Jazz Pharmaceuticals Announces Full Year And Fourth Quarter 2017 Financial Results

Published: Feb 27, 2018

DUBLIN, Feb. 27, 2018 /PRNewswire/ -- Jazz Pharmaceuticals plc (Nasdaq: JAZZ) today announced financial results for the full year and the fourth quarter of 2017 and provided financial guidance for 2018.

"2017 was a pivotal year for Jazz as we delivered record revenues while achieving two global regulatory approvals, launching an innovative new treatment for AML and advancing numerous early- and late-stage development programs," said Bruce Cozadd, chairman and chief executive officer of Jazz Pharmaceuticals. "We enter 2018 energized by the strong U.S. launch of Vyxeos and the early enthusiasm we've seen from the prescriber community; prepared for executing on Xyrem growth opportunities; looking forward to continuing the progress we've made in our pre-clinical and clinical development programs; excited about advancing solriamfetol through the regulatory approval process; and financially nimble to aggressively pursue opportunities to further diversify our commercial and R&D portfolio."

GAAP net income for 2017 was $487.8 million, or $7.96 per diluted share, compared to $396.8 million, or $6.41 per diluted share, for 2016. GAAP net income for the fourth quarter of 2017 was $232.2 million, or $3.79 per diluted share, compared to $116.7 million, or $1.91 per diluted share, for the fourth quarter of 2016.

Adjusted net income for 2017 was $676.7 million, or $11.04 per diluted share, compared to $627.2 million, or $10.14 per diluted share, for 2016. Adjusted net income for the fourth quarter of 2017 was $180.5 million, or $2.95 per diluted share, compared to $165.6 million, or $2.71 per diluted share, for the fourth quarter of 2016.

In the full year and fourth quarter 2017, the company recorded a net tax benefit on a GAAP basis of $148.8 million, or $2.43 per diluted share, resulting from provisional estimates based on the company's analysis of the U.S. Tax Cuts and Jobs Act (U.S. Tax Act). Given the significant complexity of the U.S. Tax Act, anticipated guidance from the U.S. Department of Treasury, and the potential for additional guidance from the U.S. Securities and Exchange Commission and/or the Financial Accounting Standards Board related to the U.S. Tax Act, these provisional estimates may be adjusted during 2018. The net tax benefit resulting from the U.S. Tax Act has been excluded from adjusted net income and the related per share measures for the full year and fourth quarter 2017.

Financial Highlights

                           Three Months Ended                    Year Ended
                              December 31,                      December 31,
                              ------------                      ------------

    (In thousands,
     except per share
     amounts and
     percentages)     2017                    2016 Change   2017             2016 Change
                      ----                    ---- ------   ----             ---- ------

    Total revenues            $436,399             $396,621      10%              $1,618,693 $1,487,973  9%

    GAAP net income           $232,207             $116,689      99%                $487,848   $396,831 23%

    Adjusted net
     income                   $180,493             $165,637       9%                $676,718   $627,162  8%

    GAAP EPS                     $3.79                $1.91      98%                   $7.96      $6.41 24%

    Adjusted EPS                 $2.95                $2.71       9%                  $11.04     $10.14  9%

Total Revenues

                                           Three Months Ended                   Year Ended
                                              December 31,                     December 31,
                                              ------------                     ------------

    (In thousands)                    2017                     2016             2017            2016


    Xyrem(R) (sodium oxybate) oral
     solution                                 $312,477                $291,204                       $1,186,699           $1,107,616

    Erwinaze(R) /Erwinase(R)
     (asparaginase Erwinia
     chrysanthemi)                  47,755                     56,771                   197,340                   200,678

    Defitelio(R) (defibrotide
     sodium) /defibrotide           36,299                     29,672                   133,650                   108,952

    Vyxeos(R) (daunorubicin and
     cytarabine) liposome for
     injection                      24,071                          -                   33,790                         -

    Prialt(R) (ziconotide)
     intrathecal infusion            6,058                      6,055                    27,361                    29,120

    Other                            3,435                      8,912                    22,559                    30,895
                                     -----                      -----                    ------                    ------

    Product sales, net             430,095                    392,614                 1,601,399                 1,477,261

    Royalties and contract
     revenues                        6,304                      4,007                    17,294                    10,712

    Total revenues                            $436,399                $396,621                       $1,618,693           $1,487,973
                                              ========                ========                       ==========           ==========

Total revenues increased 9% in 2017 and 10% in the fourth quarter of 2017 compared to the same periods in 2016 primarily due to an increase in net product sales of Xyrem and Defitelio and the launch of Vyxeos.

