3,800 ) 700 (2,600 )
Interest expense 5,863 5,803 11,670 10,098
Foreign currency (gain) loss 656 (210 ) 331 (206 )
Restructuring and other transition costs (15 ) 233 532
Loss on extinguishment of debt   6,512   2,270   6,512  
(1) Adjusted Net Loss $ (15,557 ) $ (8,002 ) $ (28,439 ) $ (23,270 )
 
Adjusted Net Loss to Adjusted EBITDA:
Adjusted Net Loss $ (15,557 ) $ (8,002 ) $ (28,439 ) $ (23,270 )
Income tax expense 26 122 111 276
Depreciation and amortization expense 1,939 2,336 3,931 4,649
Stock-based compensation expense 4,265   3,234   7,286   6,188  
(2) Adjusted EBITDA $ (9,327 ) $ (2,310 ) $ (17,111 ) $ (12,157 )
 
       

ENDOLOGIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

(In thousands)

 
June 30, December 31,
2018 2017
ASSETS
Current assets:
Cash and cash equivalents $ 35,629 $ 57,991
Restricted cash 2,010 2,608
Accounts receivable, net allowance for doubtful accounts of $623 and $470, respectively. 32,431 32,294
Other receivables 481 418
Inventories 42,800 45,153
Prepaid expenses and other current assets 2,582   4,670  
Total current assets 115,933   143,134  
Property and equipment, net 17,703 19,212
Goodwill 120,883 120,927
Intangibles, net 78,398 80,403
Deposits and other assets 821   1,371  
Total assets $ 333,738   $ 365,047  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 13,184 $ 12,351
Accrued payroll 13,479 15,054
Accrued expenses and other current liabilities 16,461 16,002
Current portion of debt 17,752 17,202
Revolving line of credit   21  
Total current liabilities 60,876   60,630  
Deferred income taxes 201 201
Deferred rent 7,792 7,724
Other liabilities 2,284 3,877
Contingently issuable common stock 10,000 9,300
Debt 212,959   208,253  
Total liabilities 294,112   289,985  
Commitments and contingencies
Stockholders’ equity:
Convertible preferred stock, $0.001 par value; 5,000,000 shares authorized. No shares issued and outstanding.
Common stock, $0.001 par value; 170,000,000 and 135,000,000 shares authorized, respectively. 85,132,810 and 83,855,824 shares issued, respectively. 84,707,225 and 83,643,585 shares outstanding, respectively. 85 84
Treasury stock, at cost, 425,585 and 212,239 shares, respectively. (3,705 ) (2,942 )
Additional paid-in capital 604,234 594,586
Accumulated deficit (563,644 ) (520,001 )
Accumulated other comprehensive income 2,656   3,335  
Total stockholders’ equity 39,626   75,062  
Total liabilities and stockholders’ equity $ 333,738   $ 365,047  
 

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Aurinia Reports Second Quarter Financial Results and Operational Highlights

VICTORIA, British Columbia–()–Aurinia Pharmaceuticals Inc. (NASDAQ:AUPH / TSX:AUP) (“Aurinia” or the “Company”) has released its financial results for the second quarter ended June 30, 2018. Amounts, unless specified otherwise, are expressed in U.S. dollars.

“We are excited to announce that the AURORA Phase III trial in lupus nephritis is running ahead of schedule and we now anticipate completing enrollment in early Q4 2018. We are extremely pleased with the trial’s progress thus far and having patients roll over into the AURORA 2 extension study reinforces our confidence in the program”, said Richard Glickman, Aurinia’s CEO and Chairman of the Board. “Our clinical team continues to deliver on our important milestones with the Phase II trials in FSGS and Dry Eye now initiated. We are well-capitalized into 2020 and look forward to an eventful second half of the year.”

