Tag: Revenue

Catalent, Inc. reports first quarter fiscal 2021 results

Post author By Michelle Dryden
Post date November 3, 2020
No Comments on Catalent, Inc. reports first quarter fiscal 2021 results

Q1’21 net revenue of $845.7 million increased 27% as-reported, or 26% in constant currency, compared to Q1’20. On an organic basis, constant currency net revenue in Q1’21 grew 20% compared to Q1’20.
Q1’21 Adjusted EBITDA of $174.4 million increased 37% as-reported, or 35% in constant currency, compared to Q1’20.
Q1’21 Biologics segment net revenue of $377.1 million doubled compared to Q1’20.
Net debt leverage of 2.6x as of September 30; more than $1 billion in cash and cash equivalents on-hand at September 30.
Increased guidance reflects revenue growth of 16-22% and adjusted EBITDA growth of 17-26%, compared to previous guidance of revenue growth of 12-16% and adjusted EBITDA growth of 12-19%.

SOMERSET, N.J.–(BUSINESS WIRE)–Catalent, Inc. (NYSE: CTLT), the leading global provider of advanced delivery technologies, development, and manufacturing solutions for drugs, biologics, cell and gene therapies, and consumer health products, today announced financial results for the first quarter of fiscal 2021, which ended September 30, 2020.

“Catalent’s strong start to fiscal 2021 was driven by robust growth in our Biologics segment, which doubled its revenue year-over-year and represented 44% of Catalent’s total revenue in the first quarter. Ongoing elevated demand across our drug product, drug substance and cell and gene therapy offerings, as well as new demand related to potential COVID-19 vaccines and treatments, were partially offset by headwinds in our Softgel and Oral Technologies and Oral and Specialty Delivery segments,” said John Chimi in nski, Chair and Chief Executive Officer of Catalent, Inc. He added, “We have accelerated our growth-related capital expenditures to meet the near-term needs of customers and patients, and to position Catalent for long-term value creation.”

First Quarter 2021 Consolidated Results

First quarter 2021 net revenue of $845.7 million increased 27% as reported, or 26% in constant currency, from the $664.7 million reported for the first quarter a year ago. Overall organic growth was 20%.

First quarter 2021 net earnings were $82.4 million. Accounting for the net earnings attributable to preferred shareholders on Catalent’s Series A convertible preferred stock, net earnings attributable to common shareholders were $68.8 million, or $0.42 per basic share, compared to a net loss attributable to common shareholders of $8.0 million, or a loss of $0.05 per basic share, in the first quarter a year ago.

First quarter 2021 EBITDA from operations, as referenced in the GAAP to non-GAAP reconciliation provided later in this release, was $161.8 million, an increase of $71.7 million from $90.1 million in the first quarter a year ago. First quarter 2021 Adjusted EBITDA (see the GAAP to non-GAAP reconciliation provided later in this release) was $174.4 million, or 20.6% of net revenue, compared to $127.1 million, or 19.1% of net revenue, in the first quarter a year ago. This represents an increase of 37.2% as reported, and an increase of 35.5% on a constant-currency basis.

First quarter 2021 Adjusted Net Income (see the GAAP to non-GAAP reconciliation) was $78.1 million, or $0.43 per diluted share, compared to Adjusted Net Income of $40.5 million, or $0.26 per diluted share, in the first quarter a year ago.

First Quarter 2021 Segment Review

Biologics

Net revenue from the Biologics segment was $377.1 million for the first quarter of fiscal 2021, an increase of 100% as reported and 98% in constant currency, compared to the first quarter a year ago. Segment EBITDA in the first quarter of fiscal 2021 was $106.5 million, an increase of 197% as reported and 194% in constant currency compared to the first quarter a year ago. Segment EBITDA margin was 28.2% in the first quarter of fiscal 2021 compared to 19.0% in the first quarter of the prior year.

Excluding the effect of acquisitions, net revenue increased 83% and segment EBITDA increased 179% compared to the three months ended September 30, 2019.

The Biologics segment represented 44% of Catalent’s total net revenue in the first quarter of fiscal 2021.

Softgel and Oral Technologies

Net revenue from the Softgel and Oral Technologies segment was $221.1 million for the first quarter of fiscal 2021, a decrease of 16% as reported or 17% in constant currency, compared to the first quarter a year ago. Segment EBITDA was $37.8 million in the first quarter of fiscal 2021, a decrease of 18% as reported, or 20% in constant currency, compared to the first quarter a year ago. Segment EBITDA margin was 17.1% in the first quarter of fiscal 2021 compared to 17.6% in the first quarter of the prior year.

After excluding the impact of the October 2019 divestiture of the segment’s consumer health manufacturing site in Australia, net revenue decreased 12% and segment EBITDA decreased 21% compared to the three months ended September 30, 2019.

The Softgel and Oral Technologies segment represented 26% of Catalent’s total net revenue in the first quarter of fiscal 2021.

Oral and Specialty Delivery

Net revenue from the Oral and Specialty Delivery segment was $158.3 million for the first quarter of fiscal 2021, an increase of 19% as reported and 17% in constant currency, over the first quarter a year ago. Segment EBITDA in the first quarter of fiscal 2021 was $21.4 million, a decrease of 23% as reported, or 26% in constant currency, compared to the first quarter a year ago. Segment EBITDA margin was 13.5% in the first quarter of fiscal 2021 compared to 20.9% in the first quarter of the prior year.

Excluding the effect of acquisitions, net revenue decreased 1% and segment EBITDA decreased 61% compared to the three months ended September 30, 2019.

The Oral and Specialty Delivery segment represented 19% of Catalent’s total net revenue in the first quarter of fiscal 2021.

Clinical Supply Services

Net revenue from the Clinical Supply Services segment was $92.7 million for the first quarter of fiscal 2021, an increase of 10% as reported and 8% in constant currency, compared to the first quarter a year ago. Segment EBITDA in the first quarter of fiscal 2021 was $25.0 million, an increase of 16% as reported, or 13% in constant currency, compared to the first quarter a year ago. Segment EBITDA margin was 27.0% in the first quarter of fiscal 2021 compared to 25.5% in the first quarter of the prior year.

The Clinical Supply Services segment represented 11% of Catalent’s total net revenue in the first quarter of fiscal 2021.

Backlog for the Clinical Supply Services segment, defined as estimated future service revenues from work not yet completed under signed contracts, was $428 million as of September 30, 2020, compared to backlog of $425 million as of June 30, 2020 and $374 million as of September 30, 2019. The segment recorded net new business wins of $99 million during the first quarter of fiscal 2021, an increase of 6.4% compared to the net new business wins recorded in the first quarter of the prior year.

Balance Sheet and Liquidity

As of September 30, 2020, Catalent had $3.1 billion in total debt, and $2.1 billion in total debt net of cash and short-term investments, compared to $2.1 billion in total net debt as of June 30, 2020 . The current debt structure does not include any significant maturity until 2026.

Catalent’s net leverage ratio as of September 30, 2020 was 2.6x, compared to 2.8x at June 30, 2020 and 4.3x at September 30, 2019.

Fiscal Year 2021 Outlook

Catalent is raising its previously issued guidance to reflect first quarter performance and to account for higher net underlying demand, including increased demand related to COVID-19 treatments and vaccines, partially offset by lower demand attributed to the effects of the pandemic in some offerings.

The revised guidance continues to assume no major change to either the current status of the COVID-19 pandemic generally or its effect on Catalent’s operations and business. Also, as with the earlier guidance, the revised guidance does not assume the receipt by any of our customers of any marketing approval, on an emergency basis or otherwise, for their COVID-19 vaccine candidates (but does include the projected revenue from take-or-pay arrangements in executed contracts). The guidance ranges set forth below are broader than in recent years due to the increased uncertainty introduced by the COVID-19 pandemic. The revised guidance projects:

Net revenue in the range of $3.58 billion to $3.78 billion, compared to the previous range of $3.45 billion to $3.60 billion;
Adjusted EBITDA in the range of $880 million to $950 million, compared to the previous range of $840 million to $890 million;
Adjusted Net Income in the range of $410 million to $470 million, compared to the previous range of $390 million to $435 million; and
A fully diluted share count in the range of 178 million to 180 million shares on a weighted-average basis, counting the Series A convertible preferred shares as-if converted, unchanged from previous guidance.

Earnings Webcast

The Company’s management will host a webcast to discuss the results at 8:15 a.m. ET today. Catalent invites all interested parties to listen to the webcast, which will be accessible through Catalent’s website at http://investor.catalent.com. A supplemental slide presentation will also be available in the “Investors” section of Catalent’s website prior to the start of the webcast. The webcast replay, along with the supplemental slides, will be available for 90 days in the “Investors” section of Catalent’s website at www.catalent.com.

About Catalent, Inc.

Catalent, Inc. (NYSE: CTLT), an S&P 500^® company, is the leading global provider of advanced delivery technologies, development, and manufacturing solutions for drugs, biologics, cell and gene therapies, and consumer health products. With over 85 years serving the industry, Catalent has proven expertise in bringing more customer products to market faster, enhancing product performance and ensuring reliable clinical and commercial product supply. Catalent employs more than 14,000 people, including approximately 2,400 scientists, at more than 40 facilities across four continents and in fiscal 2020 generated over $3 billion in annual revenue. Catalent is headquartered in Somerset, N.J. For more information, please visit www.catalent.com.

Non-GAAP Financial Measures

Use of EBITDA from operations, Adjusted EBITDA, Adjusted Net Income and Segment EBITDA

Management measures operating performance based on consolidated earnings from operations before interest expense, expense/(benefit) for income taxes, and depreciation and amortization, adjusted for the income or loss attributable to non-controlling interests (“EBITDA from operations”). EBITDA from operations is not defined under U.S. GAAP, is not a measure of operating income, operating performance, or liquidity presented in accordance with U.S. GAAP, and is subject to important limitations.

Catalent believes that the presentation of EBITDA from operations enhances an investor’s understanding of its financial performance. Catalent believes this measure is a useful financial metric to assess its operating performance across periods by excluding certain items that it believes are not representative of its core business and uses this measure for business planning purposes.

In addition, given the significant investments that Catalent has made in the past in property, plant and equipment, depreciation and amortization expenses represent a meaningful portion of its cost structure. Catalent believes that EBITDA from operations will provide investors with a useful tool for assessing the comparability between periods of its ability to generate cash from operations sufficient to pay taxes, to service debt and to undertake capital expenditures because it eliminates depreciation and amortization expense. Catalent presents EBITDA from operations in order to provide supplemental information that it considers relevant for the readers of its consolidated financial statements, and such information is not meant to replace or supersede U.S. GAAP measures. Catalent’s definition of EBITDA from operations may not be the same as similarly titled measures used by other companies.

Catalent evaluates the performance of its segments based on segment earnings before non-controlling interest, other (income)/expense, impairments, restructuring costs, interest expense, income tax expense/(benefit), and depreciation and amortization (“segment EBITDA”). Moreover, under Catalent’s credit agreement, its ability to engage in certain activities, such as incurring certain additional indebtedness, making certain investments and paying certain dividends, is tied to ratios based on Adjusted EBITDA, which is not defined under U.S. GAAP, is not a measure of operating income, operating performance, or liquidity presented in accordance with U.S. GAAP, and is subject to important limitations. Adjusted EBITDA is the covenant compliance measure used in the credit agreement governing debt incurrence and restricted payments. Because not all companies use identical calculations, Catalent’s presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.