Xyrem net product sales increased 7% in both 2017 and in the fourth quarter of 2017 compared to the same periods in 2016. Xyrem net product sales growth in 2017 was negatively impacted by payer mix throughout 2017 and operational changes that delayed some prescription fulfillment in the second half of 2017.

Erwinaze/Erwinase net product sales decreased 2% in 2017 and 16% in the fourth quarter of 2017 compared to the same periods in 2016. Fourth quarter 2017 net product sales were lower compared to fourth quarter 2016 due to higher ordering patterns in the fourth quarter 2016 resulting from the availability of product following an extended supply disruption in late 2016. Throughout 2017, the company experienced global supply challenges for Erwinaze. The company is currently experiencing temporary supply disruptions in the U.S. and other countries and expects that there may be further supply disruptions during 2018.

Defitelio/defibrotide net product sales increased 23% in 2017 compared to 2016 due to an increase in sales volumes and a full year of U.S. Defitelio sales after launch in April 2016. Net product sales increased 22% in the fourth quarter of 2017 compared to the same period in 2016 primarily due to an increase in sales volume outside of the U.S. The company continues to expect inter-quarter variability in Defitelio net sales given that veno-occlusive disease (VOD) is an ultra-rare disease. The recognition, diagnosis and early treatment of VOD with multi-organ dysfunction in adult patients remains an educational priority.

Vyxeos net product sales were $33.8 million in 2017 and $24.1 million in the fourth quarter of 2017. Vyxeos launched in the U.S. in August 2017.

Operating Expenses

                               Three Months Ended                           Year Ended
                                  December 31,                             December 31,
                                  ------------                             ------------

    (In thousands,
     except percentages)  2017                    2016       2017                 2016
                          ----                    ----       ----                 ----

    GAAP:

    Cost of product
     sales                      $25,248                            $33,656              $110,188 $105,386

    Gross margin         94.1%                         91.4%                  93.1%      92.9%

    Selling, general and
     administrative            $143,050                           $127,141              $544,156 $502,892

    % of total revenues  32.8%                         32.1%                  33.6%      33.8%

    Research and
     development                $65,995                            $44,158              $198,442 $162,297

    % of total revenues  15.1%                         11.1%                  12.3%      10.9%

    Acquired in-process
     research and
     development                 $8,000                        $         -              $85,000  $23,750


    Non-GAAP adjusted:

    Cost of product
     sales                      $23,782                            $32,177              $104,376 $100,797

    Gross margin         94.5%                         91.8%                  93.5%      93.2%

    Selling, general and
     administrative            $121,414                           $108,204              $454,938 $404,837

    % of total revenues  27.8%                         27.3%                  28.1%      27.2%

    Research and
     development                $43,276                            $39,619              $162,072 $146,466

    % of total revenues   9.9%                         10.0%                  10.0%       9.8%

Operating expenses changed over the prior year periods primarily due to the following:

 

  • Selling, general and administrative (SG&A) expenses increased in 2017 and in the fourth quarter of 2017 compared to the same periods in 2016 on a GAAP and on a non-GAAP adjusted basis due to higher headcount and other expenses resulting from the expansion of the company's business and the launch of Vyxeos in the U.S., partially offset by a contract termination fee of $11.6 million paid in 2016 to eliminate a potential future royalty obligation related to Vyxeos. SG&A expenses in 2016 on a GAAP basis included transaction and integration costs of $13.1 million.
  • Research and development (R&D) expenses increased in 2017 and in the fourth quarter of 2017 compared to the same periods in 2016 on a GAAP and on a non-GAAP adjusted basis. R&D expenses in 2017 reflected an increase in expenses related to the company's ongoing pre-clinical and clinical development programs and regulatory activities, including an increase in headcount, partially offset by a decrease in costs following the completion of three solriamfetol Phase 3 studies in 2017. R&D expenses in 2017 and in the fourth quarter of 2017 on a GAAP basis included $18.5 million of payments related to an amended license and option agreement with Pfenex Inc.
  • Acquired in-process research and development expenses in 2017 included an upfront payment of $75.0 million to ImmunoGen, Inc. related to entry into a collaboration and option agreement.

Cash Flow and Balance Sheet

As of December 31, 2017, cash, cash equivalents and investments were $601.0 million, and the outstanding principal balance of the company's long-term debt was $1.8 billion. In 2017, the company issued $575.0 million aggregate principal amount of 1.50% exchangeable senior notes due 2024, repaid a total of $850.0 million of borrowings under the company's revolving credit facility, made upfront and milestone payments totaling $104.5 million and used $98.8 million to repurchase approximately 704,000 ordinary shares under the company's share repurchase program at an average cost of $140.34 per ordinary share.