Highlights

  • Our Phase III clinical trial (“AURORA”) to evaluate voclosporin for the treatment of lupus nephritis (“LN”), which we initiated in May of 2017, is now expected to complete enrollment in early Q4 2018. We have over 225 clinical trial sites activated and able to enroll patients in 29 countries around the globe.
  • The first patients have rolled over into the AURORA 2 blinded extension study from the AURORA Phase III clinical trial. The purpose of AURORA 2 is to assess the long-term safety and tolerability of voclosporin in patients with LN; however, this study is not a requirement for potential regulatory approval for voclosporin.
  • We initiated a Phase II proof-of-concept study in focal segmental glomerulosclerosis (“FSGS”) in June 2018. This is an open-label study of 20 treatment naïve patients. We submitted our Investigational New Drug application (“IND”) to the FDA in Q1 2018 and received agreement from the FDA with regards to the guidance we provided on this study.
  • We also initiated a Phase II head-to-head tolerability study of voclosporin ophthalmic solution (“VOS”) versus Restasis® (cyclosporine ophthalmic emulsion) 0.05% for the treatment of Dry Eye Syndrome (“DES”) in July 2018. Depending on the pace of recruitment, data could be available as early as the end of this year or early 2019. This four-week study of approximately 90 patients is expected to be completed by the end of 2018. We believe calcineurin inhibitors (“CNIs”) are a mainstay of treatment for DES, and the goal of this program is to develop a best-in-class treatment option, and upon completion, we will look to evaluate strategic alternatives for this asset.

Financial Liquidity at June 30, 2018

At June 30, 2018, we had cash, cash equivalents and short term investments of $150.2 million compared to $159.1 million at March 31, 2018 and $173.5 million at December 31, 2017. Net cash used in operating activities was $12.3 million for the second quarter ended June 30, 2018 compared to $14.0 million for the second quarter ended June 30, 2017.

We believe, based on our current plans, that we have sufficient financial resources to fund our existing LN program, including the AURORA trial and the NDA submission to the FDA, conduct the Phase II trials for FSGS and DES, and fund operations into 2020.

Financial Results for the Three and Six Months Ended June 30, 2018

We reported a consolidated net loss of $15.7 million or $0.19 per common share for the three months ended June 30, 2018, as compared to a consolidated net loss of $2.4 million or $0.03 per common share for the three months ended June 30, 2017.

The increase in the loss for the three months ended June 30, 2018 compared to the same period in 2017 was primarily due to the non-cash change in the estimated fair value of derivative warrant liabilities of $9.4 million. The three months ended June 30, 2018 reflected a $1.9 million increase in the estimated fair value of derivative warrant liabilities compared to a reduction of $7.5 million in the estimated fair value of derivative warrant liabilities for the three months ended June 30, 2017. The change in the revaluation of the derivative warrant liabilities is primarily driven by the change in our share price at each period end. An increase in our share price results in an increase in the estimated fair value of derivative warrant liabilities and vice versa. The derivative warrant liabilities will ultimately be eliminated on the exercise or forfeiture of the warrants and will not result in any cash outlay by the Company.

The net loss before the non-cash change in estimated fair value of derivative warrant liabilities was $13.8 million for the three months ended June 30, 2018 compared to $9.9 million for the same period in 2017 with the increased loss amount primarily reflecting higher research and development expenses.

For the six months ended June 30, 2018, the consolidated net loss was $31.2 million or $0.37 per common share compared to a consolidated net loss of $54.3 million or $0.78 per common share for the comparable period in 2017. For the six months ended June 30, 2018 we recorded an increase of $4.6 million in the estimated fair value of derivative warrant liabilities compared to $33.3 million for the comparable period in 2017.

The net loss before the non-cash change in estimated fair value of derivative warrant liabilities was $26.6 million for the six months ended June 30, 2018 compared to $21.1 million for the same period in 2017. The increased loss reflected higher research and development expenses.

Research and development expenses increased to $10.5 million for the three months ended June 30, 2018, compared to $7.1 million for the three months ended June 30, 2017. We incurred research and development expenses of $19.4 million for the six months ended June 30, 2018, as compared to $14.4 million for the same period in 2017. The increased research and development expenses reflected higher AURORA clinical and drug supply costs as well as startup costs for the AURORA 2 extension study, and the FSGS and DES studies.