Management also measures operating performance based on Adjusted Net Income/(Loss) and Adjusted Net Income/(Loss) per share. Adjusted Net Income/(Loss) is not defined under U.S. GAAP, is not a measure of operating income, operating performance, or liquidity presented in accordance with U.S. GAAP and is subject to important limitations. Catalent believes that the presentation of Adjusted Net Income/(Loss) and Adjusted Net Income/(Loss) per share enhances an investor’s understanding of its financial performance. Catalent believes these measures are a useful financial metric to assess its operating performance across periods by excluding certain items that it believes are not representative of its core business and Catalent uses these measures for business planning purposes. Catalent defines Adjusted Net Income/(Loss) as net earnings/(loss) adjusted for amortization attributable to purchase accounting and adjustments for other cash and non-cash items included in the table below, partially offset by its estimate of the tax effects of such cash and non-cash items. Catalent believes that Adjusted Net Income/(Loss) and Adjusted Net Income/(Loss) per share provides investors with a useful tool for assessing the comparability between periods of its ability to generate cash from operations available to its stockholders. Catalent’s definition of Adjusted Net Income/(Loss) may not be the same as similarly titled measures used by other companies.

The most directly comparable U.S. GAAP measure to EBITDA from operations is operating earnings/(loss). The most directly comparable U.S. GAAP measure to Adjusted EBITDA and Adjusted Net Income/(Loss) is net earnings/(loss). Included in this release is a reconciliation of operating earnings/(loss) to EBITDA from operations and a reconciliation of net earnings/(loss) to Adjusted EBITDA and Adjusted Net Income.

Catalent does not provide a reconciliation of forward-looking non-GAAP financial measures to their comparable U.S. GAAP financial measures because it could not do so without unreasonable effort due to the unavailability of the information needed to calculate reconciling items and due to the variability, complexity and limited visibility of the adjusting items that would be excluded from the non-GAAP financial measures in future periods. When planning, forecasting, and analyzing future periods, Catalent does so primarily on a non-GAAP basis without preparing a U.S. GAAP analysis as that would require estimates for various cash and non-cash reconciling items that would be difficult to predict with reasonable accuracy. For example, equity compensation expense would be difficult to estimate because it depends on Catalent’s future hiring and retention needs, as well as the future fair market value of its common stock, all of which are difficult to predict and subject to constant change. It is equally difficult to anticipate the need for or magnitude of a presently unforeseen one-time restructuring expense or the values of end-of-period foreign currency exchange rates. As a result, Catalent does not believe that a U.S. GAAP reconciliation would provide meaningful supplemental information about its outlook.

Use of Constant Currency

As changes in exchange rates are an important factor in understanding period-to-period comparisons, Catalent believes the presentation of results on a constant-currency basis in addition to reported results helps improve investors’ ability to understand its operating results and evaluate its performance in comparison to prior periods. Constant-currency information compares results between periods as if exchange rates had remained constant period over period. Catalent uses results on a constant-currency basis as one measure to evaluate its performance. Catalent calculates constant currency by calculating current-year results using prior-year foreign currency exchange rates. Catalent generally refers to such amounts calculated on a constant-currency basis as excluding the impact of foreign exchange or being on a constant-currency basis. These results should be considered in addition to, not as a substitute for, results reported in accordance with U.S. GAAP. Results on a constant-currency basis, as Catalent presents them, may not be comparable to similarly titled measures used by other companies and are not measures of performance presented in accordance with U.S. GAAP.

Forward-Looking Statements

This release contains both historical and forward-looking statements. All statements other than statements of historical fact, are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements generally can be identified by the use of statements that include phrases such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “plan,” “project,” “foresee,” “likely,” “may,” “will,” “would,” or other words or phrases with similar meanings. Similarly, statements that describe Catalent’s objectives, plans, or goals are, or may be, forward-looking statements. These statements are based on current expectations of future events. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results could vary materially from Catalent’s expectations and projections. Some of the factors that could cause actual results to differ include, but are not limited to, the following: the current or future effects of the COVID-19 pandemic on Catalent’s and its clients’ businesses; participation in a highly competitive market and increased competition that may adversely affect Catalent’s business; demand for its offerings, which depends in part on its customers’ research and development and the clinical and market success of their products; product and other liability risks that could adversely affect Catalent’s results of operations, financial condition, liquidity and cash flows; failure to comply with existing and future regulatory requirements; failure to provide quality offerings to customers could have an adverse effect on Catalent’s business and subject it to regulatory actions and costly litigation; problems providing the highly exacting and complex services or support required; global economic, political and regulatory risks to Catalent’s operations; inability to enhance existing or introduce new technology or service offerings in a timely manner; inadequate patents, copyrights, trademarks and other forms of intellectual property protections; fluctuations in the costs, availability, and suitability of the components of the products Catalent manufactures, including active pharmaceutical ingredients, excipients, purchased components and raw materials; changes in market access or healthcare reimbursement in the United States or internationally; fluctuations in the exchange rate of the U.S. dollar against other currencies, including as a result of the U.K.’s exit from the European Union; adverse tax legislative or regulatory initiatives or challenges or adjustments to Catalent’s tax positions; loss of key personnel; risks generally associated with information systems; inability to complete any future acquisitions or other transactions that may complement or expand its business or divest of non-strategic businesses or assets and difficulties in successfully integrating acquired businesses and realizing anticipated benefits of such acquisitions; risks associated with timely and successfully completing, and correctly anticipating the future demand predicted for, capital expansion projects at existing facilities, offerings and customers’ products that may infringe on the intellectual property rights of third parties; environmental, health and safety laws and regulations, which could increase costs and restrict operations; labor and employment laws and regulations or labor difficulties, which could increase costs or result in operational disruptions; additional cash contributions required to fund Catalent’s existing pension plans; substantial leverage that may limit its ability to raise additional capital to fund operations and react to changes in the economy or in the industry; and exposure to interest-rate risk to the extent of its variable-rate debt preventing it from meeting its obligations under its indebtedness. For a more detailed discussion of these and other factors, see the information under the caption “Risk Factors” in Catalent’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020, filed August 31, 2020. All forward-looking statements speak only as of the date of this release or as of the date they are made, and Catalent does not undertake to update any forward-looking statement as a result of new information or future events or developments except to the extent required by law.

More products. Better treatments. Reliably supplied.™

Catalent, Inc. and Subsidiaries Consolidated Statements of Operations (Unaudited; dollars and shares in millions, except per share data)
	Three Months Ended September 30,				FX Impact		Constant Currency Increase/(Decrease)
	2020		2019				Change $		Change %
Net revenue	$	845.7	$	664.7	$	9.7	$	171.3	26	%
Cost of sales	596.8		487.0		5.8		104.0		21	%
Gross margin	248.9		177.7		3.9		67.3		38	%
Selling, general, and administrative expenses	164.7		142.8		0.9		21.0		15	%
Impairment charges and (gain)/loss on sale of assets	1.8		(0.2)		—		2.0		(1,000)	%
Restructuring and other	0.9		0.7		0.1		0.1		14	%
Operating earnings	81.5		34.4		2.9		44.2		128	%
Interest expense, net	25.3		36.3		0.2		(11.2)		(31)	%
Other (income)/expense, net	(11.2)		4.9		1.5		(17.6)		(359)	%
Earnings/(loss) before income taxes	67.4		(6.8)		1.2		73.0		(1,074)	%
Income tax expense	(15.0)		(6.9)		(0.1)		(8.0)		116	%
Net earnings	$	82.4	$	0.1	$	1.3	$	81.0	81,000	%
Less: Net earnings attributable to preferred shareholders	(13.6)		(8.1)		—		—		—	%
Net earnings/(loss) attributable to common shareholders	$	68.8	$	(8.0)	$	—	$	—	—	%

Weighted average shares outstanding	164.1		145.7
Weighted average diluted shares outstanding	166.5		145.7

Earnings/(loss) per share:
Basic
Net earnings/(loss)	$	0.42	$	(0.05)
Diluted
Net earnings/(loss)	$	0.41	$	(0.05)

Contacts

Investor Contact:

Catalent, Inc.

Paul Surdez

732-537-6325

investors@catalent.com

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Tags #Results, Catalent Inc., Financial, First Quarter, Revenue, Technologies, Technologies#Results

Healthcare

Merck announces third-quarter 2020 financial results

Post author By Michelle Dryden
Post date October 27, 2020
No Comments on Merck announces third-quarter 2020 financial results

Third-Quarter 2020 Worldwide Sales Were $12.6 Billion, an Increase of 1%; Excluding the Impact from Foreign Exchange, Sales Grew 2%
- KEYTRUDA Sales Grew 21% to $3.7 Billion
- Animal Health Sales Grew 9% to $1.2 Billion; Excluding the Impact from Foreign Exchange, Sales Grew 12%

Third-Quarter 2020 GAAP EPS Was $1.16; Third-Quarter Non-GAAP EPS Was $1.74
Advanced and Expanded Broad Pipeline
- Announced Additional Positive Phase 3 Results for Investigational Pneumococcal Conjugate Vaccine (V114) in Adults
- Presented Phase 3 Data for Investigational Gefapixant in Development for Chronic Cough; Early Data for MK-4830 in Oncology and MK-8507 for HIV
- Expanded Pipeline with Seagen Collaborations in Oncology

Company Advances Research Programs and Clinical Trials for COVID-19-Related Vaccine and Orally Available Antiviral Research Candidates

Company Narrows and Raises 2020 Full-Year Revenue Range to be Between $47.6 Billion and $48.6 Billion, Including a Negative Impact from Foreign Exchange of Approximately 1.5%

Company Narrows and Lowers 2020 Full-Year GAAP EPS Range to be Between $4.55 and $4.65; Narrows and Raises 2020 Full-Year Non-GAAP EPS Range to be Between $5.91 and $6.01, Including a Negative Impact from Foreign Exchange of Approximately 2.5%

KENILWORTH, N.J.–(BUSINESS WIRE)–$MRK #MRK–Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the third quarter of 2020.

“We continue to execute on our strategic priorities and remain confident we will achieve solid full-year revenue growth despite the impact of the ongoing COVID-19 pandemic. Demand for our products remains robust, and production, supply and distribution of our medicines, vaccines and animal health products are moving forward with minimal disruption,” said Kenneth C. Frazier, chairman and chief executive officer, Merck. “I am confident in our ability to advance our promising pipeline and clinical trials despite the challenging environment, and I believe that our leadership and track record of solid commercial execution will continue to drive long-term growth.”

Financial Summary

	$ in millions, except EPS amounts	Third Quarter
	$ in millions, except EPS amounts	2020	2019	Change	Change Ex- Exchange
	Sales	$12,551	$12,397	1%	2%
	GAAP net income¹	2,941	1,901	55%	59%
	Non-GAAP net income that excludes certain items^1,2*	4,427	3,873	14%	17%
	GAAP EPS	1.16	0.74	57%	62%
	Non-GAAP EPS that excludes certain items²*	1.74	1.51	16%	18%
*Refer to table on page 11.

GAAP (generally accepted accounting principles) earnings per share assuming dilution (EPS) was $1.16 for the third quarter of 2020. Non-GAAP EPS of $1.74 for the third quarter of 2020 excludes acquisition- and divestiture-related costs, restructuring costs, pretax charges of $1.1 billion related to certain license and collaboration agreements, and certain other items. Year-to-date results can be found in the attached tables.

