DUBLIN, Feb. 24, 2015 /PRNewswire/ -- Jazz Pharmaceuticals plc (Nasdaq: JAZZ) today announced financial results for the full year and the fourth quarter ended December 31, 2014 and provided financial guidance for 2015.
“2014 was an outstanding year for Jazz Pharmaceuticals as we executed on our growth strategy, delivered strong sales of our key products and further diversified our product portfolio and expanded our development pipeline through completion of three transactions,” said Bruce C. Cozadd, chairman and chief executive officer of Jazz Pharmaceuticals plc. “We also made significant progress in R&D, initiating multiple clinical trials and beginning the rolling submission of a new drug application for defibrotide, and in our operational capabilities, creating a scalable infrastructure that has enhanced our readiness to support future growth opportunities and continued creation of long-term shareholder value.”
Adjusted net income attributable to Jazz Pharmaceuticals plc for 2014 was $527.6 million, or $8.43 per diluted share, compared to $388.3 million, or $6.31 per diluted share, for 2013. Adjusted net income attributable to Jazz Pharmaceuticals plc for the fourth quarter of 2014 was $153.1 million, or $2.44 per diluted share, compared to $106.1 million, or $1.72 per diluted share, for 2013.
GAAP net income attributable to Jazz Pharmaceuticals plc for 2014 was $58.4 million, or $0.93 per diluted share, compared to $216.3 million, or $3.51 per diluted share, for 2013. GAAP net income attributable to Jazz Pharmaceuticals plc for the fourth quarter of 2014 was $81.6 million, or $1.30 per diluted share, compared to $55.3 million, or $0.90 per diluted share, for the fourth quarter of 2013. GAAP net income attributable to Jazz Pharmaceuticals plc for 2014 included a total of $202.6 million in upfront and milestone payments primarily for the acquisition of rights to JZP-110 and to defibrotide in the Americas. Reconciliations of applicable GAAP reported to non-GAAP adjusted information are included in this press release.
2014 Revenues and Product Sales
Total revenues for the year ended December 31, 2014 were $1,172.9 million, an increase of 34% over total revenues of $872.4 million for the year ended December 31, 2013. Total revenues for the fourth quarter of 2014 were $328.1 million, an increase of 39% over total revenues of $235.8 million for the fourth quarter of 2013. The increases in total revenues were driven primarily by net product sales of Xyrem® (sodium oxybate) oral solution, Erwinaze®/Erwinase® (asparaginase Erwinia chrysanthemi) and Defitelio® (defibrotide). Total revenues include net product sales, royalties and contract revenues.
Net product sales for 2014 and the fourth quarter of 2014 were as follows:
- Xyrem: 2014 Xyrem net sales increased by 37% to $778.6 million compared to $569.1 million during the prior year. Xyrem net sales increased by 36% to $222.5 million in the fourth quarter of 2014 compared to $164.2 million in the fourth quarter of 2013. During the fourth quarter of 2014, the average number of active Xyrem patients increased to approximately 12,250.
- Erwinaze/Erwinase: 2014 Erwinaze/Erwinase net sales increased by 15% to $199.7 million compared to $174.3 million during the prior year. Erwinaze/Erwinase net sales increased by 21% to $52.8 million in the fourth quarter of 2014 compared to $43.5 million in the fourth quarter of 2013.
- Defitelio/defibrotide: 2014 full year pro forma Defitelio/defibrotide net sales were $73.4 million compared to 2013 full year pro forma net sales of $44.6 million. Defitelio/defibrotide net sales for the period from January 23, 2014 to December 31, 2014 were $70.5 million. Defitelio/defibrotide net sales in the fourth quarter of 2014 were $19.2 million compared to pro forma net sales of $12.7 million in the fourth quarter of 2013. The pro forma information represents net sales of Defitelio/defibrotide as if the acquisition of indirect majority control of Gentium S.p.A. (Gentium), which closed on January 23, 2014, had closed on January 1, 2013.