Corporate, administration and business development expenses increased to $3.5 million for the three months ended June 30, 2018, compared to $2.9 million for the same period in 2017. We incurred corporate, administration and business development expenses of $7.3 million for the six months ended June 30, 2018 compared to $6.3 million for the comparable period in 2017. The increase was primarily due to higher non-cash stock compensation expense in 2018 compared to the same periods in 2017.

About Aurinia

Aurinia Pharmaceuticals is a clinical stage biopharmaceutical company focused on developing and commercializing therapies to treat targeted patient populations that are suffering from serious diseases with a high unmet medical need. The company is currently developing voclosporin, an investigational drug, for the potential treatment of lupus nephritis, focal segmental glomerulosclerosis, and Dry Eye Syndrome. The company is headquartered in Victoria, British Columbia and focuses its development efforts globally. For further information, see our website at www.auriniapharma.com.

About Voclosporin

Voclosporin, an investigational drug, is a novel and potentially best-in-class CNI with clinical data in over 2,400 patients across indications. Voclosporin is an immunosuppressant, with a synergistic and dual mechanism of action. By inhibiting calcineurin, voclosporin blocks IL-2 expression and T-cell mediated immune responses, and stabilizes the podocyte in the kidney. It has been shown to have a more predictable pharmacokinetic and pharmacodynamic relationship (potentially requires no therapeutic drug monitoring), an increase in potency (vs cyclosporin), and an improved metabolic profile compared to legacy CNIs. Aurinia anticipates that upon regulatory approval, patent protection for voclosporin will be extended in the United States and certain other major markets, including Europe and Japan, until at least October 2027 under the Hatch-Waxman Act and comparable laws in other countries and until April 2028 with anticipated pediatric extension.

About VOS

VOS (voclosporin ophthalmic solution) is an aqueous, preservative free nanomicellar solution containing 0.2% voclosporin intended for use in the treatment of DES. Studies have been completed in rabbit and dog models, and a single Phase I has also been completed in healthy volunteers and patients with DES. VOS has IP protection until 2031.

About Lupus Nephritis (LN)

LN in an inflammation of the kidney caused by Systemic Lupus Erythematosus (“SLE”) and represents a serious progression of SLE. SLE is a chronic, complex and often disabling disorder. The disease is highly heterogeneous, affecting a wide range of organs & tissue systems. Unlike SLE, LN has straightforward disease outcomes (measuring proteinuria) where an early response correlates with long-term outcomes. In patients with LN, renal damage results in proteinuria and/or hematuria and a decrease in renal function as evidenced by reduced estimated glomerular filtration rate (“eGFR”), and increased serum creatinine levels. LN is debilitating and costly and if poorly controlled, LN can lead to permanent and irreversible tissue damage within the kidney, resulting in end-stage renal disease (“ESRD”), thus making LN a serious and potentially life-threatening condition.

About FSGS

FSGS is a rare disease that attacks the kidney’s filtering units (glomeruli) causing serious scarring which leads to permanent kidney damage and even renal failure. FSGS is one of the leading causes of Nephrotic Syndrome (NS) and is identified by biopsy and proteinuria. NS is a collection of signs and symptoms that indicate kidney damage, including: large amounts of protein in urine; low levels of albumin and higher than normal fat and cholesterol levels in the blood, and edema. Similar to LN, early clinical response (measured by reduction of proteinuria) is thought to be critical to long-term kidney health in patients with FSGS. Currently, there are no approved therapies for FSGS in the United States and the European Union.

