DUBLIN, Nov. 4, 2014 /PRNewswire/ -- Jazz Pharmaceuticals plc (Nasdaq: JAZZ) today announced financial results for the third quarter ended September 30, 2014 and updated financial guidance for full year 2014.
"We successfully executed on key goals across the business, from strong sales growth of Xyrem, Erwinaze and Defitelio, to advances in our clinical development programs, and to furtherance of our regulatory efforts in preparation for the planned submission of a new drug application for defibrotide in the U.S. in the first half of 2015," said Bruce C. Cozadd, chairman and chief executive officer of Jazz Pharmaceuticals plc. "We're pleased with the substantial progress we've made towards meeting our 2014 goals and creating long-term shareholder value."
Adjusted net income attributable to Jazz Pharmaceuticals plc for the third quarter of 2014 was $145.8 million, or $2.33 per diluted share, compared to $109.4 million, or $1.78 per diluted share, for the third quarter of 2013.
GAAP net income attributable to Jazz Pharmaceuticals plc for the third quarter of 2014 was $25.8 million, or $0.41 per diluted share, compared to $75.4 million, or $1.23 per diluted share, for the third quarter of 2013. GAAP net income attributable to Jazz Pharmaceuticals plc for the third quarter of 2014 included an upfront payment of $75.0 million for the rights to defibrotide in the Americas. Reconciliations of applicable GAAP reported to non-GAAP adjusted information are included in this press release.
Third Quarter 2014 Revenues and Product Sales
Total revenues for the third quarter of 2014 were $306.6 million, an increase of 32% over total revenues of $232.2 million for the third quarter of 2013. This increase was 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 the third quarter of 2014 were as follows:
- Xyrem: Xyrem net sales increased by 33% to $204.3 million in the third quarter of 2014 compared to $153.7 million in the third quarter of 2013. During the third quarter of 2014, the average number of active Xyrem patients increased to 12,050.
- Erwinaze/Erwinase: Erwinaze/Erwinase net sales increased by 18% to $52.1 million in the third quarter of 2014 compared to $44.1 million in the third quarter of 2013.
- Defitelio/defibrotide: Defitelio/defibrotide net sales in the third quarter of 2014 were $18.9 million compared to pro forma net sales of $13.1 million in the third quarter of 2013. Jazz Pharmaceuticals plc acquired indirect majority control of Gentium S.p.A. (Gentium) on January 23, 2014. The pro forma information represents net sales of Defitelio/defibrotide as if the acquisition of Gentium had closed on January 1, 2013.
- Prialt® (ziconotide) intrathecal infusion: Net sales of Prialt were $6.3 million in the third quarter of 2014 compared to $11.0 million in the third quarter of 2013. The decrease in net sales was primarily due to the timing of shipments to Eisai Co., the European distributor of Prialt.
- Psychiatry products: Net sales of the company's psychiatry products were $10.8 million in the third quarter of 2014 compared to $10.7 million in the third quarter of 2013.
- Other: Net sales of other products in the third quarter of 2014 were $11.9 million compared to $10.9 million in the third quarter of 2013. On a pro forma basis, net sales of other products for the third quarter of 2013 were $13.1 million, which included net sales of active pharmaceutical ingredients by Gentium as if the acquisition of Gentium had closed on January 1, 2013.
Tables showing actual and pro forma net product sales for the three and nine months ended September 30, 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 the third quarter of 2014 were $248.5 million on a GAAP basis compared to $131.6 million for the third quarter of 2013. Operating expenses increased over the prior year period primarily due to the following:
- Cost of product sales for the third quarter of 2014 was $27.0 million on a GAAP basis compared to $24.3 million for the same period in 2013. The increase was primarily due to higher net sales. Gross margin for the third quarter of 2014, as a percentage of net product sales, was 91.1% compared to 89.5% for the same period in 2013, primarily due to a change in product mix.
- Selling, general and administrative (SG&A) expenses for the third quarter of 2014 were $93.5 million on a GAAP basis compared to $75.0 million for the same period in 2013. Adjusted SG&A expenses for the third quarter of 2014 were $77.2 million, or 25% of total revenues, compared to $59.6 million, or 26% of total revenues, for the same period in 2013. The increase was primarily due to higher headcount and expenses resulting from the expansion of the company's business.