- Prialt® (ziconotide) intrathecal infusion: 2014 Prialt net sales were $26.4 million compared to $27.1 million in the prior year. Prialt net sales were $10.0 million in the fourth quarter of 2014 compared to $6.4 million in the fourth quarter of 2013. The increase in net sales in the fourth quarter of 2014 was primarily due to the timing of shipments to Eisai Co., the European distributor of Prialt.
- Psychiatry products: 2014 net sales of the company’s psychiatry products were $40.9 million compared to $49.2 million in the prior year. Net sales of the company’s psychiatry products were $8.4 million in the fourth quarter of 2014 compared to $9.1 million in the fourth quarter of 2013.
- Other: 2014 pro forma net sales of other products were $47.0 million compared to 2013 pro forma net sales of $53.9 million. Net sales of other products in the fourth quarter of 2014 were $11.3 million compared to pro forma net sales of $12.8 million in the fourth quarter of 2013. On a pro forma basis, net sales of other products included net sales of active pharmaceutical ingredients by Gentium as if the Gentium acquisition had closed on January 1, 2013.
Tables showing actual and pro forma net product sales for the three months and year ended December 31, 2014 compared to actual and pro forma net product sales for the same periods in 2013 are included in this press release.
Operating Expenses and Other
Operating expenses for 2014 were $977.3 million on a GAAP basis compared to $532.1 million for 2013. Operating expenses for the fourth quarter of 2014 were $198.2 million on a GAAP basis compared to $141.3 million for the fourth quarter of 2013. Operating expenses increased over the prior year periods primarily due to the following:
- Cost of product sales for 2014 was $117.4 million on a GAAP basis compared to $102.1 million for 2013. Cost of product sales for the fourth quarter of 2014 was $28.8 million on a GAAP basis compared to $25.6 million for the same period in 2013. The increase in 2014 was primarily due to higher net sales and an increase in acquisition accounting inventory fair value step-up adjustments and the increase in the fourth quarter was primarily due to higher net sales. Gross margin for 2014, as a percentage of net product sales, was 89.9% compared to 88.2% for 2013. Gross margin for the fourth quarter of 2014, as a percentage of net product sales, was 91.1% compared to 89.0% for the same period in 2013. The increase in the respective periods was primarily due to a change in product mix.
- Selling, general and administrative (SG&A) expenses for 2014 were $406.1 million on a GAAP basis compared to $304.3 million for 2013. SG&A expenses for the fourth quarter of 2014 were $105.7 million on a GAAP basis compared to $81.3 million for the same period in 2013. Adjusted SG&A expenses for 2014 were $316.0 million, or 27% of total revenues, compared to $243.5 million, or 28% of total revenues, for 2013. Adjusted SG&A expenses for the fourth quarter of 2014 were $81.8 million, or 25% of total revenues, compared to $64.5 million, or 27% of total revenues, for the same period in 2013. The increase in both GAAP and adjusted SG&A expenses was primarily due to higher headcount and expenses resulting from the expansion of the company’s business.
- Research and development (R&D) expenses for 2014 were $85.2 million on a GAAP basis compared to $41.6 million for 2013. R&D expenses for the fourth quarter of 2014 were $24.6 million on a GAAP basis compared to $13.8 million for the same period in 2013. Adjusted R&D expenses for 2014 were $70.9 million, or 6% of total revenues, compared to $34.3 million, or 4% of total revenues, for 2013. Adjusted R&D expenses for the fourth quarter of 2014 were $20.9 million, or 6% of total revenues, compared to $11.0 million, or 5% of total revenues, for the same period in 2013. The increase in both GAAP and adjusted R&D expenses was primarily driven by increased costs for the development of the company’s product candidates and life cycle management activities related to the company’s existing products.
- Acquired in-process research and development expense for 2014 was $202.6 million on a GAAP basis compared to $5.0 million for 2013. The increase was due to upfront and milestone payments of $127.0 million made in connection with the acquisition of rights to JZP-110 and an upfront payment of $75.0 million made in connection with the acquisition of rights to defibrotide in the Americas.