About Dry Eye Syndrome (DES)

Dry eye syndrome (DES) is characterized by irritation and inflammation that occurs when the eye’s tear film is compromised by reduced tear production, imbalanced tear composition, or excessive tear evaporation. The impact of DES ranges from subtle, yet constant eye irritation to significant inflammation and scarring of the eye’s surface. Discomfort and pain resulting from DES can reduce quality of life and cause difficulty reading, driving, using computers and performing daily activities. DES is a chronic disease. There are currently two FDA approved therapies for the treatment of dry eye; however, there is opportunity for improvement in the effectiveness by enhancing tolerability and onset of action and alleviating the need for repetitive dosing.

Forward-Looking Statements

Certain statements made in this press release may constitute forward-looking information within the meaning of applicable Canadian securities law and forward-looking statements within the meaning of applicable United States securities law. These forward-looking statements or information include, but are not limited to statements or information with respect to: AURORA completing enrollment in early Q4, 2018, the timing voclosporin being potentially a best-in-class CNI with robust intellectual property exclusivity; the timing of completion of the Phase II tolerability study of VOS; and that Aurinia has sufficient financial resources to fund the existing LN program, including the AURORA trial, and the NDA submission to the FDA, conduct the Phase II trials for FSGS and DES and fund operations into 2020. It is possible that such results or conclusions may change based on further analyses of these data Words such as “anticipate”, “will”, “believe”, “estimate”, “expect”, “intend”, “target”, “plan”, “goals”, “objectives”, “may” and other similar words and expressions, identify forward-looking statements. We have made numerous assumptions about the forward-looking statements and information contained herein, including among other things, assumptions about: the market value for the LN program; that another company will not create a substantial competitive product for Aurinia’s LN business without violating Aurinia’s intellectual property rights; the burn rate of Aurinia’s cash for operations; the costs and expenses associated with Aurinia’s clinical trials; the planned studies achieving positive results; Aurinia being able to extend its patents on terms acceptable to Aurinia; and the size of the LN market. Even though the management of Aurinia believes that the assumptions made, and the expectations represented by such statements or information are reasonable, there can be no assurance that the forward-looking information will prove to be accurate.

Forward-looking information by their nature are based on assumptions and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Aurinia to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information. Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in forward-looking statements or information. Such risks, uncertainties and other factors include, among others, the following: difficulties, delays, or failures we may experience in the conduct of our AURORA clinical trial; difficulties we may experience in completing the development and commercialization of voclosporin; the market for the LN business may not be as estimated; Aurinia may have to pay unanticipated expenses; estimated costs for clinical trials may be underestimated, resulting in Aurinia having to make additional expenditures to achieve its current goals; Aurinia not being able to extend its patent portfolio for voclosporin; and competitors may arise with similar products. Although we have attempted to identify factors that would cause actual actions, events or results to differ materially from those described in forward-looking statements and information, there may be other factors that cause actual results, performances, achievements or events to not be as anticipated, estimated or intended. Also, many of the factors are beyond our control. There can be no assurance that forward-looking statements or information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, you should not place undue reliance on forward-looking statements or information.

Except as required by law, Aurinia will not update forward-looking information. All forward-looking information contained in this press release is qualified by this cautionary statement. Additional information related to Aurinia, including a detailed list of the risks and uncertainties affecting Aurinia and its business can be found in Aurinia’s most recent Annual Information Form available by accessing the Canadian Securities Administrators’ System for Electronic Document Analysis and Retrieval (SEDAR) website at www.sedar.com or the U.S. Securities and Exchange Commission’s Electronic Document Gathering and Retrieval System (EDGAR) website at www.sec.gov/edgar.

We seek Safe Harbor.