- Research and development (R&D) expenses for the third quarter of 2014 were $22.4 million on a GAAP basis compared to $11.8 million for the same period in 2013. Adjusted R&D expenses for the third quarter of 2014 were $18.1 million, or 6% of total revenues, compared to $9.9 million, or 4% of total revenues, for the same period in 2013. The increase in R&D expenses was primarily driven by increased costs from the development of the company's product candidates and life cycle management of the company's existing products.
- Acquired in-process research and development expense for the third quarter of 2014 was $75.0 million on a GAAP basis compared to $1.0 million for the same period in 2013. The increase was due to an upfront payment made in connection with the acquisition of the rights to defibrotide in the Americas in August 2014.
Net interest expense for the third quarter of 2014 was $14.5 million compared to $6.2 million for the third quarter of 2013. The increase was due to the company's increased debt levels following the acquisition of Gentium in January 2014 and the sale, in August 2014, of $575.0 million principal amount of 1.875% exchangeable senior notes due 2021, resulting in net proceeds to the company of $558.9 million. A portion of the net proceeds from the sale of exchangeable senior notes was used to repay total outstanding borrowings of $300 million under the company's revolving credit facility.
Foreign currency gain during the third quarter of 2014 was $6.5 million primarily due to the strengthening of the U.S. dollar against the Euro.
As of September 30, 2014, cash and cash equivalents were $575.0 million and the principal balance of the company's long-term debt was $1.5 billion. Cash and cash equivalents decreased from December 31, 2013 primarily due to funds used to acquire Gentium, JZP-110 and the rights to defibrotide in the Americas, make a contingent consideration payment to the former equity holders of EUSA Pharma, repurchase ordinary shares under the company's share repurchase program and fund capital expenditures, offset in part by the net proceeds from the company's term loans, exchangeable senior notes and cash generated by the business.
In the nine months ended September 30, 2014, the company repurchased 0.2 million ordinary shares under its share repurchase program for $30.0 million at an average cost of $131.88 per ordinary share. As of September 30, 2014, the remaining amount under the current share repurchase program was $33.6 million.
Recent Developments
- The first patient has enrolled in the Phase 3 clinical trial of Xyrem in pediatric narcolepsy patients with cataplexy.
- The first patient has received a dose of JZP-416 in the pivotal Phase 2 clinical trials in children who have experienced a hypersensitivity reaction to treatment with pegaspargase therapy for acute lymphoblastic leukemia.
- The Phase 1 clinical trial of JZP-386 completed enrollment during the third quarter. The trial was a first-in-human trial evaluating the safety, pharmacokinetics, and pharmacodynamics of JZP-386, a deuterium-modified sodium oxybate compound licensed from Concert Pharmaceuticals.
2014 Financial Guidance
Jazz Pharmaceuticals' updated full year 2014 financial guidance is as follows:
Revenues | $1,150-$1,170 million |
Total net product sales | $1,142-$1,160 million |
-Xyrem net sales | $765-$780 million |
-Erwinaze/Erwinase net sales | $190-$200 million |
-Defitelio/defibrotide net sales | $65-$70 million |
Adjusted gross margin %1,4 | 91-92% |
Adjusted SG&A expenses2,4 | $315-$325 million |
Adjusted R&D expenses3,4 | $65-$75 million |
GAAP net income attributable to Jazz Pharmaceuticals plc per diluted share | $0.73-$1.05 |
Non-GAAP adjusted net income attributable to Jazz Pharmaceuticals plc per diluted share4 | $8.20-$8.35 |
1. | Excludes $10 million of acquisition accounting inventory fair value step-up adjustments, $4 million in share-based compensation expense and $1 million of depreciation expense from estimated GAAP gross margin of 90-91%. |
2. | Excludes $55-$59 million of share-based compensation expense, $25-$30 million of transaction and integration costs and $5 million of depreciation expense from estimated GAAP SG&A expenses of $400-$420 million. |
3. | Excludes $11-$12 million of share-based compensation expense and $1 million of depreciation expense from estimated GAAP R&D expenses of $77-$88 million. |
4. | See "Non-GAAP Financial Measures" below. Reconciliations of non-GAAP adjusted guidance measures are included above and in the tables accompanying 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, discuss its 2014 third quarter results and update 2014 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 +1 866 318 8615 in the U.S., or +1 617 399 5134 outside the U.S., and entering passcode 57934182.