COVID-19 Research Highlights

Building on the company’s experience with antivirals and vaccines, Merck advanced its multiple scientific programs in an effort to help combat SARS-CoV-2, specifically,

Molnupiravir (formerly known as MK-4482) — an orally available antiviral candidate in development for the treatment of COVID-19 in collaboration with Ridgeback Bio with the initiation of two large pivotal Phase 2/3 trials: a trial anticipated to enroll approximately 1,450 non-hospitalized adult COVID-19 patients (outpatient) and another planned to enroll approximately 1,300 hospitalized adult COVID-19 patients;
V591 — a SARS-CoV-2 vaccine candidate that uses a measles virus vector platform has entered Phase 1 development; and
V590 — a SARS-CoV-2 vaccine candidate in development in collaboration with the International AIDS Vaccine Initiative (IAVI) that uses a recombinant vesicular stomatitis virus (rVSV) platform, the same platform used for Merck’s approved Ebola Zaire virus vaccine, will enter Phase 1 development shortly.

Oncology Pipeline Highlights

Merck continued to advance the development programs for KEYTRUDA (pembrolizumab), the company’s anti-PD-1 therapy; Lynparza (olaparib), a PARP inhibitor being co-developed and co-commercialized with AstraZeneca; and Lenvima (lenvatinib mesylate), an orally available tyrosine kinase inhibitor being co-developed and co-commercialized with Eisai Co., Ltd. (Eisai), in addition to other notable developments as follows:

Merck announced the following regulatory milestones for KEYTRUDA:
- Approval in the United States by the Food and Drug Administration (FDA) of an expanded indication as monotherapy for the treatment of adult patients with relapsed or refractory classical Hodgkin lymphoma (cHL) based on the Phase 3 KEYNOTE-204 trial and an updated pediatric indication for the treatment of pediatric patients with refractory cHL or cHL that has relapsed after two or more lines of therapy, both of which were previously approved under the FDA’s accelerated approval process; and
- Two approvals in Japan: (1) as monotherapy for the treatment of patients whose tumors are PD-L1-positive and have radically unresectable, advanced or recurrent esophageal squamous cell carcinoma (ESCC) who have progressed after chemotherapy based on the KEYNOTE-181 trial; and (2) use at an additional recommended dosage of 400 mg every six weeks (Q6W) administered as an intravenous infusion over 30 minutes across all adult indications, including KEYTRUDA monotherapy and combination therapy.
Merck presented results from the pivotal Phase 3 KEYNOTE-590 trial for the first-line treatment of patients with locally advanced or metastatic esophageal and gastroesophageal junction (GEJ) cancer at the European Society for Medical Oncology (ESMO) Virtual Congress 2020. In the study, KEYTRUDA in combination with platinum-based chemotherapy (cisplatin plus 5-fluorouracil [5-FU]) significantly improved overall survival (OS) and progression-free survival (PFS) versus chemotherapy regardless of histology or PD-L1 expression status.
Merck presented five-year survival results from the pivotal Phase 3 KEYNOTE-024 trial at the ESMO Virtual Congress 2020, which demonstrated a sustained, long-term survival benefit and durable responses with KEYTRUDA versus chemotherapy as a first-line treatment in patients with metastatic non-small cell lung cancer (NSCLC) whose tumors express PD-L1 (tumor proportion score [TPS] ≥50%) with no EGFR or ALK genomic tumor aberrations. Results from KEYNOTE-024 represent the longest follow-up survival data for an immunotherapy in a randomized Phase 3 study for the first-line treatment of metastatic NSCLC.
Merck presented long-term findings from the EORTC1325/KEYNOTE-054 trial evaluating KEYTRUDA as adjuvant therapy in resected, high-risk stage III melanoma at the ESMO Virtual Congress 2020.
Merck presented three-year survival data from the KEYNOTE-021 (Cohort G) study that evaluated KEYTRUDA in combination with chemotherapy in patients with advanced nonsquamous NSCLC regardless of PD‑L1 expression with no EGFR or ALK genomic tumor aberrations at the IASLC 2020 North America Conference on Lung Cancer (NACLC). Updated follow-up data from a Phase 1/2 study of quavonlimab (MK-1308), a novel investigational anti-CTLA-4 antibody, in combination with KEYTRUDA in patients with advanced NSCLC also was presented; a Phase 3 study of quavonlimab coformulated with KEYTRUDA in first-line advanced NSCLC is planned.
Merck and AstraZeneca announced the adoption of two positive opinions by the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) for Lynparza:
- As a first-line maintenance treatment with bevacizumab for homologous recombination deficient (HRD)-positive advanced ovarian cancer who are in complete or partial response following completion of first-line platinum-based chemotherapy in combination with bevacizumab based on the Phase 3 PAOLA-1 trial, and
- As monotherapy for the treatment of BRCA1/2 metastatic castration-resistant prostate cancer (mCRPC) patients who have progressed following a prior therapy that included a new hormonal agent based on the Phase 3 PROfound trial. Final results from this study were recently presented at the ESMO Virtual Congress 2020.
Merck and AstraZeneca presented positive five-year follow-up data from the Phase 3 SOLO-1 trial, which demonstrated a long-term PFS benefit of Lynparza versus placebo as a first-line maintenance treatment in patients with newly diagnosed, advanced BRCA-mutated (BRCAm) ovarian cancer who were in complete or partial response to platinum-based chemotherapy.
Merck and Eisai presented first-time data from two studies evaluating KEYTRUDA plus Lenvima at the ESMO Virtual Congress 2020: data from the Phase 2 LEAP-004 study for the second-line treatment of patients with unresectable or advanced melanoma who progressed on anti-PD-1/PD-L1 therapy and from the Phase 2 LEAP-005 study in previously-treated patients with six tumor types, including biliary tract cancer, colorectal cancer, gastric cancer, glioblastoma multiforme, ovarian cancer and triple-negative breast cancer.
Merck also presented new data for three investigational medicines from its oncology pipeline at the ESMO Virtual Congress 2020:
- New Phase 1 data for the company’s anti-TIGIT therapy vibostolimab (MK-7684) as monotherapy and in combination with KEYTRUDA in patients with metastatic NSCLC,
- First-time Phase 1 results for the novel anti-immunoglobulin-like transcript 4 (ILT4) therapy MK-4830 in patients with advanced solid tumors, and
- New Phase 2 data evaluating the hypoxia-inducible factor-2 alpha (HIF-2α) inhibitor MK-6482 in von Hippel-Lindau (VHL) patients with non-renal cell carcinoma (RCC) tumors and updated data in VHL patients with clear cell RCC.

Other Pipeline Highlights

Merck announced that two Phase 3 adult studies [the pivotal PNEU-AGE trial (V114-019) as well as the PNEU-TRUE trial (V114-020)] and separately two other Phase 3 adult studies [the PNEU-PATH (V114-016) and PNEU-DAY (V114-017) trials], evaluating the safety, tolerability and immunogenicity of V114, the company’s investigational 15-valent pneumococcal conjugate vaccine, each met their primary immunogenicity objectives. These findings, and additional Phase 3 data from the clinical program, will form the basis of global regulatory licensure applications beginning with the FDA before the end of the year.
Merck presented results from two pivotal Phase 3 trials (COUGH-1 and COUGH-2) evaluating gefapixant, an investigational, orally administered selective P2X3 receptor antagonist, in which gefapixant 45 mg twice daily demonstrated a statistically significant reduction in 24-hour cough frequency compared to placebo at Week 12 and 24 in adult patients with refractory or unexplained chronic cough. The gefapixant 15 mg twice daily treatment arms did not meet the primary efficacy endpoint in either Phase 3 study. The results were presented at the Virtual European Respiratory Society (ERS) International Congress 2020.
Merck presented Week 96 data from the Phase 2b trial that showed islatravir, the company’s investigational oral nucleoside reverse transcriptase translocation inhibitor (NRTTI), in combination with doravirine (PIFELTRO), maintained viral suppression in treatment-naïve adults with HIV-1 infection. Also presented at the virtual 2020 International Congress on Drug Therapy in HIV Infection (HIV Glasgow 2020 Virtual) were results from Phase 1/1b studies for MK-8507, the company’s investigational once-weekly, oral non-nucleoside reverse transcriptase inhibitor (NNRTI), that support further investigation for once-weekly oral administration as part of combination antiretroviral therapy.
The FDA has granted V181, the company’s investigational dengue vaccine in Phase 1 development, Fast Track designation.

Business Developments

Merck and Seagen Inc. (formerly known as Seattle Genetics, Inc.) announced two strategic oncology collaborations, in which Merck will make $810 million of upfront payments in the aggregate as well as acquire a $1 billion equity stake in Seagen common stock:
- Companies to co-develop and co-commercialize Seagen’s ladiratuzumab vedotin, an investigational antibody-drug conjugate targeting LIV-1, globally; and
- Companies enter into exclusive license and co-development agreement to accelerate global reach of Tukysa (tucatinib), a small molecule tyrosine kinase inhibitor for the treatment of HER-2 positive cancers. Merck was granted an exclusive license to commercialize Tukysa in Asia, the Middle East and Latin America and other regions outside of the U.S., Canada and Europe.
Merck and Hanmi Pharmaceutical announced that the companies have entered into an exclusive licensing agreement for the development, manufacture and commercialization of efinopegdutide (formerly HM12525A), Hanmi’s investigational once-weekly glucagon-like peptide-1 (GLP-1)/glucagon receptor dual agonist, for the treatment of nonalcoholic steatohepatitis (NASH);
Merck announced the completion of its acquisition of IdentiGEN, a leader in DNA-based animal traceability solutions for livestock and aquaculture; and
Merck announced the completion of its acquisition of the worldwide rights to VECOXAN (diclazuril), an oral suspension for the prevention of coccidiosis in calves and lambs.

Organon & Co.

Merck continued to make progress on the Organon & Co. (Organon) spinoff, including additional leadership appointments, and expects the transaction to be completed in the second quarter of 2021.

Third-Quarter Financial Impact of COVID-19

In the third quarter, the estimated negative impact of the COVID-19 pandemic to Merck’s pharmaceutical revenue was approximately $475 million, bringing the company’s year-to-date negative impact on revenue to approximately $2.1 billion. Lower back-to-school demand negatively impacted vaccine sales, in particular GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) in the U.S. In addition, access to health care providers remains reduced, although improved from the second quarter. The negative impact to Animal Health sales in the third quarter was immaterial.

Operating expenses were positively impacted in the third quarter by approximately $115 million, primarily driven by lower promotional and selling costs as well as lower research and development (R&D) expenses, net of investments in COVID-19-related antiviral and vaccine research programs.

Third-Quarter Revenue Performance

The following table reflects sales of the company’s top pharmaceutical products, as well as sales of animal health products.

$ in millions	Third Quarter
	2020	2019	Change	Change Ex- Exchange
Total Sales	$12,551	$12,397	1%	2%
Pharmaceutical	11,320	11,095	2%	2%
KEYTRUDA	3,715	3,070	21%	21%
JANUVIA / JANUMET	1,327	1,311	1%	2%
GARDASIL / GARDASIL 9	1,187	1,320	-10%	-10%
PROQUAD, M-M-R II and VARIVAX	576	623	-8%	-7%
PNEUMOVAX 23	375	237	58%	58%
BRIDION	320	284	13%	13%
ROTATEQ	210	180	16%	17%
SIMPONI	209	203	3%	0%
ISENTRESS / ISENTRESS HD	205	250	-18%	-18%
Lynparza*	196	123	59%	58%
IMPLANON / NEXPLANON	189	199	-5%	-4%
Lenvima*	142	109	30%	29%
Animal Health	1,220	1,122	9%	12%
Livestock	758	726	5%	8%
Companion Animals	462	396	17%	18%
Other Revenues**	11	180	-94%	-33%

*Alliance revenue for these products represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.