 

Aurinia Pharmaceuticals Inc.
Interim Condensed Consolidated Statements of Financial Position
(unaudited – amounts in thousands of U.S. dollars)

 
   

June 30,
2018
$

 

December 31,
2017
$

Assets
Cash and cash equivalents 132,302 165,629
Short term investments 17,899 7,833
Other current assets 3,598   1,790
Total current assets 153,799 175,252
 
Acquired intellectual property and other intangible assets 13,354 14,116
Other non-current assets 702   479
Total assets 167,855   189,847
 
Liabilities and Shareholders’ Equity
Accounts payable and accrued liabilities 4,886 7,959
Other current liabilities 190   191
Total current liabilities 5,076 8,150
 
Derivative warrant liabilities 16,357 11,793
Other non-current liabilities 4,252   4,161
Total liabilities 25,685 24,104
 
Shareholders’ equity 142,170   165,743
Total liabilities and shareholders’ equity 167,855   189,847
 
 

Aurinia Pharmaceuticals Inc.
Interim Condensed Consolidated Statements of Operations and Comprehensive Loss
(unaudited – amounts in thousands of U.S. dollars, except per share data)

 

 

    Three Months Ended   Six months Ended

June 30,
2018

 

June 30,
2017

June 30,
2018

 

June 30,
2017

$ $ $ $
Revenue
Licensing revenue 29   329   59   359
 
Expenses
Research and development 10,504 7,107 19,391 14,432
Corporate, administration and business development 3,462 2,901 7,253 6,328

Amortization of acquired intellectual property and other intangible assets

397 364 793 721
Amortization of property and equipment 6 6 9 12
Other (income) expense (566)   (152)   (766)   (77)

13,803

 

10,226

  26,680   21,416
 

Net loss before change in estimated fair value of derivative warrant liabilities

(13,774) (9,897) (26,621) (21,057)
 

Change in estimated fair value of derivative warrant liabilities

(1,933)

 

7,498

  (4,564)   (33,283)
 
Net loss and comprehensive loss for the period (15,707)   (2,399)   (31,185)   (54,340)
 
 
Net loss per common share (expressed in $ per share)
Basic and diluted loss per common share (0.19)   (0.03)   (0.37)   (0.78)
 
Weighted average number of common shares outstanding (in thousands) 84,350   82,973   84,833   69,899
 

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Omeros Corporation Reports Second Quarter 2018 Financial Results

SEATTLE–()–Omeros Corporation (NASDAQ: OMER) today announced recent highlights and developments as well as financial results for the second quarter ended June 30, 2018, which include:

  • 2Q 2018 total and OMIDRIA® revenues were $1.7 million, compared to $17.2 million in 2Q 2017; the decrease was due to the significantly reduced usage of OMIDRIA by ambulatory surgery centers (ASCs) and hospitals during the period (January 1, 2018 through September 30, 2018) in which transitional pass-through reimbursement for OMIDRIA is unavailable. Pass-through status for OMIDRIA will reinitiate on October 1, 2018 and is scheduled to remain in effect through September 30, 2020.
  • Net loss in 2Q 2018 was $33.7 million, or $0.70 per share. Non-cash expenses for 2Q 2018 were $4.6 million, or $0.10 per share.
  • At June 30, 2018, the company had cash, cash equivalents and short-term investments available for operations of $88.4 million.
  • Successful meetings held with the U.S. Food and Drug Administration (FDA) and a European regulatory agency focused on pathways to accelerated, conditional and full approval for OMS721 in “high-risk” stem cell transplant-associated thrombotic microangiopathy. Interactions with U.S. and European regulatory agencies are ongoing and the company continues preparations for Biologics License Application (BLA) and Marketing Authorization Application (MAA) submissions.
  • Settled patent infringement lawsuit against Lupin on favorable terms in May 2018, and patent infringement lawsuit against Sandoz was dismissed in July 2018 because Sandoz stipulated to no longer pursue its Abbreviated New Drug Application (ANDA) prior to OMIDRIA patent expiration in 2033, resolving all litigation with ANDA filers.
  • In July 2018, the first patient was dosed in the Phase 1 clinical trial for Omeros’ lead phosphodiesterase 7 (PDE7) inhibitor OMS527. Dosing has been completed in the first two cohorts of this Phase 1 clinical trial and to date the drug remains well-tolerated.