Recent Developments

In February 2018, the company enrolled the first patient in a Phase 2 clinical trial evaluating the efficacy and safety of defibrotide for the prevention of acute graft-versus-host disease in adult and pediatric patients after allogeneic hematopoietic stem cell transplant.

In February 2018, the National Comprehensive Cancer Network (NCCN) added Vyxeos to the Clinical Practice Guidelines in Oncology (NCCN Guidelines) for acute myeloid leukemia (AML). NCCN Guidelines now include a Category 1 recommendation for use of Vyxeos for adult patients 60 years of age or greater with newly-diagnosed therapy-related AML or AML with myelodysplasia-related changes. The Category 1 recommendation indicates that, based upon high-level evidence, there is uniform NCCN consensus that Vyxeos is appropriate for these patients.

In December 2017, the company submitted a New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) seeking marketing approval for solriamfetol, an investigational medicine for the treatment of excessive sleepiness in adult patients with narcolepsy or obstructive sleep apnea.

2018 Financial Guidance

Jazz Pharmaceuticals' full year 2018 financial guidance is as follows (in millions, except per share amounts and percentages):

    Revenues                                        $1,860-$1,930

    Total net product sales                         $1,845-$1,910

    -Xyrem net sales                                $1,310-$1,340

    -Erwinaze/Erwinase net sales                        $190-$220

    -Defitelio/defibrotide net sales                    $145-$165

    -Vyxeos net sales                                   $130-$155

    GAAP gross margin %                                     93%

    Non-GAAP adjusted gross margin %1,5                       93%

    GAAP SG&A expenses                                  $608-$648

    Non-GAAP adjusted SG&A expenses2,5                  $525-$555

    GAAP R&D expenses                                   $232-$263

    Non-GAAP adjusted R&D expenses3,5                   $205-$225

    GAAP effective tax rate                               18%-21%

    Non-GAAP adjusted effective tax rate4,5               17%-19%

    GAAP net income per diluted share                 $7.15-$8.45

    Non-GAAP adjusted net income per diluted share5 $12.65-$13.25


    1.             Excludes $5-$9 million of
                   share-based compensation
                   expense from estimated GAAP
                   gross margin.

    2.             Excludes $83-$93 million of
                   share-based compensation
                   expense from estimated GAAP
                   SG&A expenses.

                  Excludes $17-$23 million of
                   share-based compensation
                   expense and $10-$15 million
                   of milestone payments from
    3.             estimated GAAP R&D expenses.

    4.             Excludes the income tax effect
                   of adjustments between GAAP
                   reported and non-GAAP
                   adjusted net income.

                  See "Non-GAAP Financial
                   Measures" below.
                   Reconciliations of non-GAAP
                   adjusted guidance measures are
                   included above and in the
                   table titled "Reconciliation
                   of GAAP to Non-GAAP Adjusted
                   2018 Net Income Guidance" at
    5.             the end of this press release.

Conference Call Details

Jazz Pharmaceuticals will host an investor conference call and live audio webcast today at 4:30 p.m. EST (9:30 p.m. GMT) to provide a business and financial update and discuss its 2017 full year and fourth quarter results and provide 2018 financial guidance. The live webcast may be accessed from the Investors section of the company's website at www.jazzpharmaceuticals.com. Please connect to the website prior to the start of the conference call to ensure adequate time for any software downloads that may be necessary. Investors may participate in the conference call by dialing +1 855 353 7924 in the U.S., or +1 503 343 6056 outside the U.S., and entering passcode 4179828.

A replay of the conference call will be available through March 6, 2018 by dialing +1 855 859 2056 in the U.S., or +1 404 537 3406 outside the U.S., and entering passcode 4179828. An archived version of the webcast will be available for at least one week in the Investors section of the company's website at www.jazzpharmaceuticals.com.

About Jazz Pharmaceuticals plc

Jazz Pharmaceuticals plc (Nasdaq: JAZZ) is an international biopharmaceutical company focused on improving patients' lives by identifying, developing and commercializing meaningful products that address unmet medical needs. The company has a diverse portfolio of products and product candidates with a focus in the areas of sleep and hematology/oncology. In these areas, Jazz Pharmaceuticals markets Xyrem® (sodium oxybate) oral solution, Erwinaze® (asparaginase Erwinia chrysanthemi), Defitelio® (defibrotide sodium) and Vyxeos® (daunorubicin and cytarabine) liposome for injection in the U.S. and markets Erwinase® and Defitelio® (defibrotide) in countries outside the U.S. For country-specific product information, please visit www.jazzpharmaceuticals.com/products. For more information, please visit www.jazzpharmaceuticals.com and follow us on Twitter at @JazzPharma.