- Impairment charges for 2014 were $39.4 million on a GAAP basis. The impairment charges resulted from the reorganization of operations in Europe to focus on the company’s hematology/oncology franchise following the Gentium acquisition and the decision to sell certain products acquired as part of the acquisition of EUSA Pharma Inc. (EUSA Pharma). In the fourth quarter of 2014, we signed a definitive agreement to sell those products and the related business, and expect that the sale, subject to certain closing conditions, will close in the first half of 2015. The company reports sales of these products under “Other” products.
Net interest expense for 2014 was $52.7 million compared to $26.9 million for 2013. Net interest expense for the fourth quarter of 2014 was $16.7 million compared to $6.2 million for the fourth quarter of 2013. The increase was due to the company’s increased debt levels following the Gentium acquisition in January 2014 and the sale in August 2014 of $575.0 million principal amount of 1.875% exchangeable senior notes due 2021. A portion of the net proceeds from the sale of the exchangeable senior notes was used to repay total outstanding borrowings of $300 million under the company’s revolving credit facility.
Foreign currency gain was $8.7 million and $2.0 million for 2014 and the fourth quarter of 2014, respectively, primarily due to the strengthening of the U.S. dollar against the Euro.
As of December 31, 2014, cash and cash equivalents were $684.0 million and the outstanding principal balance of the company’s long-term debt was $1.5 billion. Cash and cash equivalents increased from December 31, 2013 primarily due to the net proceeds from the company’s term loans and exchangeable senior notes and cash generated by the business, offset in part by cash used for the Gentium acquisition and to acquire the rights to JZP-110 and the rights to defibrotide in the Americas, to repay outstanding borrowings under the company’s revolving credit facility, to make a contingent consideration payment to the former equity holders of EUSA Pharma, to repurchase ordinary shares under the company’s share repurchase program and to fund capital expenditures.
In 2014, the company repurchased 0.3 million ordinary shares under its share repurchase program for $42.2 million at an average cost of $138.64 per ordinary share. As of December 31, 2014, the amount remaining under the current share repurchase program was $21.3 million.
Management Transition
Jeffrey Tobias, M.D., executive vice president of research and development and chief medical officer (CMO), will be retiring effective September 2015 after more than 35 years in medicine and the biopharmaceuticals industry. In the interim, Dr. Tobias will continue in his current role through the end of March, at which time he will transition to a new role as executive vice president of R&D strategy and CMO.
“I want to thank Jeff for his significant contributions to the growth and success of Jazz Pharmaceuticals over the past four years. Jeff has led the reshaping of R&D at Jazz, building strong capabilities and expanding from a U.S. to an international organization with a global leadership team and deep clinical expertise in our core therapeutic areas,” said Bruce Cozadd, chairman and chief executive officer of Jazz Pharmaceuticals plc.
Recent Developments
- The company received marketing approval for Erwinase in France, the first country approval through the ongoing Mutual Recognition Procedure, and will continue to seek additional approvals in other EU countries.
- The company voluntarily suspended patient enrollment in the pivotal Phase 2 clinical trial of JZP-416 based on occurrence of hypersensitivity-like reactions following the administration of JZP-416 in some treated patients. JZP-416, the PEGylated recombinant Erwinia chrysanthemi L-asparaginase, is being developed for the treatment of patients with acute lymphoblastic leukemia who are hypersensitive to pegylated E. coli-derived asparaginase (pegaspargase). The company is in the process of collecting and evaluating the available data and plans to conduct additional research and analysis prior to determining whether to resume the study as well as determining next steps regarding the development of JZP-416.