“During the last quarter, we made significant strides across multiple fronts,” said Gregory A. Demopulos, M.D., chairman and chief executive officer of Omeros. “For OMS721, our MASP-2 inhibitor, Phase 3 clinical trials are advancing in both IgA nephropathy and aHUS, and our stem-cell TMA program is moving toward regulatory filings for marketing approval in both the U.S. and Europe. Our PDE7 inhibitor OMS527 is demonstrating good drug behavior in its Phase 1 clinical trial. We are also excited about our MASP-3 inhibitor OMS906, our MASP-2 small molecules for oral administration and our multiple GPCR cancer therapeutic programs, all of which look promising and are slated to begin entering the clinic as early as late 2019. And to help fund our pipeline’s continuing progress, OMIDRIA is rapidly approaching its return to pass-through status on October 1. All of the pieces appear to be coming together, and we look forward to realizing the near- and long-term prospects for Omeros.”

Second Quarter and Recent Developments

  • Developments regarding OMS721, Omeros’ lead human monoclonal antibody in its mannan-binding lectin-associated serine protease-2 (MASP-2) programs for the treatment of hematopoietic stem cell transplant-associated thrombotic microangiopathy (HSCT-TMA), Immunoglobulin A (IgA) nephropathy, and atypical hemolytic uremic syndrome (aHUS), include:
    • The company recently held successful meetings with the FDA and a European regulatory agency covering pathways to accelerated, conditional and full approval for OMS721 in “high-risk” HSCT-TMA. Interactions with U.S. and European regulatory agencies are ongoing and the company continues preparations for BLA and MAA submissions.
    • Omeros announced in April 2018 that the FDA granted breakthrough therapy designation to OMS721 for the treatment of patients with “high-risk” HSCT-TMA, specifically those patients who have persistent TMA despite modification of immunosuppressive therapy. This is the second breakthrough therapy designation for OMS721, which last year received the designation from FDA for the treatment of IgA nephropathy.
    • In April 2018, Omeros reported new results in patients with HSCT-TMA from the ongoing OMS721 Phase 2 study. The analysis of 100-day mortality, an important endpoint previously used as an approval endpoint in another condition related to HSCT, showed that OMS721-treated patients had improved survival relative to the historical control (53% vs 10%; p = 0.0002).
    • Dosing in the U.S. cohort has been completed in the placebo-controlled portion of the company’s Phase 2 trial of OMS721 in IgA nephropathy. Data are expected in September.
    • In July 2018, the European Medicines Agency’s (EMA’s) Committee for Orphan Medicinal Products (COMP) issued a positive opinion recommending orphan drug designation of OMS721 for treatment in hematopoietic stem cell transplantation. The positive opinion is expected to be adopted by the European Commission in August.
  • Developments regarding OMIDRIA include:
    • In the recently released 2019 proposed rule for the Centers for Medicare & Medicaid Services’ (CMS’) outpatient prospective payment system (OPPS), CMS indicated that it will separately pay in the ASC setting for non-opioid drugs with an FDA-approved indication for postoperative pain relief. Although not specifically named, Omeros believes that OMIDRIA meets this definition.
    • Commercial activities have been focused on re-engaging and expanding ASC and hospital customers in anticipation of the recommencement of Medicare Part B separate payment beginning October 1, 2018 through September 30, 2020.
    • In May 2018, the company entered into a settlement agreement and consent judgment with Lupin Ltd. and Lupin Pharmaceuticals, Inc. (collectively, Lupin) concerning Lupin’s filing of an ANDA seeking approval from the FDA to market a generic version of OMIDRIA. A similar settlement was reached with Par Pharmaceutical late last year. In July 2018, the company announced that its patent infringement lawsuit against Sandoz Inc. (Sandoz) had been dismissed by stipulation of the parties. All of Omeros’ litigation with ANDA filers has now been favorably concluded. The earliest ANDA entry date for any of the three generic manufacturers is April 2032 unless otherwise subsequently authorized pursuant to the settlement agreements.
    • In July 2018, Omeros reported that OMIDRIA had been made available in the European Union (EU) on a limited basis, which maintained the ongoing validity of the European marketing authorization for OMIDRIA.
    • OMIDRIA was added to the Veterans Health Administration (VA) National Formulary in April 2018.
    • In April 2018, Omeros announced that the results of four “real-world” clinical studies were presented at the American Society of Cataract and Refractive Surgery and American Society of Ophthalmic Administrators Annual Meeting. The studies demonstrate significant benefits of OMIDRIA to both patients and surgeons across routine and complex cataract surgery cases performed in high-volume surgery centers, with and without femtosecond laser.
  • In Omeros’ PDE7 program, the company is developing proprietary compounds to treat addiction and compulsive disorders as well as movement disorders. In June 2018, Omeros reported that it had obtained regulatory authority and ethics committee clearance to start the Phase 1 clinical trial evaluating the safety, tolerability, pharmacodynamics and pharmacokinetics of its lead PDE7 inhibitor, OMS527, in healthy subjects. Dosing has been completed in the first two cohorts of this Phase 1 clinical trial and to date, the drug remains well-tolerated. Data are expected in the first half of 2019. The initial target planned for OMS527 is nicotine addiction.
  • As reported previously, the company’s credit facility with CRG was amended in April 2018 to eliminate the revenue and market capitalization covenants with respect to the 12-month period ending on December 31, 2018 and to reduce the market capitalization threshold for future periods to three times the aggregate principal amount of loans outstanding (i.e., $375.0 million based on June 30, 2018 borrowings) on the applicable determination date. In May 2018, the company borrowed the remaining $45.0 million available under this facility.