**Other revenues are comprised primarily of third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities.

Pharmaceutical Revenue

Third-quarter pharmaceutical sales increased by $225 million, or 2%, to $11.3 billion. The increase was driven primarily by growth in oncology and certain hospital acute care products, partially offset by the negative impact of the COVID-19 pandemic and the ongoing impacts of the loss of market exclusivity for several products.

Growth in oncology was largely driven by higher sales of KEYTRUDA, which grew 21% to $3.7 billion in the quarter. In the U.S., sales of KEYTRUDA grew 24% to $2.2 billion. Global sales growth of KEYTRUDA reflects continued strong momentum from the NSCLC indications as well as continued uptake in other indications, including adjuvant melanoma, RCC, bladder, head and neck squamous cell carcinoma (HNSCC) and microsatellite instability-high (MSI-H) cancers as well as uptake following the recent launch of the Q6W dosing regimen in the U.S., partially offset by the negative impacts of the COVID-19 pandemic and pricing in Japan. Also contributing to growth in oncology was higher alliance revenue related to Lynparza and Lenvima reflecting continued uptake in approved indications in the U.S., Europe and China.

Performance in hospital acute care reflects higher demand globally for BRIDION (sugammadex), a medicine for the reversal of neuromuscular blockade induced by rocuronium bromide or vecuronium bromide in adults undergoing surgery and the ongoing launch of PREVYMIS (letermovir), a medicine for prophylaxis (prevention) of cytomegalovirus (CMV) infection and disease in adult CMV-seropositive recipients of an allogeneic hematopoietic stem cell transplant.

In addition, sales of JANUVIA (sitagliptin) and JANUMET (sitagliptin and metformin HCI) increased slightly in the quarter reflecting strong demand from certain international markets, partially offset by continued pricing pressure in the U.S.

Vaccine sales performance reflects higher sales of PNEUMOVAX 23 (pneumococcal vaccine polyvalent), a vaccine to help prevent pneumococcal disease, primarily driven by higher volumes in the U.S., Europe and Japan attributable in part to increased demand for pneumococcal vaccination during the COVID-19 pandemic.

Vaccine sales were negatively affected by declines in sales of GARDASIL [Human Papillomavirus Quadrivalent (Types 6,11,16 and 18) Vaccine, Recombinant]/GARDASIL 9, vaccines to prevent certain cancers and other diseases caused by HPV, largely due to lower demand in the U.S. and Hong Kong, SAR, PRC attributable to the COVID-19 pandemic, partially offset by higher volumes in China and in Europe.

Combined sales of pediatric vaccines VARIVAX (Varicella Virus Vaccine Live), a vaccine to help prevent chickenpox; PROQUAD (Measles, Mumps, Rubella and Varicella Virus Vaccine Live), a combination vaccine to help protect against measles, mumps, rubella and varicella; and M-M-R II (Measles, Mumps and Rubella Virus Vaccine Live), a vaccine to help prevent measles, mumps and rubella, declined in the third quarter, primarily due to lower demand in the U.S. related to the COVID-19 pandemic.

Pharmaceutical sales in the quarter were negatively affected by the ongoing impacts from the loss of market exclusivity, including for NUVARING (etonogestrel/ethinyl estradiol vaginal ring), NOXAFIL (posaconazole) and EMEND (aprepitant)/EMEND (fosaprepitant dimeglumine) for Injection.

Animal Health Revenue

Animal Health sales totaled $1.2 billion in the third quarter of 2020, an increase of 9% compared with the third quarter of 2019; excluding the unfavorable effect from foreign exchange, Animal Health sales grew 12%. Growth in companion animal products was driven largely by higher demand in companion animal vaccines and higher demand for the BRAVECTO (fluralaner) line of products for parasitic control. Performance in livestock products reflects higher demand globally for ruminant, poultry and swine products.

Third-Quarter Expense, EPS and Related Information

The tables below present selected expense information.

$ in millions Third-Quarter 2020	GAAP	Acquisition- and Divestiture- Related Costs³	Restructuring Costs	Certain Other Items	Non-GAAP²
Cost of sales	$3,481	$285	$38	$−	$3,158
Selling, general and administrative	2,450	207	15	−	2,228
Research and development	3,390	16	19	1,082	2,273
Restructuring costs	114	−	114	−	−
Other (income) expense, net	(312)	−	−	(1)	(311)
Third-Quarter 2019
Cost of sales	$3,990	$941	$62	$−	$2,987
Selling, general and administrative	2,589	22	1	−	2,566
Research and development	3,204	6	1	982	2,215
Restructuring costs	232	−	232	−	−
Other (income) expense, net	35	6	–	−	29

GAAP Expense, EPS and Related Information

Gross margin was 72.3% for the third quarter of 2020 compared to 67.8% for the third quarter of 2019. The increase reflects lower acquisition- and divestiture-related costs and the favorable effect of product mix, partially offset by the unfavorable effects of pricing pressure, inventory write-offs, higher amortization of intangible assets related to collaborations and foreign exchange.

Selling, general and administrative expenses were $2.5 billion in the third quarter of 2020, a decrease of 5% compared to the third quarter of 2019. The decrease primarily reflects lower administrative and selling costs, including less travel and meeting expenses, due in part to the COVID-19 pandemic, partially offset by higher acquisition- and divestiture-related costs, primarily reflecting costs related to the company’s planned spinoff of Organon.

Research and development expenses were $3.4 billion in the third quarter of 2020, an increase of 6% compared with the third quarter of 2019. The increase was primarily driven by higher upfront payments related to collaborations and license agreements, higher expenses related to clinical development and increased investment in discovery research and early drug development, partially offset by lower charges for the acquisitions of businesses, as well as lower laboratory, travel and meeting expenses due to the COVID-19 pandemic.

Other (income) expense, net, was $312 million of income in the third quarter of 2020 compared to $35 million of expense in the third quarter of 2019, primarily due to higher income from investments in equity securities, net, which was $360 million in 2020 compared with $16 million in 2019, largely from the recognition of unrealized gains on securities.

The effective income tax rate was 14.1% for the third quarter of 2020 compared to 18.7% in the third quarter of 2019. The effective income tax rate in 2019 reflects the unfavorable impact of a charge for the acquisition of Peloton Therapeutics, Inc. (Peloton) for which no tax benefit was recognized.

GAAP EPS was $1.16 for the third quarter of 2020 compared with $0.74 for the third quarter of 2019.

Non-GAAP Expense, EPS and Related Information

Non-GAAP gross margin was 74.8% for the third quarter of 2020 compared to 75.9% for the third quarter of 2019. The decrease in non-GAAP gross margin reflects the unfavorable effects of pricing pressure, inventory write-offs, higher amortization of intangible assets related to collaborations and foreign exchange, partially offset by the favorable effect of product mix.

Non-GAAP selling, general and administrative expenses were $2.2 billion in the third quarter of 2020, a decrease of 13% compared to the third quarter of 2019. The decrease primarily reflects lower administrative and selling costs, including less travel and meeting expenses, due in part to the COVID-19 pandemic.

Non-GAAP R&D expenses were $2.3 billion in the third quarter of 2020, a 3% increase compared to the third quarter of 2019. The increase was primarily driven by higher expenses related to clinical development and increased investment in discovery research and early drug development, partially offset by lower laboratory, travel and meeting expenses due to the COVID-19 pandemic.

Contacts

Media:

Pamela Eisele

(267) 305-3558

Patrick Ryan

(201) 452-2409

Investors:

Peter Dannenbaum

(908) 740-1037

Michael DeCarbo

(908) 740-1807

Read full story here

Tags #MRK, #MSD, Financial, Merck, NYSE, Revenue, Third Quarter 2020, Third Quarter 2020#MRK

Business

Tegra118 and Red Rock Strategic Partners join forces to help firms drive growth and improve advisor-client engagement

Post author By Michelle Dryden
Post date October 15, 2020
No Comments on Tegra118 and Red Rock Strategic Partners join forces to help firms drive growth and improve advisor-client engagement

Strategic partnership helps firms and advisors gain untapped value from technology to accelerate growth, reduce expenses and enhance client experiences

WARREN, N.J.–(BUSINESS WIRE)–Tegra118, a top provider of wealth and asset management technology and Motive Partners company, today announced a partnership with Red Rock Strategic Partners providing comprehensive and results-driven approaches for firms to accelerate growth, foster technology adoption and increase sales opportunities. Through a collaborative alliance, Tegra118 and Red Rock Strategic Partners will perform “health checks” for firms to help identify the best strategy for their business and find value in technology investments to propel growth and create better advisor-client experiences.

The partnership will help firms and their leaders address challenges related to:

Utilizing and monetizing the investments in tools, resources and technology
Addressing the needs of advisors and clients relating to current platforms and service model
Identifying growth opportunities with maximum efficiency and results
Delivering an omnichannel client experience to keep pace with changing needs and demands

“We are in sync with Red Rock Strategic Partners and eager to help our clients gain maximum efficiencies and identify new growth opportunities,” said Tito Singh, Chief Revenue Officer, Tegra118. “As an extension of our Tegra118 team, Red Rock Strategic Partners will help our clients take full advantage of the tools and solutions they use by demonstrating easy to use applications, creating new workflows for improved productivity and establishing real return on investment strategies. Tegra118’s technology combined with Red Rock Strategic Partner’s expertise will deliver limitless opportunities to clients.”

Red Rock Strategic Partners CEO Matt Johnston added, “Working closely with financial institutions that span the spectrum of the industry, leaders are reimagining profitable distribution. We believe Tegra118 has a unique capacity to deliver forward-thinking, integrated and modern technology solutions in a holistic manner that offers exceptional experiences to advisors and clients and optimizes growth potential. Our partnership allows for focus on full platform adoption, advancing the skills and capabilities that advisors bring to their clients to drive profitable revenue growth, advisor retention, client expansion and satisfaction. We couldn’t be more excited to begin our journey with Tegra118.”

About Tegra118

Tegra118 is an industry leading provider of software solutions to the wealth and asset management industry with a vast network of broker-dealers, asset managers, and custodians and trading interfaces. Its technology platform provides portfolio management, trading, accounting, rebalancing and reporting for managed accounts. Tegra118 also provides modular, goals-based financial planning, performance reporting and fee billing software for financial advisors and asset managers using modern API-based open technology. Tegra118 is committed to delivering powerful solutions that set a new standard for how people interact with, manage, and grow their wealth.

Tegra118 is a Motive Partners company, a specialist private equity firm with offices in New York City and London, focused on technology-enabled business and financial services companies. Please visit www.tegra118.com.

About Red Rock Strategic Partners

Red Rock Strategic Partners operates as an advisor to wealth and asset management firms and their leaders focusing on opportunities to accelerating profitable revenue growth. Red Rock assists with core business strategy, refinements and modifications to a firms operating model and business platforms including technology leverage, assists in driving productivity and the full utilization of technology solutions as well as supporting business leaders’ growth objectives. Red Rock Strategic Partners is a privately held company located in Atlanta, Georgia.