Non-GAAP Financial Measures

To supplement Jazz Pharmaceuticals' financial results and guidance presented in accordance with U.S. generally accepted accounting principles (GAAP), the company uses certain non-GAAP (also referred to as adjusted or non-GAAP adjusted) financial measures in this press release and the accompanying tables. In particular, the company presents non-GAAP adjusted net income (and the related per share measure) and its line item components, as well as certain non-GAAP adjusted financial measures derived therefrom, including non-GAAP adjusted gross margin percentage, non-GAAP adjusted income tax provision and non-GAAP adjusted effective tax rate. Non-GAAP adjusted net income (and the related per share measure) and its line item components exclude from reported GAAP net income (and the related per share measure) and its line item components certain items, as detailed in the reconciliation tables that follow, and in the case of non-GAAP adjusted net income (and the related per share measure), adjust for the income tax effect of non-GAAP adjustments and, for the full year and fourth quarter of 2017, the U.S. Tax Act benefit. In this regard, the components of non-GAAP adjusted net income, including non-GAAP cost of product sales, non-GAAP selling, general and administrative expenses and non-GAAP research and development expenses, are income statement line items prepared on the same basis as, and therefore components of, the overall non-GAAP adjusted net income measure.

The company believes that each of these non-GAAP financial measures provides useful supplementary information to, and facilitates additional analysis by, investors and analysts. In particular, the company believes that each of these non-GAAP financial measures, when considered together with the company's financial information prepared in accordance with GAAP, can enhance investors' and analysts' ability to meaningfully compare the company's results from period to period and to its forward-looking guidance, and to identify operating trends in the company's business. In addition, these non-GAAP financial measures are regularly used by investors and analysts to model and track the company's financial performance. Jazz Pharmaceuticals' management also regularly uses these non-GAAP financial measures internally to understand, manage and evaluate the company's business and to make operating decisions, and compensation of executives is based in part on certain of these non-GAAP financial measures. Because these non-GAAP financial measures are important internal measurements for Jazz Pharmaceuticals' management, the company also believes that these non-GAAP financial measures are useful to investors and analysts since these measures allow for greater transparency with respect to key financial metrics the company uses in assessing its own operating performance and making operating decisions.

These non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures; should be read in conjunction with the company's condensed consolidated financial statements prepared in accordance with GAAP; have no standardized meaning prescribed by GAAP; and are not prepared under any comprehensive set of accounting rules or principles. In addition, from time to time in the future there may be other items that the company may exclude for purposes of its non-GAAP financial measures; and the company has ceased, and may in the future cease, to exclude items that it has historically excluded for purposes of its non-GAAP financial measures. Likewise, the company may determine to modify the nature of its adjustments to arrive at its non-GAAP financial measures. Because of the non-standardized definitions of non-GAAP financial measures, the non-GAAP financial measures as used by Jazz Pharmaceuticals in this press release and the accompanying tables have limits in their usefulness to investors and may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995