Financial Results

For the quarter ended June 30, 2018, revenues were $1.7 million, all relating to sales of OMIDRIA. This compares to OMIDRIA revenues of $17.2 million for the same period in 2017. The decrease in revenue from the comparable quarter in 2017 was due to the significantly reduced usage of OMIDRIA by ASCs and hospitals during the period (January 1, 2018 through September 30, 2018) in which transitional pass-through reimbursement for OMIDRIA is unavailable. On a sequential quarter-over-quarter basis, OMIDRIA revenues increased by $0.1 million from the $1.6 million achieved in the first quarter of 2018. Pass-through status for OMIDRIA will reinitiate on October 1, 2018 and is scheduled to remain in effect through September 30, 2020.

Total costs and expenses for the three months ended June 30, 2018 were $32.3 million compared to $29.1 million for the same period in 2017. The increase in the current year quarter was primarily due to higher manufacturing scale-up costs for the OMS721 programs and to incremental costs associated with initiating the OMS721 IgA nephropathy Phase 3 clinical trial. These increases were partially offset by decreased OMIDRIA patent litigation costs.

For the three months ended June 30, 2018, Omeros reported a net loss of $33.7 million, or $0.70 per share, which included non-cash expenses of $4.6 million ($0.10 per share). In comparison, for the prior year’s second quarter Omeros reported a net loss of $14.4 million, or $0.33 per share including non-cash expenses of $4.3 million ($0.10 per share).

As of June 30, 2018, the company had $88.4 million of cash, cash equivalents and short-term investments available for operations and another $5.8 million in restricted investments. This includes the remaining $45.0 million available under the company’s existing credit facility, which was drawn down in May 2018.

Conference Call Details

Omeros’ management will host a conference call to discuss the financial results and to provide an update on business activities. The call will be held today at 1:30 p.m. Pacific Time; 4:30 p.m. Eastern Time. To access the live conference call via phone, please dial (844) 831-4029 from the United States and Canada or (920) 663-6278 internationally. The participant passcode is 3989669. Please dial in approximately 10 minutes prior to the start of the call. A telephone replay will be available for one week following the call and may be accessed by dialing (855) 859-2056 from the United States and Canada or (404) 537-3406 internationally. The replay passcode is 3989669.

