Jazz Pharma Announces Third Quarter 2017 Financial Results
Total Revenues Increased 10% to $412 Million
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| [07-November-2017] |
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DUBLIN, Nov. 7, 2017 /PRNewswire/ -- Jazz Pharmaceuticals (Nasdaq: JAZZ) today announced financial results for the third quarter of 2017 and updated financial guidance for 2017. "The third quarter of 2017 was highlighted by the approval and strong launch of Vyxeos in the U.S. for the treatment of adult patients with newly-diagnosed high-risk AML, leading to our increase in 2017 Vyxeos sales guidance," said Bruce Cozadd, chairman and chief executive officer of Jazz Pharmaceuticals. "While Xyrem has experienced lower than expected growth in 2017, and we are slightly decreasing our annual sales guidance accordingly, we remain confident in our ability to address the key drivers impacting Xyrem to position the product for solid future growth." GAAP net income for the third quarter of 2017 was $63.5 million, or $1.03 per diluted share, compared to $89.8 million, or $1.45 per diluted share, for the third quarter of 2016. GAAP net income for the third quarter of 2017 included an upfront payment of $75.0 million to ImmunoGen, Inc. related to a collaboration and option agreement. Adjusted net income for the third quarter of 2017 was $197.6 million, or $3.22 per diluted share, compared to $161.2 million, or $2.61 per diluted share, for the third quarter of 2016. The tax provision and the effective tax rate for the third quarter of 2017 on both a GAAP and non-GAAP basis were favorably impacted by certain tax benefits. For further information, see "Operating Expenses and Income Tax Provision" below. Reconciliations of applicable GAAP reported to non-GAAP adjusted information are included at the end of this press release. Financial Highlights
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
(In thousands,
except per share
amounts and
percentages) 2017 2016 Change 2017 2016 Change
---- ---- ------ ---- ---- ------
Total revenues $411,855 $374,181 10% $1,182,294 $1,091,352 8%
GAAP net income $63,526 $89,828 (29)% $255,641 $280,142 (9)%
Adjusted net
income $197,649 $161,153 23% $496,225 $461,525 8%
GAAP EPS $1.03 $1.45 (29)% $4.17 $4.51 (8)%
Adjusted EPS $3.22 $2.61 23% $8.09 $7.43 9%
Total Revenues
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
(In thousands) 2017 2016 2017 2016
---- ----
Xyrem(R) (sodium oxybate) oral solution $303,870 $285,907 $874,222 $816,412
Erwinaze(R) /Erwinase(R) (asparaginase
Erwinia chrysanthemi) 49,173 42,986 149,585 143,907
Defitelio(R) (defibrotide sodium) /
defibrotide 31,213 28,137 97,351 79,280
VyxeosTM (daunorubicin and cytarabine)
liposome for injection 9,719 - 9,719 -
Prialt(R) (ziconotide) intrathecal
infusion 7,930 8,783 21,303 23,065
Other 6,066 5,808 19,124 21,983
----- ----- ------ ------
Product sales, net 407,971 371,621 1,171,304 1,084,647
Royalties and contract revenues 3,884 2,560 10,990 6,705
Total revenues $411,855 $374,181 $1,182,294 $1,091,352
======== ======== ========== ==========
Net product sales increased 10% in the third quarter of 2017 compared to the same period in 2016 primarily due to an increase in net product sales of our lead marketed products. Xyrem net product sales increased 6% in the third quarter of 2017 compared to the same period in 2016. Xyrem net product sales growth in the 2017 period was negatively impacted by payer mix, one fewer shipping day, and operational changes that delayed some prescription fulfillment. Erwinaze/Erwinase net product sales increased 14% in the third quarter of 2017 compared to the same period in 2016. The company experienced supply disruptions during both periods; however, net product sales were higher in the third quarter of 2017 compared to the same period in 2016 due to the timing of product availability. The company expects that additional supply disruptions may occur in 2017 and into 2018. Defitelio/defibrotide net product sales increased 11% in the third quarter of 2017 compared to the same period in 2016 primarily due to an increase in U.S. net product sales. The company expects continued inter-quarter variability in Defitelio net sales given that veno-occlusive disease is an ultra-rare disease. Vyxeos net product sales in the third quarter of 2017 were $9.7 million. Vyxeos launched in the U.S. on August 11, 2017. Operating Expenses and Income Tax Provision
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
(In thousands,