This press release contains forward-looking statements, including, but not limited to, statements related to Jazz Pharmaceuticals' future financial and operating results, including 2018 financial guidance and the potential for 2018 adjustments to the company's provisional tax estimates, the company's expectations regarding its ability to execute on Xyrem growth opportunities, continuing progress in the company's pre-clinical and clinical development programs, advancing solriamfetol through the regulatory approval process, the potential for future opportunities to diversify the company's commercial and research and development portfolio and the company's ability to execute on those opportunities, the company's expectations for future Erwinaze supply disruptions and inter-quarter variability in Defitelio net sales, and other statements that are not historical facts. These forward-looking statements are based on the company's current plans, objectives, estimates, expectations and intentions and inherently involve significant risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks and uncertainties associated with: maintaining or increasing sales of and revenue from Xyrem, such as the potential U.S. introduction of a generic version of Xyrem before the entry dates specified in the company's settlements with certain companies that have filed abbreviated new drug applications with the FDA seeking approval to market a generic version of Xyrem or on terms that are different from those contemplated by the settlements; ongoing patent litigation and related proceedings; effectively commercializing the company's other products and product candidates; the time-consuming and uncertain regulatory approval process, including the risk that the company's regulatory submissions, including the solriamfetol NDA and the marketing authorization application for Vyxeos in the European Union, may not be approved by applicable regulatory authorities in a timely manner or at all; protecting and enhancing the company's intellectual property rights; delays or problems in the supply or manufacture of the company's products and product candidates; complying with applicable U.S. and non-U.S. regulatory requirements; government investigations and other actions; obtaining and maintaining appropriate pricing and reimbursement for the company's products; pharmaceutical product development and the uncertainty of clinical success, including risks related to failure or delays in initiating or completing clinical trials; identifying and acquiring, in-licensing or developing additional products or product candidates, financing these transactions and successfully integrating acquired businesses; potential restrictions on the company's ability and flexibility to pursue share repurchases and future strategic opportunities as a result of its substantial outstanding debt obligations; the ability to achieve expected future financial performance and results and the uncertainty of future tax and other provisions and estimates; and other risks and uncertainties affecting the company, including those described from time to time under the caption "Risk Factors" and elsewhere in Jazz Pharmaceuticals plc's Securities and Exchange Commission filings and reports (Commission File No. 001-33500), including the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 and future filings and reports by the company, including the company's Annual Report on Form 10-K for the year ended December 31, 2017. Other risks and uncertainties of which the company is not currently aware may also affect the company's forward-looking statements and may cause actual results and timing of events to differ materially from those anticipated. The forward-looking statements herein are made only as of the date hereof or as of the dates indicated in the forward-looking statements, even if they are subsequently made available by the company on its website or otherwise. The company undertakes no obligation to update or supplement any forward-looking statements to reflect actual results, new information, future events, changes in its expectations or other circumstances that exist after the date as of which the forward-looking statements were made.

                                                                          JAZZ PHARMACEUTICALS PLC

                                                                CONDENSED CONSOLIDATED STATEMENTS OF INCOME

                                                                  (In thousands, except per share amounts)

                                                                                (Unaudited)


                                             Three Months Ended                                           Year Ended
                                              December 31,                                         December 31,


                                        2017                         2016                                2017        2016
                                        ----                         ----                                ----        ----

    Revenues:

    Product sales, net                        $430,095                                      $392,614                      $1,601,399  $1,477,261

    Royalties and contract
     revenues                          6,304                          4,007                                17,294              10,712
                                       -----                          -----                                ------              ------

    Total revenues                   436,399                        396,621                             1,618,693           1,487,973

    Operating expenses:

    Cost of product sales
     (excluding amortization
     of intangible assets)            25,248                         33,656                               110,188             105,386

    Selling, general and
     administrative                  143,050                        127,141                               544,156             502,892

    Research and development          65,995                         44,158                               198,442             162,297

    Acquired in-process
     research and
     development                       8,000                              -                               85,000              23,750

    Intangible asset
     amortization                     52,901                         26,162                               152,065             101,994

    Total operating expenses         295,194                        231,117                             1,089,851             896,319
                                     -------                        -------                             ---------             -------

    Income from operations           141,205                        165,504                               528,842             591,654

    Interest expense, net           (21,426)                      (19,131)                              (77,756)           (61,942)

    Foreign exchange gain
     (loss)                            (854)                         4,940                               (9,969)              3,372

    Loss on extinguishment
     and modification of
     debt                                  -                             -                                    -              (638)
                                         ---                           ---                                  ---               ----

    Income before income tax
     provision (benefit) and
     equity in loss of
     investees                       118,925                        151,313                               441,117             532,446

    Income tax provision
     (benefit)                     (113,654)                        34,348                              (47,740)            135,236

    Equity in loss of
     investees                           372                            276                                 1,009                 379
                                         ---                            ---                                 -----                 ---

    Net income                                $232,207                                      $116,689                        $487,848    $396,831
                                              ========                                      ========                        ========    ========


    Net income per ordinary share:

    Basic                                        $3.87                                         $1.95                           $8.13       $6.56
                                                 =====                                         =====                           =====       =====

    Diluted                                      $3.79                                         $1.91                           $7.96       $6.41
                                                 =====                                         =====                           =====       =====

    Weighted-average
     ordinary shares used in
     per share calculations
     - basic                          59,980                         59,930                                60,018              60,500
                                      ======                         ======                                ======              ======

    Weighted-average
     ordinary shares used in
     per share calculations
     - diluted                        61,189                         61,033                                61,317              61,870
                                      ======                         ======                                ======              ======

 

                                                                            JAZZ PHARMACEUTICALS PLC

                                                                     CONDENSED CONSOLIDATED BALANCE SHEETS

                                                                                 (In thousands)

                                                                                  (Unaudited)


                                                                                                                       December 31
                                                                                                                      -----------

                                                                                                                2017                  2016
                                                                                                                ----                  ----

                                                         ASSETS

    Current assets:

    Cash and cash equivalents                                                                                          $386,035                $365,963

    Investments                                                                                              215,000                  60,000

    Accounts receivable, net of allowances                                                                   224,129                 234,244

    Inventories                                                                                               43,245                  34,051

    Prepaid expenses                                                                                          23,182                  24,501

    Other current assets                                                                                      76,686                  29,310

    Total current assets                                                                                     968,277                 748,069

    Property and equipment, net                                                                              170,080                 107,490

    Intangible assets, net                                                                                 2,979,127               3,012,001

    Goodwill                                                                                                 947,537                 893,810

    Deferred tax assets, net                                                                                  34,559                  15,060

    Deferred financing costs                                                                                   7,673                   9,737

    Other non-current assets                                                                                  16,419                  14,060
                                                                                                              ------                  ------

    Total assets                                                                                                     $5,123,672              $4,800,227
                                                                                                                     ==========              ==========

                                          LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities:

    Accounts payable                                                                                                    $24,368                 $22,415

    Accrued liabilities                                                                                      198,779                 193,268

    Current portion of long-term debt                                                                         40,605                  36,094

    Income taxes payable                                                                                      21,577                   4,506

    Deferred revenue                                                                                           8,618                   1,123
                                                                                                               -----

    Total current liabilities                                                                                293,947                 257,406

    Deferred revenue, non-current                                                                             16,115                   2,601

    Long-term debt, less current portion                                                                   1,540,433               1,993,531

    Deferred tax liabilities, net                                                                            383,472                 556,733

    Other non-current liabilities                                                                            176,608                 112,617

    Total shareholders' equity                                                                             2,713,097               1,877,339

    Total liabilities and shareholders' equity                                                                       $5,123,672              $4,800,227
                                                                                                                     ==========              ==========

 

                     JAZZ PHARMACEUTICALS PLC

                      SUMMARY OF CASH FLOWS

                          (In thousands)

                           (Unaudited)


                           Year Ended December 31,
                          -----------------------

                      2017                               2016
                      ----                               ----

    Net cash
     provided
     by
     operating
     activities               $693,087                            $592,391

    Net cash
     used in
     investing
     activities  (268,950)                         (1,751,155)

    Net cash
     provided
     by (used
     in)
     financing
     activities  (409,111)                             540,987

    Effect of
     exchange
     rates on
     cash and
     cash
     equivalents     5,046                              (5,045)
                     -----                               ------

    Net
     increase
     (decrease)
     in cash
     and cash
     equivalents               $20,072                          $(622,822)
                               =======                           =========

 

                                                                     JAZZ PHARMACEUTICALS PLC

                                                RECONCILIATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION

                                                             (In thousands, except per share amounts)

                                                                           (Unaudited)


                                       Three Months Ended                                        Year Ended
                                        December 31,                                     December 31,
                                        ------------                                     ------------

                                  2017                           2016                      2017                   2016
                                  ----                           ----                      ----                   ----

    GAAP reported net income            $232,207                                        $116,689                        $487,848  $396,831

    Intangible asset
     amortization               52,901                           26,162                               152,065             101,994

    Share-based
     compensation expense       27,321                           24,281                               106,900              98,771

    Upfront and milestone
     payments                   26,500                                -                              101,500              23,750

    Transaction and
     integration related
     costs                           -                             674                                     -             13,644

    Expenses related to
     certain legal
     proceedings and
     restructuring                   -                               -                                6,000               6,060

    Non-cash interest
     expense                    10,792                            5,715                                30,026              22,133

    Loss on extinguishment
     and modification of
     debt                            -                               -                                    -                638

    Income tax effect of
     above adjustments        (20,425)                         (7,884)                              (58,818)           (36,659)

    U.S. Tax Act benefit     (148,803)                               -                            (148,803)                   -

    Non-GAAP adjusted net
     income                             $180,493                                        $165,637                        $676,718  $627,162
                                        ========                                        ========                        ========  ========


    GAAP reported net income
     per diluted share                     $3.79                                           $1.91                           $7.96     $6.41
                                           =====                                           =====                           =====     =====

    Non-GAAP adjusted net
     income per diluted
     share                                 $2.95                                           $2.71                          $11.04    $10.14
                                           =====                                           =====                          ======    ======

    Weighted-average
     ordinary shares used in
     diluted per share
     calculations               61,189                           61,033                                61,317              61,870
                                ======                           ======                                ======              ======

 

                                                                                                                           JAZZ PHARMACEUTICALS PLC

                                                                                                       RECONCILIATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION

                                                                                                                   CERTAIN LINE ITEMS AND OTHER INFORMATION

                                                                                                           (In thousands, except per share amounts and percentages)