To access the live or subsequently archived webcast of the conference call on the internet, go to the company’s website at www.omeros.com and select “Events” under the Investors section of the website. To access the live webcast, please connect to the website at least 15 minutes prior to the call to allow for any software download that may be necessary.

About Omeros Corporation

Omeros is a commercial-stage biopharmaceutical company committed to discovering, developing and commercializing small-molecule and protein therapeutics for large-market as well as orphan indications targeting inflammation, complement-mediated diseases and disorders of the central nervous system. The company’s drug product OMIDRIA® (phenylephrine and ketorolac intraocular solution) 1% / 0.3% is marketed for use during cataract surgery or intraocular lens (IOL) replacement to maintain pupil size by preventing intraoperative miosis (pupil constriction) and to reduce postoperative ocular pain. In the European Union, the European Commission has approved OMIDRIA for use in cataract surgery and other IOL replacement procedures to maintain mydriasis (pupil dilation), prevent miosis (pupil constriction), and to reduce postoperative eye pain. Omeros has multiple Phase 3 and Phase 2 clinical-stage development programs focused on: complement-associated thrombotic microangiopathies; complement-mediated glomerulonephropathies; cognitive impairment; and addictive and compulsive disorders. In addition, Omeros has a diverse group of preclinical programs and a proprietary G protein-coupled receptor (GPCR) platform through which it controls 54 new GPCR drug targets and corresponding compounds, a number of which are in preclinical development. The company also exclusively possesses a novel antibody-generating platform.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are subject to the “safe harbor” created by those sections for such statements. All statements other than statements of historical fact are forward-looking statements, which are often indicated by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “goal,” “intend,” “likely,” “look forward to,” “may,” “plan,” “potential,” “predict,” “project,” “prospects,” “should,” “slated,” “will,” “would” and similar expressions and variations thereof. Forward-looking statements are based on management’s beliefs and assumptions and on information available to management only as of the date of this press release. Omeros’ actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including, without limitation, risks associated with product commercialization and commercial operations, unproven preclinical and clinical development activities, regulatory oversight, intellectual property claims, competitive developments, litigation, and the risks, uncertainties and other factors described under the heading “Risk Factors” in the company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 9, 2018. Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements, and the company assumes no obligation to update these forward-looking statements, even if new information becomes available in the future.

 
OMEROS CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
 
    Three Months Ended     Six Months Ended
June 30, June 30,
2018     2017 2018     2017
Revenue:
Product sales, net $ 1,655 $ 17,151 $ 3,244 $ 29,408
 
Costs and expenses:
Cost of product sales 116 157 319 429
Research and development 19,412 13,137 37,551 25,377
Selling, general and administrative   12,744     15,796     23,678     28,267  
Total costs and expenses   32,272     29,090     61,548     54,073  
Loss from operations (30,617 ) (11,939 ) (58,304 ) (24,665 )
Interest expense (3,676 ) (2,723 ) (6,502 ) (5,386 )
Other income   597     303     1,056     603  
Net loss $ (33,696 ) $ (14,359 ) $ (63,750 ) $ (29,448 )
Comprehensive loss $ (33,696 ) $ (14,359 ) $ (63,750 ) $ (29,448 )
Basic and diluted net loss per share $ (0.70 ) $ (0.33 ) $ (1.32 ) $ (0.67 )

Weighted-average shares used to compute basic and diluted net loss per share

  48,384,460     44,037,471     48,333,610     43,933,022  
 
 
OMEROS CORPORATION
UNAUDITED CONSOLIDATED BALANCE SHEET DATA
(In thousands)
 
   

June 30,
2018

   

December 31,
2017

Cash, cash equivalents and short-term investments $ 88,404 $ 83,749
Working capital 72,062 82,065
Restricted investments 5,779 5,835
Total assets 106,349 116,328
Total current liabilities 24,442 26,307
Notes payable and lease financing obligations, net 130,358 84,607
Accumulated deficit (587,118 ) (523,368 )
Total shareholders’ deficit (56,297 ) (2,814 )
 

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