Contacts

Media Relations:
Tricia Viola

Vice President, Marketing

Tegra118

Tel: 201 253 3389

tricia.viola@fiserv.com

Tags #Investments, #Wealth, Advisor-Client, Red Rock Strategic Partners, Revenue, Technology, Tegra118, Tegra118#Investments

Local News

Why independent bloggers need DEI from funders

Post author By Michelle Dryden
Post date September 20, 2020
No Comments on Why independent bloggers need DEI from funders

The news media landscape has been evolving, where independent bloggers and freelancers are an essential part of the news ecosystem, which supports our democracy.

Nevertheless, due to the new digital era and the independent roles that have been established, some bloggers and journalists are experiencing revenue disadvantages in funding for small blog businesses, and from advertisement networks such as Google AdSense.

They lack diversity, equity and inclusion (DEI).

An example of the changes in the journalism industry exists even with the New York Times that has transitioned from a traditional newsroom with a large daily newspaper circulation, to include a robust digital online presence nowadays. Many other publications these days do not even have print copies but are now only online.

With emerging online news options, the entire business at large continues to change. Headlines and news leads no longer strictly adhere to traditional Associated Press (AP) rules, in terms of length and forbidden English articles such as “the,” “a” and “an.” The game is so different now because the Internet provides unlimited space for content.

But with so much in and a lot more gone from our newsrooms, who will be paying for the new technology and those using it for freelance and independent work?

Is the answer the collaboratives such as The Lenfest Institute and Facebook Journalism Project?

“The Lenfest Institute team was hired in Sept. 2016, and our first major grant program was 2017,’’ stated Jim Friedlich, who is part of the Lenfest-FJP team.

Many other organizations such as grant funders for Journalism projects and initiatives are on the rise to endeavor in assisting with business costs and revenues. But who gets these funds? Do all eligible and qualified journalists get their fair share? The answer is, NO!

The Google News Initiative, for example, tries to be inclusive with each of their different funding projects.

“We try to fund for a diversity of applicants, so we change the themes, too: From local and technology to diversity equity and inclusion,” explained Madhav Chinnappa, director of News Ecosystem Development at GNI.

The GNI has been funding innovative Journalism projects for a few years now, and since the COVID-19 Pandemic, it even funded journalists just to help with emergency revenues. But still, the DEI efforts to fund all eligible applicants have not been fully successful.

This is where we experience the adverse effects of traditional journalism out, and digital in. With all the newspaper industry changes and the issues of downsizing, the Internet has replaced a lot of manpower, or people needed for newsroom jobs.

So, now we have social media, bloggers, and independent Journalists doing the traditional newsroom jobs that must go on in a digital era. This is a big deal. Everyone now has a stronger voice. Democracy is very much alive. But not everyone is getting paid.

Journalist are still carrying on the voice of their local newspapers in a digital way. The problem is, who pays the digital journalists now? How do bloggers and Independent Journalist get paid for helping to keep our democracy functioning?

There are a few true and tried methods for revenue: Of course, the grant funders make an effort; also do the advertisement networks such as Google AdSense and others, and thanks to readers’ contributions.

But all that is not enough when some independent journalists are constantly working and posting their stories but are not making a living wage. It seems this disparity affects minorities because of the built-in systematic injustices that are tied into the new journalism revenue systems.

Grant funding is never guaranteed even though minority applicants are very eligible and over-qualified. Neither are the payments from Google AdSense diverse, equitable or inclusive. Minority journalists always have to compete for a paycheck. This is a huge discrepancy in the revenue system and for our shared democracy.

Although Chinnappa states that Google Adsense does not intentionally lack DEI, and “that it is definitely not the intent in any of (Google) products,” to show disparity, some Journalist are just not happy with the current revenue system that significantly limits payments for those who work, but are not as accepted or as popular.

Our democracy needs all our voices, not just some. That’s why voting matters for all, and so does journalism.

Now, with everyone having a place online to speak up and help to contribute to a variety of discourses, communities have a greater sense of our common humanity, and a better understanding of who we all are, and our place and purpose in society.

All people matter. All of our voices and our purposes matter.

Tags #DigitalJournalism, #FJP, #GNI, #Grants, #Newsrooms, COVID-19, Facebook Journalism Project, Funders, Google News Initiative, Grant Funding, journalism, Revenue, The Lenfest Institute, traditional, traditional#DigitalJournalism

Business

Dun & Bradstreet reports second quarter 2020 financial results

Post author By Michelle Dryden
Post date August 6, 2020
No Comments on Dun & Bradstreet reports second quarter 2020 financial results

SHORT HILLS, N.J.–(BUSINESS WIRE)–Dun & Bradstreet Holdings, Inc. (NYSE: DNB), a leading global provider of business decisioning data and analytics, today announced unaudited financial results for the second quarter ended June 30, 2020. A reconciliation of U.S. generally accepted accounting principles (“GAAP”) to non-GAAP financial measures has been provided in this press release, including the accompanying tables. An explanation of these measures is also included below under the heading “Use of Non-GAAP Financial Measures.”

Revenue of $420.6 million, up 5.4%, and up 5.6% on a constant currency basis; which includes the net impact of lower deferred revenue purchase accounting adjustments of $35.9 million.

Net loss of $207.1 million, or diluted loss per share of $0.66, and adjusted net income of $81.6 million, or adjusted diluted earnings per share of $0.26.

Adjusted EBITDA of $176.1 million, up 18.5%, and adjusted EBITDA margin of 41.9%, an increase of 470 basis points; which includes the net impact of lower deferred revenue purchase accounting adjustments of $35.9 million.

Completed initial public offering and concurrent private placement of $400.0 million in July, raising net proceeds of $2.2 billion.

Dun & Bradstreet Chairman Bill Foley said, “Our recent IPO was a significant milestone for the company, and another step forward as part of our longer journey of transformation. We are excited about the opportunities that lie ahead at Dun & Bradstreet as we work to drive long-term value and sustained growth.”

Dun & Bradstreet CEO Anthony Jabbour said, “Our performance for the quarter was in line with expectations and we continue to make significant progress in our transformation that ultimately supports our long-term strategic goals. Despite a challenging macro-economic environment, our core business fundamentals remained strong and we continue to be uniquely positioned to support our customers through these difficult times.”

Second Quarter 2020 Segment Results

North America

North America revenue was $354.3 million, a decrease of 1.8% as reported and on a constant currency basis. Finance and Risk revenue was $193.6 million, a decrease of 3.6%, and a decrease of 3.5% on a constant currency basis driven by structural changes we made within our legacy Credibility solutions and the impact of COVID-19 on usage volumes. Sales and Marketing revenue was $160.7 million, an increase of 0.4% as reported and on a constant currency basis. North America adjusted EBITDA was $170.1 million, a decrease of 2.8%, with adjusted EBITDA margin of 48.0%, a decrease of 50 basis points.

International

International revenue was $68.4 million, a decrease of 9.9%, and a decrease of 8.9% on a constant currency basis. Finance and Risk revenue was $55.9 million, a decrease of 12.4%, and a decrease of 11.3% on a constant currency basis primarily driven by lower non-recurring revenues in the Worldwide Network along with the impact of COVID-19 on usage volumes. Sales and Marketing revenue was $12.5 million, an increase of 3.5% and an increase of 3.6% on a constant currency basis. International adjusted EBITDA was $20.2 million, a decrease of 26.7%, with adjusted EBITDA margin of 29.5%, a decrease of 670 basis points.

Balance Sheet

As of June 30, 2020, we had cash and cash equivalents of $99.8 million and total debt of $4,061 million. As of June 30, 2020, we had available capacity of $312.5 million on our revolving credit facility.

On July 6, 2020, Dun & Bradstreet completed its initial public offering at an offering price of $22.00 per share. The Company issued 90.0 million shares, including the additional 11.7 million shares purchased by the underwriters resulting from the exercise of their overallotment option. In addition, the Company issued 18.5 million shares in connection with the $400 million concurrent private placement which resulted in net proceeds of $2.2 billion after deducting underwriting discounts and IPO related expenses. Dun & Bradstreet used a portion of the net proceeds to redeem all of its outstanding Series A Preferred Stock and repay $300.0 million of its 10.250% Senior Unsecured Notes outstanding due 2027.

Business Outlook

Dun & Bradstreet’s full year 2020 outlook is as follows:

Revenue is expected to be in the range of $1,729 million to $1,759 million.
Adjusted EBITDA is expected to be in the range of $704 million to $724 million.
Revenue and adjusted EBITDA include a ($21) million impact from deferred revenue purchase accounting, in both the low and high ends of the range.
Adjusted EPS is expected to be in the range of $0.89 to $0.93.
Adjusted EPS includes a $(0.04) impact from deferred revenue purchase accounting, in both the low and high ends of the range.

The foregoing forward-looking statements reflect Dun & Bradstreet’s expectations as of today’s date and Revenue assumes constant foreign currency rates. Given the number of risk factors, uncertainties and assumptions discussed below, actual results may differ materially. Dun & Bradstreet does not intend to update its forward-looking statements until its next quarterly results announcement, other than in publicly available statements.

Earnings Conference Call and Audio Webcast

Dun & Bradstreet will host a conference call to discuss the second quarter 2020 financial results on August 6, 2020 at 8:30 a.m. ET. The conference call can be accessed live over the phone by dialing 833-350-1376, or for international callers 647-689-6655. A replay will be available from 11:30 a.m. ET on August 6, 2020, through August 13, 2020, by dialing 800-585-8367, or for international callers 416-621-4642. The replay passcode will be 7189713.

The call will also be webcast live from Dun & Bradstreet’s investor relations website at https://investor.dnb.com. Following the completion of the call, a recorded replay of the webcast will be available on the website.

About Dun & Bradstreet

Dun & Bradstreet, a leading global provider of business decisioning data and analytics, enables companies around the world to improve their business performance. Dun & Bradstreet’s Data Cloud fuels solutions and delivers insights that empower customers to accelerate revenue, lower cost, mitigate risk, and transform their businesses. Since 1841, companies of every size have relied on Dun & Bradstreet to help them manage risk and reveal opportunity. For more information on Dun & Bradstreet, please visit www.dnb.com.

Use of Non-GAAP Financial Measures

In addition to reporting GAAP results, we evaluate performance and report our results on the non-GAAP financial measures discussed below. We believe that the presentation of these non-GAAP measures provides useful information to investors and rating agencies regarding our results, operating trends and performance between periods. These non-GAAP financial measures include adjusted revenue, adjusted earnings before interest, taxes, depreciation and amortization (‘‘adjusted EBITDA’’), adjusted EBITDA margin and adjusted net income. Adjusted results are non-GAAP measures that adjust for the impact due to purchase accounting application and divestitures, restructuring charges, equity-based compensation, acquisition and divestiture-related costs (such as costs for bankers, legal fees, due diligence, retention payments and contingent consideration adjustments) and other non-core gains and charges that are not in the normal course of our business (such as gains and losses on sales of businesses, impairment charges, effect of significant changes in tax laws and material tax and legal settlements). We exclude amortization of recognized intangible assets resulting from the application of purchase accounting because it is non-cash and not indicative of our ongoing and underlying operating performance. Recognized intangible assets arise from acquisitions, or primarily the Take-Private Transaction. We believe that recognized intangible assets by their nature are fundamentally different from other depreciating assets that are replaced on a predictable operating cycle. Unlike other depreciating assets, such as developed and purchased software licenses or property and equipment, there is no replacement cost once these recognized intangible assets expire and the assets are not replaced. Additionally, our costs to operate, maintain and extend the life of acquired intangible assets and purchased intellectual property are reflected in our operating costs as personnel, data fee, facilities, overhead and similar items. Management believes it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation. Amortization of recognized intangible assets will recur in future periods until such assets have been fully amortized. In addition, we isolate the effects of changes in foreign exchange rates on our revenue growth because we believe it is useful for investors to be able to compare revenue from one period to another, both after and before the effects of foreign exchange rate changes. The change in revenue performance attributable to foreign currency rates is determined by converting both our prior and current periods’ foreign currency revenue by a constant rate. As a result, we monitor our adjusted revenue growth both after and before the effects of foreign exchange rate changes. We believe that these supplemental non-GAAP financial measures provide management and other users with additional meaningful financial information that should be considered when assessing our ongoing performance and comparability of our operating results from period to period. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the factors management uses in planning for and forecasting future periods. Non-GAAP financial measures should be viewed in addition to, and not as an alternative to our reported results prepared in accordance with GAAP.