                                                                                                                                  (Unaudited)


                                                                          Three Months Ended
                                                                          ------------------

                                       December 31, 2017                                                                December 31, 2016


                           GAAP               Adjustments          Non-GAAP                                GAAP                    Adjustments                 Non-GAAP
                         Reported                                  Adjusted                             Reported                                               Adjusted
                         --------                                  --------                             --------                                               --------

    Total revenues                 $436,399                                 $                        -                                             $436,399                              $396,621                  $       -     $396,621

    Cost of product
     sales (excluding
     amortization of
     intangible assets)     25,248                         (1,466)              (a)                         23,782                                    33,656                    (1,479)           (a)     32,177

    Selling, general and
     administrative        143,050                        (21,636)               (b)                        121,414                                   127,141                   (18,937)           (b)    108,204

    Research and
     development            65,995                        (22,719)               (c)                         43,276                                    44,158                    (4,539)           (c)     39,619

    Acquired in-process
     research and
     development             8,000                         (8,000)                                               -                                        -                         -                        -

    Intangible asset
     amortization           52,901                        (52,901)                                                -                                   26,162                   (26,162)                        -

    Interest expense,
     net                    21,426                        (10,792)               (d)                         10,634                                    19,131                    (5,715)           (d)     13,416

    Foreign currency
     loss (gain)               854                               -                                             854                                   (4,940)                         -                  (4,940)

    Income before income
     tax provision
     (benefit) and
     equity in loss of
     investees             118,925                         117,514               (e)                        236,439                                   151,313                     56,832            (e)    208,145

    Income tax provision
     (benefit)           (113,654)                        169,228               (f)                         55,574                                    34,348                      7,884            (f)     42,232

    Effective tax rate
     (g)                   (95.6)%                                                              23.5%                                    22.7%                                            20.3%

    Equity in loss of
     investees                 372                               -                                             372                                       276                          -                      276

    Net income                     $232,207                                                  $(51,714)               (h)                           $180,493                              $116,689                    $48,948 (h)  $165,637

    Net income per
     diluted share                    $3.79                                                                                 $2.95                                        $1.91                                         $2.71

 

                                                                                                                            JAZZ PHARMACEUTICALS PLC

                                                                                                        RECONCILIATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION

                                                                                                                    CERTAIN LINE ITEMS AND OTHER INFORMATION

                                                                                                            (In thousands, except per share amounts and percentages)

                                                                                                                                   (Unaudited)


                                                                                   Year Ended
                                                                                   ----------

                                          December 31, 2017                                                             December 31, 2016


                             GAAP                 Adjustments           Non-GAAP                          GAAP                     Adjustments                      Non-GAAP
                           Reported                                     Adjusted                       Reported                                                     Adjusted
                           --------                                     --------                       --------                                                     --------

    Total revenues                   $1,618,693                                  $                   -                                             $1,618,693                                 $1,487,973                   $       -      $1,487,973

    Cost of product sales
     (excluding
     amortization of
     intangible assets)      110,188                            (5,812)             (i)                   104,376                                      105,386                       (4,589)              (i)    100,797

    Selling, general and
     administrative          544,156                           (89,218)             (j)                   454,938                                      502,892                      (98,055)              (j)    404,837

    Research and
     development             198,442                           (36,370)             (k)                   162,072                                      162,297                      (15,831)              (k)    146,466

    Acquired in-process
     research and
     development              85,000                           (83,000)                                     2,000                                       23,750                      (23,750)                           -

    Intangible asset
     amortization            152,065                          (152,065)                                          -                                     101,994                     (101,994)                           -

    Interest expense, net     77,756                           (30,026)             (d)                    47,730                                       61,942                      (22,133)              (d)     39,809

    Foreign currency loss
     (gain)                    9,969                                  -                                     9,969                                      (3,372)                            -                     (3,372)

    Loss on extinguishment
     and modification of
     debt                          -                                 -                                         -                                         638                         (638)                           -

    Income before income
     tax provision
     (benefit) and equity
     in loss of investees    441,117                            396,491              (l)                   837,608                                      532,446                       266,990               (l)    799,436

    Income tax provision
     (benefit)              (47,740)                           207,621              (m)                   159,881                                      135,236                        36,659               (m)    171,895

    Effective tax rate (g)   (10.8)%                                                            19.1%                                    25.4%                                                   21.5%

    Equity in loss of
     investees                 1,009                                  -                                     1,009                                          379                             -                         379

    Net income                         $487,848                                               $188,870               (n)                              $676,718                                   $396,831                    $230,331 (n)     $627,162

    Net income per diluted
     share                                $7.96                                                                            $11.04                                            $6.41                                            $10.14


    Explanation of Adjustments and Certain Line Items (in thousands):


                     Share-based compensation
                      expense of $1,466 and $1,479
                      for the three months ended
                      December 31, 2017 and 2016,
         (a)          respectively.