except percentages) 2017 2016 2017 2016
---- ---- ---- ----
GAAP:
Cost of product
sales $31,203 $24,311 $84,940 $71,730
Gross margin 92.4% 93.5% 92.7% 93.4%
Selling, general and
administrative $124,523 $124,368 $401,106 $375,751
% of total revenues 30.2% 33.2% 33.9% 34.4%
Research and
development $47,362 $47,796 $132,447 $118,139
% of total revenues 11.5% 12.8% 11.2% 10.8%
Acquired in-process
research and
development $75,000 $15,000 $77,000 $23,750
Income tax provision $1,239 $26,437 $65,914 $100,888
Effective tax rate 1.9% 22.7% 20.5% 26.5%
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
(In thousands,
except percentages) 2017 2016 2017 2016
---- ---- ---- ----
Non-GAAP adjusted:
Cost of product
sales $29,630 $22,963 $80,594 $68,620
Gross margin 92.7% 93.8% 93.1% 93.7%
Selling, general and
administrative $103,620 $94,534 $333,524 $296,633
% of total revenues 25.2% 25.3% 28.2% 27.2%
Research and
development $42,712 $43,323 $118,796 $106,847
% of total revenues 10.4% 11.6% 10.0% 9.8%
Income tax provision $24,410 $38,500 $104,307 $129,663
Effective tax rate 11.0% 19.3% 17.4% 21.9%
Operating expenses changed over the prior year period primarily due to the following:
The tax provision and the effective tax rate for the third quarter of 2017 on both a GAAP and non-GAAP basis were favorably impacted by the release of a valuation allowance held against certain foreign net operating losses and the release of reserves related to uncertain tax positions upon the expiration of a statute of limitation. Cash Flow and Balance Sheet Recent Developments
2017 Financial Guidance
Revenues $1,600-$1,650
Total net product sales $1,590-$1,630
-Xyrem net sales $1,180-$1,200
-Erwinaze/Erwinase net sales $200-$215
-Defitelio/defibrotide net sales $130-$150
-Vyxeos net sales $20-$30
GAAP gross margin % 93%
Non-GAAP adjusted gross margin %1,4 93%
GAAP SG&A expenses $521-$551
Non-GAAP adjusted SG&A expenses2,4 $440-$460
GAAP R&D expenses $180-$200
Non-GAAP adjusted R&D expenses3,4 $165-$180
GAAP net income per diluted share $5.30-$6.30
Non-GAAP adjusted net income per diluted share4 $10.70-$11.20
Excludes $5
million of
share-based
compensation
expense from
estimated GAAP
1. gross margin.
2. Excludes $75-
$85 million of
share-based
compensation
expense and $6
million of
expenses
related to
certain legal
proceedings
and
restructuring
from estimated
GAAP SG&A
expenses.
Excludes $15-
$20 million of
share-based
compensation
expense from
estimated GAAP
3. R&D expenses.
4. 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 2017
Net Income
Guidance" at
the end of
this press
release.
Conference Call Details A replay of the conference call will be available through November 14, 2017 by dialing +1 855 859 2056 in the U.S., or +1 404 537 3406 outside the U.S., and entering passcode 95499424. 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 Non-GAAP Financial Measures 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
JAZZ PHARMACEUTICALS PLC
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
---- ---- ---- ----
Revenues:
Product sales, net $407,971 $371,621 $1,171,304 $1,084,647
Royalties and contract
revenues 3,884 2,560 10,990 6,705
----- ----- ------ -----
Total revenues 411,855 374,181 1,182,294 1,091,352
Operating expenses:
Cost of product sales
(excluding amortization
of intangible assets) 31,203 24,311 84,940 71,730
Selling, general and
administrative 124,523 124,368 401,106 375,751
Research and development 47,362 47,796 132,447 118,139
Acquired in-process
research and
development 75,000 15,000 77,000 23,750
Intangible asset
amortization 47,313 26,453 99,164 75,832
Total operating expenses 325,401 237,928 794,657 665,202
------- ------- ------- -------
Income from operations 86,454 136,253 387,637 426,150
Interest expense, net (19,192) (18,498) (56,330) (42,811)
Foreign exchange loss (2,224) (749) (9,115) (1,568)
Loss on extinguishment
and modification of
debt - (638) - (638)
--- ---- --- ----
Income before income tax
provision and equity in
loss of investees 65,038 116,368 322,192 381,133
Income tax provision 1,239 26,437 65,914 100,888
Equity in loss of
investees 273 103 637 103
--- --- --- ---
Net income $63,526 $89,828 $255,641 $280,142
======= ======= ======== ========
Net income per ordinary share:
Basic $1.06 $1.49 $4.26 $4.62
===== ===== ===== =====
Diluted $1.03 $1.45 $4.17 $4.51
===== ===== ===== =====
Weighted-average
ordinary shares used in
per share calculations
- basic 60,108 60,437 60,030 60,692
====== ====== ====== ======
Weighted-average
ordinary shares used in