Our non-GAAP or adjusted financial measures reflect adjustments based on the following items, as well as the related income tax.

Adjusted Revenue

We define adjusted revenue as revenue adjusted to include revenue for the period from January 8 to February 7, 2019 (‘‘International lag adjustment’’) for the Predecessor related to the lag reporting for our International operations. On a GAAP basis, we report International results on a one-month lag, and for 2019 the Predecessor period for International is December 1, 2018 through January 7, 2019. The Successor period for International is February 8, 2019 (commencing on the closing date of the Take-Private Transaction) through November 30, 2019 for the Successor period from January 1, 2019 to December 31, 2019. The International lag adjustment is to facilitate comparability of 2019 periods to 2020 periods.

Adjusted EBITDA and Adjusted EBITDA Margin

We define adjusted EBITDA as net income (loss) attributable to Dun & Bradstreet Holdings, Inc. (Successor) / The Dun & Bradstreet Corporation (Predecessor) excluding the following items:

depreciation and amortization;

interest expense and income;

income tax benefit or provision;

other expenses or income;

equity in net income of affiliates;

net income attributable to non-controlling interests;

dividends allocated to preferred stockholders;

revenue and expense adjustments to include results for the period from January 8 to February 7, 2019, for the Predecessor related to the International lag adjustment (see above discussion);

other incremental or reduced expenses from the application of purchase accounting (e.g. commission asset amortization);

equity-based compensation;

restructuring charges;

merger and acquisition-related operating costs;

transition costs primarily consisting of non-recurring incentive expenses associated with our synergy program;

legal reserve and costs associated with significant legal and regulatory matters; and

asset impairment.

We calculate adjusted EBITDA margin by dividing adjusted EBITDA by adjusted revenue.

Adjusted Net Income

We define adjusted net income as net income (loss) attributable to Dun & Bradstreet Holdings, Inc. (Successor) / The Dun & Bradstreet Corporation (Predecessor) adjusted for the following items:

revenue and expense adjustments to include results for the period from January 8 to February 7, 2019, for the Predecessor related to the International lag adjustment (see above discussion);

incremental amortization resulting from the application of purchase accounting. We exclude amortization of recognized intangible assets resulting from the application of purchase accounting because it is non-cash and is not indicative of our ongoing and underlying operating performance. The Company believes that recognized intangible assets by their nature are fundamentally different from other depreciating assets that are replaced on a predictable operating cycle. Unlike other depreciating assets, such as developed and purchased software licenses or property and equipment, there is no replacement cost once these recognized intangible assets expire and the assets are not replaced. Additionally, the Company’s costs to operate, maintain and extend the life of acquired intangible assets and purchased intellectual property are reflected in the Company’s operating costs as personnel, data fee, facilities, overhead and similar items;

other incremental or reduced expenses from the application of purchase accounting (e.g. commission asset amortization);

equity-based compensation;

restructuring charges;

merger and acquisition-related operating costs;

transition costs primarily consisting of non-recurring incentive expenses associated with our synergy program;

legal reserve and costs associated with significant legal and regulatory matters;

change in fair value of the make-whole derivative liability associated with the Series A Preferred Stock;

asset impairment;

non-recurring pension charges, related to pension settlement charge and actuarial loss amortization eliminated as a result of the Take-Private Transaction;

dividends allocated to preferred stockholders;

merger, acquisition and divestiture-related non-operating costs;

debt refinancing and extinguishment costs; and

tax effect of the non-GAAP adjustments and the impact resulting from the enactment of the CARES Act.

Adjusted Net Earnings per Diluted Share

We calculate adjusted net earnings per diluted share by dividing adjusted net income (loss) by the weighted average number of common shares outstanding for the period plus the dilutive effect of common shares potentially issuable in connection with awards outstanding under our stock incentive plan. For consistency purposes, we assume the stock split effected on June 23, 2020 at the beginning of each of the Predecessor periods.

Forward-Looking Statements

The statements contained in this release that are not purely historical are forward-looking statements, including statements regarding expectations, hopes, intentions or strategies regarding the future. Forward-looking statements are based on Dun & Bradstreet’s management’s beliefs, as well as assumptions made by, and information currently available to, them. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods, or by the inclusion of forecasts or projections. Examples of forward-looking statements include, but are not limited to, statements we make regarding the outlook for our future business and financial performance. Because such statements are based on expectations as to future financial and operating results and are not statements of fact, actual results may differ materially from those projected. It is not possible to predict or identify all risk factors. Consequently, the risks and uncertainties listed below should not be considered a complete discussion of all of our potential trends, risks and uncertainties. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

The risks and uncertainties that forward-looking statements are subject to include, but are not limited to: (i) an outbreak of disease, global or localized health pandemic or epidemic, or the fear of such an event (such as the COVID-19 global pandemic), including the global economic uncertainty and measures taken in response; (ii) the short- and long-term effects of the COVID-19 global pandemic, including the pace of recovery or any future resurgence; (iii) our ability to implement and execute our strategic plans to transform the business; (iv) our ability to develop or sell solutions in a timely manner or maintain client relationships; (v) competition for our solutions; (vi) harm to our brand and reputation; (vii) unfavorable global economic conditions; (viii) risks associated with operating and expanding internationally; (ix) failure to prevent cybersecurity incidents or the perception that confidential information is not secure; (x) failure in the integrity of our data or systems; (xi) system failures and personnel disruptions, which could delay the delivery of our solutions to our clients; (xii) loss of access to data sources; (xiii) failure of our software vendors and network and cloud providers to perform as expected or if our relationship is terminated; (xiv) loss or diminution of one or more of our key clients, business partners or government contracts; (xv) dependence on strategic alliances, joint ventures and acquisitions to grow our business; (xvi) our ability to protect our intellectual property adequately or cost-effectively; (xvii) claims for intellectual property infringement; (xviii) interruptions, delays or outages to subscription or payment processing platforms; (xix) risks related to acquiring and integrating businesses and divestitures of existing businesses; (xx) our ability to retain members of the senior leadership team and attract and retain skilled employees; (xxi) compliance with governmental laws and regulations; (xxii) risks associated with our structure and status as a “controlled company;” and (xxiii) the other factors described under the headings “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Cautionary Note Regarding Forward-Looking Statements” and other sections of our final prospectus dated June 30, 2020 and filed with the Securities and Exchange Commission on July 2, 2020, in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 and the Company’s subsequent filings with the Securities and Exchange Commission.


Dun & Bradstreet Holdings, Inc.
Condensed Consolidated Statement of Operations (Unaudited)
(Amounts in millions, except per share data)

	Three-Month Period						Six-Month Period

	Successor												Predecessor
	Three Months Ended June 30, 2020			Three Months Ended June 30, 2019			Six Months Ended June 30, 2020			Period from January 1 to June 30, 2019			Period from January 1 to February 7, 2019
Revenue	$	420.6		$	398.9		$	815.9		$	573.0		$	178.7
Operating expenses	139.2			127.8			278.1			192.2			56.7
Selling and administrative expenses	143.4			126.0			269.3			339.6			122.4
Depreciation and amortization	132.6			136.8			266.9			217.3			11.1
Restructuring charge	6.8			17.4			11.3			35.9			0.1
Operating costs	422.0			408.0			825.6			785.0			190.3
Operating income (loss)	(1.4		)	(9.1		)	(9.7		)	(212.0		)	(11.6		)
Interest income	0.2			0.6			0.5			1.6			0.3
Interest expense	(78.0		)	(86.0		)	(161.0		)	(135.0		)	(5.5		)
Other income (expense) – net	(122.7		)	8.1			(32.7		)	12.3			(86.0		)
Non-operating income (expense) – net	(200.5		)	(77.3		)	(193.2		)	(121.1		)	(91.2		)
Income (loss) before provision (benefit) for income taxes and equity in net income of affiliates	(201.9		)	(86.4		)	(202.9		)	(333.1		)	(102.8		)
Less: provision (benefit) for income taxes	(27.5		)	(23.1		)	(101.8		)	(60.1		)	(27.5		)
Equity in net income of affiliates	0.6			2.8			1.2			2.9			0.5
Net income (loss)	(173.8		)	(60.5		)	(99.9		)	(270.1		)	(74.8		)
Less: net (income) loss attributable to the non-controlling interest	(1.2		)	(1.5		)	(1.6		)	(1.9		)	(0.8		)
Less: Dividends allocated to preferred stockholders	(32.1		)	(32.0		)	(64.1		)	(49.9		)	—
Net income (loss) attributable to Dun & Bradstreet Holdings, Inc. (Successor) / The Dun & Bradstreet Corporation (Predecessor)	(207.1		)	(94.0		)	(165.6		)	(321.9		)	(75.6		)
Basic earnings (loss) per share of common stock:
Net income (loss) attributable to Dun & Bradstreet Holdings, Inc. (Successor) / The Dun & Bradstreet Corporation (Predecessor)	$	(0.66	)	$	(0.30	)	$	(0.53	)	$	(1.02	)	$	(2.04	)
Diluted earnings (loss) per share of common stock:
Net income (loss) attributable to Dun & Bradstreet Holdings, Inc. (Successor) / The Dun & Bradstreet Corporation (Predecessor)	$	(0.66	)	$	(0.30	)	$	(0.53	)	$	(1.02	)	$	(2.04	)
Weighted average number of shares outstanding-basic	314.5			314.5			314.5			314.5			37.2
Weighted average number of shares outstanding-diluted	314.5			314.5			314.5			314.5			37.2

Dun & Bradstreet Holdings, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(Amounts in millions, except share data and per share data)

	June 30, 2020		December 31, 2019
Assets
Current assets
Cash and cash equivalents	$	99.8	$	98.6
Accounts receivable, net of allowance of $10.1 at June 30, 2020 and $7.3 at December 31, 2019 (Note 3)	246.2		269.3
Other receivables	7.9		10.0
Prepaid taxes	91.8		4.0
Other prepaids	36.8		31.4
Other current assets	6.5		4.6
Total current assets	489.0		417.9
Non-current assets
Property, plant and equipment, net of accumulated depreciation of $12.0 at June 30, 2020 and $7.5 at December 31, 2019	28.1		29.4
Computer software, net of accumulated amortization of $85.5 at June 30, 2020 and $52.9 at December 31, 2019	391.8		379.8
Goodwill	2,848.0		2,840.1
Deferred income tax	13.7		12.6
Other intangibles	5,022.3		5,251.4
Deferred costs	61.5		47.0
Other non-current assets	130.7		134.6
Total non-current assets	8,496.1		8,694.9
Total assets	$	8,985.1	$	9,112.8
Liabilities
Current liabilities
Accounts payable	$	59.9	$	55.0
Accrued payroll	59.8		137.9
Accrued income tax	23.2		7.8
Short-term debt	325.3		81.9
Cumulative Series A Preferred Stock redemption liability	1,067.9		—
Make-whole derivative liability	205.2		172.4
Other accrued and current liabilities	191.5		167.3
Deferred revenue	520.8		467.5
Total current liabilities	2,453.6		1,089.8
Long-term pension and postretirement benefits	185.7		206.6
Long-term debt	3,620.8		3,818.9
Liabilities for unrecognized tax benefits	17.1		16.8
Deferred income tax	1,187.8		1,233.5
Other non-current liabilities	131.1		137.7
Total liabilities	7,596.1		6,503.3
Commitments and contingencies