2015 Financial Guidance
Jazz Pharmaceuticals’ full year 2015 financial guidance is as follows:
Revenues | $1,310-$1,370 million |
Total net product sales | $1,303-$1,363 million |
-Xyrem net sales | $950-$970 million |
-Erwinaze/Erwinase net sales | $200-$215 million |
-Defitelio/defibrotide net sales | $73-$83 million |
Adjusted gross margin %1, 5 | 92-93% |
Adjusted SG&A expenses2, 5 | $355-$365 million |
Adjusted R&D expenses3, 5 | $95-$105 million |
Adjusted interest expense4,5 | $40 million |
GAAP net income attributable to Jazz Pharmaceuticals plc per diluted share | $5.17-$5.70 |
Non-GAAP adjusted net income attributable to Jazz Pharmaceuticals plc per diluted share5,6 | $9.45-$9.75 |
1. | Excludes $4 million of share-based compensation expense from estimated GAAP gross margin of 92-93%. | |||
2. | Excludes $76-$82 million of share-based compensation expense from estimated GAAP SG&A expenses of $431-$447 million. | |||
3. | Excludes a milestone payment of $25 million payable in the event of acceptance for filing by the U.S. Food and Drug Administration of the first new drug application (NDA) for defibrotide for veno-occlusive disease (VOD) and $15-$19 million of share-based compensation expense from estimated GAAP R&D expenses of $135-$149 million. | |||
4. | Excludes non-cash interest expense of $23-$27 million from estimated GAAP interest expense of $63-$67 million. | |||
5. | See “Non-GAAP Financial Measures” below. Reconciliations of non-GAAP adjusted guidance measures are included above and in the tables accompanying this press release. | |||
6. | Beginning with the 2015 financial guidance presented in this press release, the company will no longer include an adjustment for depreciation expense in its non-GAAP adjusted financial measures. Accordingly, any historical non-GAAP adjusted financial measures presented by the company in the future, beginning with the company’s earnings press release for the first quarter of 2015, will not include an adjustment for depreciation expense. Any comparative historical periods presented will also be updated to reflect this change beginning with the company’s earnings press release for the first quarter of 2015. However, for purposes of comparability with the company’s prior presentations of non-GAAP financial measures, the historical non-GAAP financial measures presented in this press release include an adjustment for depreciation expense. | |||
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, discuss its 2014 full year and fourth quarter results and provide 2015 financial guidance. The live webcast may be accessed from the Investors & Media 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 +1 800 237 9752 in the U.S., or +1 617 847 8706 outside the U.S., and entering passcode 21347754.
A replay of the conference call will be available through March 3, 2015 by dialing +1 888 286 8010 in the U.S., or +1 617 801 6888 outside the U.S., and entering passcode 39765339. An archived version of the webcast will be available for at least one week in the Investors & Media section of the Jazz Pharmaceuticals 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 and Erwinaze® (asparaginase Erwinia chrysanthemi) in the U.S., and markets Erwinase® and Defitelio® (defibrotide) in Europe and other countries outside the U.S. For more information, please visit www.jazzpharmaceuticals.com.
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. The company believes that each of these non-GAAP financial measures is helpful in understanding its past financial performance and potential future results, particularly in light of the effect of various acquisition and divestiture transactions effected by the company. They are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read in conjunction with the consolidated financial statements prepared in accordance with GAAP. Jazz Pharmaceuticals’ management regularly uses these supplemental non-GAAP financial measures internally to understand, manage and evaluate its business and make operating decisions. Compensation of executives is based in part on the performance of the company’s business based on certain of these non-GAAP financial measures. In addition, Jazz Pharmaceuticals believes that the presentation of these non-GAAP financial measures is useful to investors because it enhances the ability of investors to compare its results from period-to-period and allows for greater transparency with respect to key financial metrics the company uses in making operating decisions, and also because the company’s investors and analysts regularly use them to model and track the company’s financial performance.
Investors should note that these non-GAAP financial measures are not prepared under any comprehensive set of accounting rules or principles and do not reflect all of the amounts associated with the company’s results of operations as determined in accordance with GAAP. Investors should also note that these non-GAAP financial measures have no standardized meaning prescribed by GAAP and, therefore, have limits in their usefulness to investors.
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