per share calculations
- diluted 61,436 61,795 61,360 62,150
====== ====== ====== ======
JAZZ PHARMACEUTICALS PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
September 30, December 31,
2017 2016
---- ----
ASSETS
Current assets:
Cash and cash equivalents $252,615 $365,963
Investments 200,000 60,000
Accounts receivable, net of
allowances 258,616 234,244
Inventories 41,344 34,051
Prepaid expenses 29,249 24,501
Other current assets 49,120 29,310
Total current assets 830,944 748,069
Property and equipment, net 159,386 107,490
Intangible assets, net 3,019,035 3,012,001
Goodwill 941,428 893,810
Deferred tax assets, net, non-
current 23,662 15,060
Deferred financing costs 8,149 9,737
Other non-current assets 16,420 14,060
------ ------
Total assets $4,999,024 $4,800,227
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $29,972 $22,415
Accrued liabilities 179,890 193,268
Current portion of long-term
debt 36,094 36,094
Income taxes payable 13,603 4,506
Deferred revenue 8,618 1,123
-----
Total current liabilities 268,177 257,406
Deferred revenue, non-current 18,270 2,601
Long-term debt, less current
portion 1,543,819 1,993,531
Deferred tax liability, net,
non-current 540,964 556,733
Other non-current liabilities 158,497 112,617
Total shareholders' equity 2,469,297 1,877,339
Total liabilities and
shareholders' equity $4,999,024 $4,800,227
========== ==========
JAZZ PHARMACEUTICALS PLC
SUMMARY OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
-------------
2017 2016
---- ----
Net cash
provided by
operating
activities $488,528 $411,696
Net cash used
in investing
activities (237,072) (1,749,296)
Net cash
provided by
(used in)
financing
activities (369,127) 713,032
Effect of
exchange
rates on
cash and
cash
equivalents 4,323 2,350
----- -----
Net decrease
in cash and
cash
equivalents $(113,348) $(622,218)
========= =========
JAZZ PHARMACEUTICALS PLC
RECONCILIATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2017 2016 2017 2016
---- ---- ---- ----
GAAP reported net income $63,526 $89,828 $255,641 $280,142
Intangible asset
amortization 47,313 26,453 99,164 75,832
Share-based
compensation expense 27,126 24,874 79,579 74,490
Upfront and milestone
payments 75,000 15,000 75,000 23,750
Transaction and
integration related
costs - 10,781 - 12,970
Expenses related to
certain legal
proceedings and
restructuring - - 6,000 6,060
Non-cash interest
expense 7,855 5,642 19,234 16,418
Loss on extinguishment
and modification of
debt - 638 - 638
Income tax effect of
adjustments (1) (23,171) (12,063) (38,393) (28,775)
Non-GAAP adjusted net
income $197,649 $161,153 $496,225 $461,525
======== ======== ======== ========
GAAP reported net income
per diluted share $1.03 $1.45 $4.17 $4.51
===== ===== ===== =====
Non-GAAP adjusted net
income per diluted
share $3.22 $2.61 $8.09 $7.43
===== ===== ===== =====
Weighted-average
ordinary shares used in
diluted per share
calculations 61,436 61,795 61,360 62,150
====== ====== ====== ======
(1) The income tax
effect of the
adjustments
between GAAP
reported and non-
GAAP adjusted net
income takes into
account the tax
treatment and
related tax
rate(s) that
apply to each
adjustment in the
applicable tax
jurisdiction(s).
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
------------------
September 30, 2017 September 30, 2016
GAAP Adjustments Non-GAAP GAAP Adjustments Non-GAAP
Reported Adjusted Reported Adjusted
-------- -------- -------- --------
Total revenues $411,855 $ - $411,855 $374,181 $ - $374,181
Cost of product sales
(excluding
amortization of
intangible assets) 31,203 (1,573) (a) 29,630 24,311 (1,348) (a) 22,963
Selling, general and
administrative 124,523 (20,903) (b) 103,620 124,368 (29,834) (b) 94,534
Research and
development 47,362 (4,650) (c) 42,712 47,796 (4,473) (c) 43,323
Acquired in-process
research and
development 75,000 (75,000) - 15,000 (15,000) -
Intangible asset
amortization 47,313 (47,313) - 26,453 (26,453) -
Interest expense, net 19,192 (7,855) (d) 11,337 18,498 (5,642) (d) 12,856
Foreign currency loss 2,224 - 2,224 749 - 749
Loss on extinguishment
and modification of
debt - - - 638 (638) -
Income before income
tax provision and
equity in loss of
investees 65,038 157,294 (e) 222,332 116,368 83,388 (e) 199,756
Income tax provision 1,239 23,171 (f) 24,410 26,437 12,063 (f) 38,500
Effective tax rate (g) 1.9% 11.0% 22.7% 19.3%
Equity in loss of
investees 273 - 273 103 - 103
Net income $63,526 $134,123 (h) $197,649 $89,828 $71,325 (h) $161,153
Net income per diluted
share $1.03 $3.22 $1.45 $2.61