                     Share-based compensation
                      expense of $21,636 and $18,373
                      and transaction and
                      integration related costs of
                      $0 and $564 for the three
                      months ended December 31, 2017
         (b)          and 2016, respectively.

                     Upfront and milestone payments
                      of $18,500 and $0, share-
                      based compensation expense of
                      $4,219 and $4,429 and
                      transaction and integration
                      related costs of $0 and $110
                      for the three months ended
                      December 31, 2017 and 2016,
         (c)          respectively.

                     Non-cash interest expense
                      associated with debt discount
                      and debt issuance costs for
                      the respective three- and
         (d)          twelve-month periods.

                     Sum of adjustments (a) through
                      (d) plus the adjustments for
                      acquired in-process research
                      and development and intangible
                      asset amortization, as
                      applicable, for the respective
         (e)          three-month period.

                     Income tax adjustments related
                      to the impact of the U.S. Tax
                      Act of $148,803 and $0 and the
                      income tax effect of
                      adjustments between GAAP
                      reported and non-GAAP
                      adjusted net income of $20,425
                      and $7,884 for the three
                      months ended December 31, 2017
         (f)          and 2016, respectively.

                     Income tax provision (benefit)
                      divided by income before
                      income tax provision (benefit)
                      and equity in loss of
                      investees for the respective
                      three- and twelve-month
         (g)          periods.

         (h)          Net of adjustments (e) and (f)
                      for the respective three-
                      month period.

                     Share-based compensation
                      expense of $5,812 and $4,438,
                      expenses related to certain
                      legal proceedings and
                      restructuring of $0 and $110
                      and transaction and
                      integration related costs of
                      $0 and $41 for the years ended
                      December 31, 2017 and 2016,
         (i)          respectively.

                     Share-based compensation
                      expense of $83,218 and
                      $79,037, expenses related to
                      certain legal proceedings and
                      restructuring of $6,000 and
                      $5,950 and transaction and
                      integration related costs of
                      $0 and $13,068 for the years
                      ended December 31, 2017 and
         (j)          2016, respectively.

                     Upfront and milestone payments
                      of $18,500 and $0, share-
                      based compensation expense of
                      $17,870 and $15,296 and
                      transaction and integration
                      related costs of $0 and $535
                      for the years ended December
                      31, 2017 and 2016,
         (k)          respectively.

                     Sum of adjustments (i), (j),
                      (k) and (d) plus the
                      adjustments for acquired in-
                      process research and
                      development, intangible asset
                      amortization and loss on
                      extinguishment and
                      modification of debt, as
                      applicable, for the respective
         (l)          twelve-month period.

                     Income tax adjustments related
                      to the impact of the U.S. Tax
                      Act of $148,803 and $0 and the
                      income tax effect of
                      adjustments between GAAP
                      reported and non-GAAP
                      adjusted net income of $58,818
                      and $36,659 for the years
                      ended December 31, 2017 and
         (m)          2016, respectively.

         (n)          Net of adjustments (l) and (m)
                      for the respective twelve-
                      month period.

 

                                                                                          JAZZ PHARMACEUTICALS PLC

                                                                    RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED 2018 NET INCOME GUIDANCE

                                                                                   (In millions, except per share amounts)

                                                                                                 (Unaudited)


    GAAP net income                                                                                                                                    $435 - $520

    Intangible asset amortization                                                                                                         190 - 220

    Share-based compensation expense                                                                                                      105 - 125

    Milestone payments                                                                                                                     10 - 15

    Non-cash interest expense                                                                                                              40 - 50

    Income tax effect of adjustments                                                                                                     (50) - (70)

    Non-GAAP adjusted net income                                                                                                                       $775 - $815
                                                                                                                                                       ===========


    GAAP net income per diluted share                                                                                                                  $7.15-$8.45
                                                                                                                                                       ===========

    Non-GAAP adjusted net income per diluted share                                                                                                   $12.65-$13.25
                                                                                                                                                     =============


    Weighted-average ordinary shares used in per share calculations                                                                                             61

 

 

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SOURCE Jazz Pharmaceuticals plc


Company Codes: NASDAQ-NMS:JAZZ

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