Cumulative Series A Preferred Stock $0.001 par value per share,1,050,000 shares authorized and issued at June 30, 2020 and December 31, 2019; Liquidation Preference of $1,067.9 at June 30, 2020 and December 31, 2019	—		1,031.8
Equity
Successor Common Stock, $0.0001 par value per share, authorized—2,000,000,000 shares; issued— 314,494,968 shares	—		—
Capital surplus	2,043.9		2,116.9
Accumulated deficit	(675.0)		(573.5)
Accumulated other comprehensive loss	(37.8)		(23.5)
Total stockholder equity	1,331.1		1,519.9
Non-controlling interest	57.9		57.8
Total equity	1,389.0		1,577.7
Total liabilities and stockholder equity	$	8,985.1	$	9,112.8

Contacts

Media:

Lisette Kwong

973-921-6263

KwongL@dnb.com

Investors:

Debra McCann

973-921-6008

IR@dnb.com

Read full story here

Tags #Results, Business, Dun & Bradstreet, EBITDA, Financial, Holdings, Management, Marketing, non-GAAP, North America, Revenue, sales, sales#Results

Business

Zoetis announces second quarter 2020 results

Post author By Michelle Dryden
Post date August 6, 2020
No Comments on Zoetis announces second quarter 2020 results

Reports Flat Revenue of $1.5 Billion, and Net Income of $377 Million, or $0.79 per Diluted Share, Increasing 2% and 3%, Respectively, on a Reported Basis for Second Quarter 2020
Reports Adjusted Net Income of $427 Million, or Adjusted Diluted EPS of $0.89 for Second Quarter 2020
Delivers 4% Operational Growth in Revenue and 4% Operational Growth in Adjusted Net Income for Second Quarter 2020
Raises and Narrows Full Year 2020 Revenue Guidance to $6.300 – $6.475 Billion and Diluted EPS of $3.14 – $3.32 on a Reported Basis, or $3.52 – $3.68 on an Adjusted Basis

PARSIPPANY, N.J.–(BUSINESS WIRE)–$ZTS #animalhealth—Zoetis Inc. (NYSE: ZTS) today reported its financial results for the second quarter of 2020 and raised and narrowed its guidance for full year 2020 to reflect the company’s current view of the estimated full-year impact of the COVID-19 pandemic and foreign currency headwinds.

The company reported revenue of $1.5 billion for the second quarter of 2020, which is flat compared with the second quarter of 2019. Net income for the second quarter of 2020 was $377 million, or $0.79 per diluted share, an increase of 2% and 3%, respectively, on a reported basis.

Adjusted net income¹ for the second quarter of 2020 was $427 million, or $0.89 per diluted share, a decrease of 2%, on a reported basis. Adjusted net income for the second quarter of 2020 excludes the net impact of $50 million for purchase accounting adjustments, acquisition-related costs and certain significant items.

On an operational² basis, revenue for the second quarter of 2020 increased 4%, excluding the impact of foreign currency. Adjusted net income for the second quarter of 2020 increased 4% operationally, excluding the impact of foreign currency.

EXECUTIVE COMMENTARY

“As an essential business supporting the global food supply and the care of people’s pets during the pandemic, Zoetis demonstrated greater resiliency than expected in the second quarter, with 4% operational growth in revenue and 4% operational growth in adjusted net income,” said Kristin Peck, Chief Executive Officer of Zoetis. “Our strong companion animal portfolio, based on our internal innovations, helped offset some of the deeper challenges in the livestock market today.”

“Looking ahead, we expect our overall revenue growth for the remainder of the year to be driven largely by companion animal products, especially parasiticides and our key dermatology portfolio, and we are raising our guidance to reflect our current outlook for the year. We will continue to invest in products that will strengthen the innovations and digital solutions that are needed by our customers across the continuum of care – from prediction and prevention to detection and treatment of diseases,” said Peck.

QUARTERLY HIGHLIGHTS

Zoetis organizes and manages its commercial operations across two segments: United States (U.S.) and International. Within these segments, the company delivers a diverse portfolio of products for companion animals and livestock, tailored to local trends and customer needs. In the second quarter of 2020:

Revenue in the U.S. segment was $823 million, an increase of 6% compared with the second quarter of 2019. Sales of companion animal products increased 19% driven primarily by growth in the Simparica^® franchise, including the continued launch of Simparica Trio^®, the company’s new triple combination parasiticide for dogs. Also contributing to growth was the company’s key dermatology portfolio across both the Cytopoint^® and Apoquel^® brands. Additionally, companion animal sales benefited from the recent acquisitions of Platinum Performance and its nutritional product formulas, as well as a number of regional diagnostic reference labs. Sales of livestock products decreased 18% in the quarter. Disruptions in the food supply chain including reduced producer processing capacity and continued channel migration from dining out to preparing food at home impacted producer profitability and resulted in a decline across each of the cattle, swine and poultry portfolios. The decline in the cattle portfolio was also the result of continued unfavorable market conditions in beef and dairy, while swine product sales were negatively impacted by increased competition.
Revenue in the International segment was $708 million, a decrease of 5% on a reported basis and an increase of 3% operationally compared with the second quarter of 2019. Sales of companion animal products declined 3% on a reported basis and grew 2% on an operational basis. Growth resulted from increased sales of the company’s key dermatology portfolio across both the Apoquel and Cytopoint brands, as well as the Simparica franchise, including the launch of Simparica Trio in Canada and certain markets in the EU. Sales of companion animal products in China continued to grow rapidly driven by strong underlying market dynamics. Growth in companion animal products was partially offset by the impact of COVID-19 and social distancing measures in certain EU markets and in Latin America, including Brazil, that resulted in decreased veterinary clinic traffic. Sales of livestock products declined 5% on a reported basis and grew 4% operationally. Sales of swine products grew as a result of expanding herd production in key accounts and increased biosecurity measures in the wake of African Swine Fever in China. The timing of seasonal vaccination protocols in key salmon markets and the recently launched parasiticide Alpha Flux^® were the primary drivers of growth in fish. Growth in our poultry portfolio was the result of increased sales of medicated feed additives and sales of biodevices. Sales of cattle products declined in the quarter due to the impact of COVID-19 in certain markets as well as the discontinuation of non-core products in Brazil.

INVESTMENTS IN GROWTH

Zoetis diversifies and grows its business through the introduction of new products, lifecycle innovations, business development initiatives, and entries into new markets and technologies. The company is increasingly focused on developing integrated solutions for pet owners, veterinarians and farmers that span the continuum of animal care – helping to predict, prevent, detect and treat diseases.

Since our last quarterly earnings announcement, Zoetis continued to bring leading products into new markets. In Brazil, Zoetis received approval for Vanguard^® B Oral, a vaccine that aids in preventing kennel cough in dogs, as well as Excenel^® RTU EZ (ceftiofur hydrochloride), an anti-infective that treats respiratory diseases in cattle and swine. Additionally, Fostera^® Gold PCV MH was approved in Australia. This vaccine provides livestock farmers with greater options and flexibility to reduce the clinical symptoms in pigs associated with porcine circovirus (PCV2) and Mycoplasma hyopneumoniae (M. hyo). Fostera Gold PCV Metastim was also approved in Australia to reduce the clinical symptoms associated with PCV2.

In addition to new product approvals and lifecycle innovations, Zoetis continues to support future growth through business development activities. In July, the company acquired Fish Vet Group as a strategic addition to its Pharmaq business, which develops and commercializes fish vaccines and offers services in vaccination and diagnostics for aquaculture. Adding Fish Vet Group grows the geographic reach and enhances the diagnostics expertise and testing services for fish farmers in major aquaculture markets.

FINANCIAL GUIDANCE

Zoetis is raising and narrowing its full year 2020 guidance, which includes:

Revenue between $6.300 billion and $6.475 billion
Reported diluted EPS between $3.14 and $3.32
Adjusted diluted EPS between $3.52 and $3.68

This guidance reflects foreign exchange rates as of mid-July. Additional details on guidance are included in the financial tables and will be discussed on the company’s conference call this morning.

WEBCAST & CONFERENCE CALL DETAILS

Zoetis will host a webcast and conference call at 8:30 a.m. (ET) today, during which company executives will review second quarter 2020 results, discuss financial guidance and respond to questions from financial analysts. Investors and the public may access the live webcast by visiting the Zoetis website at http://investor.zoetis.com/events-presentations. A replay of the webcast will be archived and made available on Aug. 6, 2020.

About Zoetis

Zoetis is the leading animal health company, dedicated to supporting its customers and their businesses. Building on more than 65 years of experience in animal health, Zoetis discovers, develops, manufactures and commercializes medicines, vaccines and diagnostic products, which are complemented by biodevices, genetic tests and precision livestock farming. Zoetis serves veterinarians, livestock producers and people who raise and care for farm and companion animals with sales of its products in more than 100 countries. In 2019, the company generated annual revenue of $6.3 billion with approximately 10,600 employees. For more information, visit www.zoetis.com.

¹Adjusted net income and its components and adjusted diluted earnings per share (non-GAAP financial measures) are defined as reported net income attributable to Zoetis and reported diluted earnings per share, excluding purchase accounting adjustments, acquisition-related costs and certain significant items.

²Operational revenue growth (a non-GAAP financial measure) is defined as growth excluding the impact of foreign exchange.

DISCLOSURE NOTICES

Forward-Looking Statements: This press release contains forward-looking statements, which reflect the current views of Zoetis with respect to: business plans or prospects; future operating or financial performance, future guidance, future operating models; expectations regarding products, product approvals or products under development; expected timing of product launches; the potential impact of the coronavirus (COVID-19) pandemic on our business, suppliers, customers and employees; expectations regarding the performance of acquired companies and our ability to integrate new businesses; expectations regarding the financial impact of acquisitions; future use of cash and dividend payments; tax rate and tax regimes; changes in the tax regimes and laws in other jurisdictions; and other future events. These statements are not guarantees of future performance or actions. Forward-looking statements are subject to risks and uncertainties. If one or more of these risks or uncertainties materialize, or if management’s underlying assumptions prove to be incorrect, actual results may differ materially from those contemplated by a forward-looking statement. Forward-looking statements speak only as of the date on which they are made. Zoetis expressly disclaims any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. A further list and description of risks, uncertainties and other matters can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, including in the sections thereof captioned “Forward-Looking Statements and Factors That May Affect Future Results” and “Item 1A. Risk Factors,” in our Quarterly Reports on Form 10-Q and in our Current Reports on Form 8-K. Such risks and uncertainties may be amplified by the coronavirus (COVID-19) pandemic and its potential impact on the global economy and our business. These filings and subsequent filings are available online at www.sec.gov, www.zoetis.com, or on request from Zoetis.