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)
Nine Months Ended
-----------------
September 30, 2017 September 30, 2016
GAAP Adjustments Non-GAAP GAAP Adjustments Non-GAAP
Reported Adjusted Reported Adjusted
-------- -------- -------- --------
Total revenues $1,182,294 $ - $1,182,294 $1,091,352 $ - $1,091,352
Cost of product sales
(excluding
amortization of
intangible assets) 84,940 (4,346) (i) 80,594 71,730 (3,110) (i) 68,620
Selling, general and
administrative 401,106 (67,582) (j) 333,524 375,751 (79,118) (j) 296,633
Research and
development 132,447 (13,651) (k) 118,796 118,139 (11,292) (k) 106,847
Acquired in-process
research and
development 77,000 (75,000) 2,000 23,750 (23,750) -
Intangible asset
amortization 99,164 (99,164) - 75,832 (75,832) -
Interest expense, net 56,330 (19,234) (d) 37,096 42,811 (16,418) (d) 26,393
Foreign currency loss 9,115 - 9,115 1,568 - 1,568
Loss on extinguishment
and modification of
debt - - - 638 (638) -
Income before income
tax provision and
equity in loss of
investees 322,192 278,977 (l) 601,169 381,133 210,158 (l) 591,291
Income tax provision 65,914 38,393 (f) 104,307 100,888 28,775 (f) 129,663
Effective tax rate (g) 20.5% 17.4% 26.5% 21.9%
Equity in loss of
investees 637 - 637 103 - 103
Net income $255,641 $240,584 (m) $496,225 $280,142 $181,383 (m) $461,525
Net income per diluted
share $4.17 $8.09 $4.51 $7.43
Explanation of Adjustments and Certain Line Items
(in thousands):
(a) Share-based compensation expense of
$1,573 and $1,307 and transaction
and integration related costs of $0
and $41 for the three months ended
September 30, 2017 and 2016,
respectively.
(b) Share-based compensation expense of
$20,903 and $19,511 and transaction
and integration related costs of $0
and $10,323 for the three months
ended September 30, 2017 and 2016,
respectively.
(c) Share-based compensation expense of
$4,650 and $4,056 and transaction
and integration related costs of $0
and $417 for the three months ended
September 30, 2017 and 2016,
respectively.
(d) Non-cash interest expense associated
with debt discount and debt issuance
costs for the respective three- and
nine-month periods.
(e) Sum of adjustments (a) through (d)
plus the adjustments for acquired
in-process research and
development, intangible asset
amortization and loss on
extinguishment and modification of
debt for the respective three-month
period.
(f) Income tax effect of the adjustments
between GAAP reported and non-GAAP
adjusted net income takes into
account the tax treatment and
related tax rate(s) that apply to
each adjustment in the applicable
tax jurisdiction(s) for the
respective three- and nine-month
periods.
(g) Income tax provision divided by
income before income tax provision
and equity in loss of investees for
the respective three- and nine-
month periods.
(h) Net of adjustments (e) and (f) for
the respective three-month period.
(i) Share-based compensation expense of
$4,346 and $2,959, expenses related
to certain legal proceedings and
restructuring of $0 and $110 and
transaction and integration related
costs of $0 and $41 for the nine
months ended September 30, 2017 and
2016, respectively.
(j) Share-based compensation expense of
$61,582 and $60,664, expenses
related to certain legal proceedings
and restructuring of $6,000 and
$5,950 and transaction and
integration related costs of $0 and
$12,504 for the nine months ended
September 30, 2017 and 2016,
respectively.
(k) Share-based compensation expense of
$13,651 and $10,867 and transaction
and integration related costs of $0
and $425 for the nine months ended
September 30, 2017 and 2016,
respectively.
(l) 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 nine-month period.
(m) Net of adjustments (l) and (f) for
the respective nine-month period.
JAZZ PHARMACEUTICALS PLC
RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED 2017 NET
INCOME GUIDANCE
(In millions, except per share amounts)
(Unaudited)
GAAP net income $325 - $385
Intangible asset amortization 130 - 165
Share-based compensation expense 95 - 110
Upfront and milestone payments 75
Expenses related to certain legal
proceedings and restructuring 6
Non-cash interest expense 30 - 35
Income tax effect of adjustments (50) - (60)
Non-GAAP adjusted net income $655 - $685
===========
GAAP net income per diluted share $5.30-$6.30
===========
Non-GAAP adjusted net income per
diluted share $10.70-$11.20
=============
Weighted-average ordinary shares
used in per share calculations 61
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Company Codes: NASDAQ-NMS:JAZZ |