Use of Non-GAAP Financial Measures: We use non-GAAP financial measures, such as adjusted net income, adjusted diluted earnings per share and operational results (which exclude the impact of foreign exchange), to assess and analyze our results and trends and to make financial and operational decisions. We believe these non-GAAP financial measures are also useful to investors because they provide greater transparency regarding our operating performance. The non-GAAP financial measures included in this press release should not be considered alternatives to measurements required by GAAP, such as net income, operating income, and earnings per share, and should not be considered measures of liquidity. These non-GAAP financial measures are unlikely to be comparable with non-GAAP information provided by other companies. Reconciliation of non-GAAP financial measures and GAAP financial measures are included in the tables accompanying this press release and are posted on our website at www.zoetis.com.

Internet Posting of Information: We routinely post information that may be important to investors in the ‘Investors’ section of our website at www.zoetis.com, on our Facebook page at http://www.facebook.com/zoetis and on Twitter@zoetis. We encourage investors and potential investors to consult our website regularly and to follow us on Facebook and Twitter for important information about us.

ZTS-IR

ZTS-FIN


ZOETIS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME^(a)
(UNAUDITED)
(millions of dollars, except per share data)

	Quarter Ended					Six Months Ended
	June 30,					June 30,
	2020		2019		% Change	2020		2019		% Change
Revenue	$	1,548	$	1,547	—	$	3,082	$	3,002	3
Costs and expenses:
Cost of sales	451		465		(3)	910		983		(7)
Selling, general and administrative expenses	393		406		(3)	782		775		1
Research and development expenses	111		111		—	218		213		2
Amortization of intangible assets	40		39		3	80		77		4
Restructuring charges and certain acquisition-related costs	8		22		(64)	17		27		(37)
Interest expense, net of capitalized interest	58		55		5	111		111		—
Other (income)/deductions—net	5		(6)		*	(15)		(20)		(25)
Income before provision for taxes on income	482		455		6	979		836		17
Provision for taxes on income	106		84		26	180		153		18
Net income before allocation to noncontrolling interests	376		371		1	799		683		17
Less: Net loss attributable to noncontrolling interests	(1)		—		*	(1)		—		*
Net income attributable to Zoetis	$	377	$	371	2	$	800	$	683	17

Earnings per share—basic	$	0.79	$	0.77	3	$	1.68	$	1.43	17

Earnings per share—diluted	$	0.79	$	0.77	3	$	1.67	$	1.41	18

Weighted-average shares used to calculate earnings per share
Basic	475.3		478.8			475.4		479.2
Diluted	478.1		482.3			478.6		482.7

(a)		The condensed consolidated statements of income present the quarter and six months ended June 30, 2020 and June 30, 2019. Subsidiaries operating outside the United States are included for the quarter and six months ended May 31, 2020 and May 31, 2019.
* Calculation not meaningful.


ZOETIS INC.
RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS
(UNAUDITED)
(millions of dollars, except per share data)

	Quarter Ended June 30, 2020
	GAAP Reported^(a)		Purchase Accounting Adjustments		Acquisition- Related Costs⁽¹⁾		Certain Significant Items⁽²⁾		Non-GAAP Adjusted^(b)
Cost of sales	$	451	$	(2)	$	—	$	(1)	$	448
Gross profit	1,097		2		—		1		1,100
Selling, general and administrative expenses	393		(17)		—		(4)		372
Research and development expenses	111		(1)		—		—		110
Amortization of intangible assets	40		(33)		—		—		7
Restructuring charges and certain acquisition-related costs	8		—		(7)		(1)		—
Other (income)/deductions–net	5		—		—		—		5
Income before provision for taxes on income	482		53		7		6		548
Provision for taxes on income	106		14		1		1		122
Net income attributable to Zoetis	377		39		6		5		427
Earnings per common share attributable to Zoetis–diluted	0.79		0.08		0.01		0.01		0.89

	Quarter Ended June 30, 2019
	GAAP Reported^(a)		Purchase Accounting Adjustments		Acquisition- Related Costs⁽¹⁾		Certain Significant Items⁽²⁾		Non-GAAP Adjusted^(b)
Cost of sales	$	465	$	(5)	$	—	$	(3)	$	457
Gross profit	1,082		5		—		3		1,090
Selling, general and administrative expenses	406		(18)		—		—		388
Research and development expenses	111		(1)		—		—		110
Amortization of intangible assets	39		(34)		—		—		5
Restructuring charges and certain acquisition-related costs	22		—		(22)		—		—
Other (income)/deductions–net	(6)		—		—		—		(6)
Income before provision for taxes on income	455		58		22		3		538
Provision for taxes on income	84		13		4		1		102
Net income attributable to Zoetis	371		45		18		2		436
Earnings per common share attributable to Zoetis–diluted	0.77		0.09		0.04		—		0.90

(a)		The condensed consolidated statements of income present the quarter and six months ended June 30, 2020 and June 30, 2019. Subsidiaries operating outside the United States are included for the second quarter ended May 31, 2020 and May 31, 2019.
(b)		Non-GAAP adjusted net income and its components and non-GAAP adjusted diluted EPS are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted EPS. Despite the importance of these measures to management in goal setting and performance measurement, non-GAAP adjusted net income and its components and non-GAAP adjusted diluted EPS are non-GAAP financial measures that have no standardized meaning prescribed by U.S. GAAP and, therefore, have limits in their usefulness to investors. Because of the non-standardized definitions, non-GAAP adjusted net income and its components and non-GAAP adjusted diluted EPS (unlike U.S. GAAP net income and its components and diluted EPS) may not be comparable to the calculation of similar measures of other companies. Non-GAAP adjusted net income and its components, and non-GAAP adjusted diluted EPS are presented solely to permit investors to more fully understand how management assesses performance.
See Notes to Reconciliation of GAAP Reported to Non-GAAP Adjusted Information for notes (1) and (2).


ZOETIS INC.
RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS – Continued
(UNAUDITED)
(millions of dollars, except per share data)

	Six Months Ended June 30, 2020
	GAAP Reported^(a)		Purchase Accounting Adjustments		Acquisition- Related Costs⁽¹⁾		Certain Significant Items⁽²⁾		Non-GAAP Adjusted^(b)
Cost of sales	$	910	$	(4)	$	—	$	(3)	$	903
Gross profit	2,172		4		—		3		2,179
Selling, general and administrative expenses	782		(35)		—		(6)		741
Research and development expenses	218		(1)		—		—		217
Amortization of intangible assets	80		(67)		—		—		13
Restructuring charges and certain acquisition-related costs	17		—		(14)		(3)		—
Other (income)/deductions–net	(15)		—		—		17		2
Income before provision for taxes on income	979		107		14		(5)		1,095
Provision for taxes on income	180		36		—		(2)		214
Net income attributable to Zoetis	800		71		14		(3)		882
Earnings per common share attributable to Zoetis–diluted	1.67		0.15		0.03		(0.01)		1.84

	Six Months Ended June 30, 2019
	GAAP Reported^(a)		Purchase Accounting Adjustments		Acquisition- Related Costs⁽¹⁾		Certain Significant Items⁽²⁾		Non-GAAP Adjusted^(b)
Cost of sales	$	983	$	(19)	$	—	$	(73)	$	891
Gross profit	2,019		19		—		73		2,111
Selling, general and administrative expenses	775		(36)		—		—		739
Research and development expenses	213		(1)		—		—		212
Amortization of intangible assets	77		(68)		—		—		9
Restructuring charges and certain acquisition-related costs	27		—		(27)		—		—
Other (income)/deductions–net	(20)		—		—		—		(20)
Income before provision for taxes on income	836		124		27		73		1,060
Provision for taxes on income	153		33		5		9		200
Net income attributable to Zoetis	683		91		22		64		860
Earnings per common share attributable to Zoetis–diluted	1.41		0.19		0.05		0.13		1.78

(a)		The condensed consolidated statements of income present the quarter and six months ended June 30, 2020 and June 30, 2019. Subsidiaries operating outside the United States are included for the second quarter ended May 31, 2020 and May 31, 2019.
(b)		Non-GAAP adjusted net income and its components and non-GAAP adjusted diluted EPS are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted EPS. Despite the importance of these measures to management in goal setting and performance measurement, non-GAAP adjusted net income and its components and non-GAAP adjusted diluted EPS are non-GAAP financial measures that have no standardized meaning prescribed by U.S. GAAP and, therefore, have limits in their usefulness to investors. Because of the non-standardized definitions, non-GAAP adjusted net income and its components and non-GAAP adjusted diluted EPS (unlike U.S. GAAP net income and its components and diluted EPS) may not be comparable to the calculation of similar measures of other companies. Non-GAAP adjusted net income and its components, and non-GAAP adjusted diluted EPS are presented solely to permit investors to more fully understand how management assesses performance.
See Notes to Reconciliation of GAAP Reported to Non-GAAP Adjusted Information for notes (1) and (2).


ZOETIS INC.
NOTES TO RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS
(UNAUDITED)
(millions of dollars)

(1) Acquisition-related costs include the following:

	Quarter Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Integration costs^(a)	$	6	$	8	$	12	$	9
Restructuring charges^(b)	1		14		2		18
Total acquisition-related costs—pre-tax	7		22		14		27
Income taxes^(c)	1		4		—		5
Total acquisition-related costs—net of tax	$	6	$	18	$	14	$	22

(a)		Integration costs represent external, incremental costs directly related to integrating acquired businesses and primarily include expenditures for consulting and the integration of systems and processes. Included in Restructuring charges and certain acquisition-related costs.
(b)		Represents employee termination costs, included in Restructuring charges and certain acquisition-related costs.
(c)		Included in Provision for taxes on income. Income taxes include the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pre-tax amounts and applying that jurisdiction’s applicable tax rate. For the six months ended June 30, 2020, also includes a tax charge related to a remeasurement of deferred taxes resulting from the integration of acquired businesses.

(2) Certain significant items include the following:

	Quarter Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Operational efficiency initiative^(a)	$	—	$	—	$	(17)	$	—
Supply network strategy^(b)	1		3		3		5
Other restructuring charges and cost-reduction/productivity initiatives^(c)	1		—		3		—
Other^(d)	4		—		6		68
Total certain significant items—pre-tax	6		3		(5)		73
Income taxes^(e)	1		1		(2)		9
Total certain significant items—net of tax	$	5	$	2	$	(3)	$	64

(a)		Represents a net gain resulting from net cash proceeds received pursuant to an agreement related to the 2016 sale of certain U.S. manufacturing sites, included in Other (income)/deductions-net.
(b)		Represents consulting fees, included in Cost of sales, related to cost-reduction and productivity initiatives.
(c)		Represents employee termination costs incurred as a result of the CEO transition, included in Restructuring charges and certain acquisition-related costs.
(d)		For the quarter and six months ended June 30, 2020, primarily represents the modification of share-based compensation related to CEO transition costs, included in Selling, general and administrative expenses. For the six months ended June 30, 2019, represents a change in estimate related to inventory costing, included in Cost of sales.
(e)		Included in Provision for taxes on income. Income taxes include the tax effect of the associated pre-tax amounts, calculated by determining the jurisdictional location of the pretax amounts and applying that jurisdiction’s applicable tax rate.

Contacts

Media Contacts:

Bill Price

1-973-443-2742 (o)

william.price@zoetis.com

Kristen Seely

1-973-443-2777 (o)

kristen.seely@zoetis.com

Investor Contacts:

Steve Frank

1-973-822-7141 (o)

steve.frank@zoetis.com

Keith Gaub

1-973-822-7154 (o)

keith.gaub@zoetis.com

Read full story here

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