A replay of the conference call will be available through November 11, 2014 by dialing +1 888 286 8010 in the U.S., or +1 617 801 6888 outside the U.S., and entering passcode 24997214. 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 a specialty biopharmaceutical company focused on improving patients' lives by identifying, developing and commercializing differentiated products that address unmet medical needs. The company has a diverse portfolio of products and/or product candidates in the areas of sleep, hematology/oncology, pain and psychiatry. The company's U.S. marketed products in these areas include: Xyrem® (sodium oxybate) oral solution, Erwinaze® (asparaginase Erwinia chrysanthemi), Prialt® (ziconotide) intrathecal infusion, Versacloz® (clozapine) oral suspension, FazaClo® (clozapine, USP) HD and FazaClo LD. Jazz Pharmaceuticals also has a number of products marketed outside the United States, including Erwinase® and Defitelio® (defibrotide). 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. 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; likewise, the company may in the future cease to exclude items that it has historically excluded for purposes of its non-GAAP financial measures. Because of the non-standardized definitions, the non-GAAP financial measures as used by Jazz Pharmaceuticals in this press release and the accompanying tables may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by the company's competitors and other companies.
As used in this press release, (i) the historical adjusted net income measures attributable to Jazz Pharmaceuticals plc (and the related per share measures) exclude from GAAP net income (loss) attributable to Jazz Pharmaceuticals plc, as applicable, intangible asset amortization, share-based compensation expense, intangible asset impairment, upfront and milestone payments, transaction and integration costs, acquisition accounting inventory fair value step-up adjustments, restructuring charges, change in fair value of contingent consideration, depreciation expense, loss on extinguishment and modification of debt and non-cash interest expense; adjust the income tax provision to the estimated amount of taxes that are payable in cash; and adjust for the amount attributable to noncontrolling interests; (ii) the historical adjusted SG&A expense measures exclude from GAAP SG&A expenses, as applicable, share-based compensation expense, transaction and integration costs, restructuring charges, change in fair value of contingent consideration and depreciation expense; (iii) the historical adjusted R&D expense measures exclude from GAAP R&D expenses, as applicable, share-based compensation expense, transaction and integration costs and depreciation expense; (iv) the adjusted net income attributable to Jazz Pharmaceuticals plc (and the related per share) guidance measures exclude from estimated GAAP net income attributable to Jazz Pharmaceuticals plc intangible asset amortization and depreciation expense, share-based compensation expense, intangible asset impairment, upfront and milestone payments, transaction and integration costs, acquisition accounting inventory fair value step-up adjustments and non-cash interest expense; adjust the income tax provision to the estimated amount of taxes that are payable in cash; and adjust for the amount attributable to noncontrolling interests; (v) the adjusted gross margin percentage guidance excludes from estimated GAAP gross margin percentage share-based compensation expense, acquisition accounting inventory fair value step-up adjustments and depreciation expense; (vi) the adjusted SG&A expenses guidance excludes from estimated GAAP SG&A expenses share-based compensation expense, transaction and integration costs and depreciation expense; and (vii) the adjusted R&D expenses guidance excludes from estimated GAAP R&D expenses share-based compensation expense and depreciation expense.
"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 results, including 2014 financial guidance, the company's plans to submit a new drug application for defibrotide in the United States and the timing thereof, the potential for creating long-term shareholder value, and other statements that are not historical facts. These forward-looking statements are based on Jazz Pharmaceuticals' current expectations 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 and increasing sales of and revenue from Xyrem, such as the potential introduction of generic competition or other sodium oxybate products that compete with Xyrem and changed or increased regulatory restrictions on or requirements with respect to Xyrem, as well as similar risks related to effectively commercializing the company's other marketed products, including Erwinaze and Defitelio; protecting and enhancing the company's intellectual property rights; delays or problems in the supply or manufacture of the company's products, particularly with respect to certain products as to which the company maintains limited inventories, and dependence on single source suppliers, including the risk that the company may not be able to obtain and supply sufficient product to meet commercial demand or to meet requirements for clinical trial supplies; obtaining appropriate pricing and reimbursement for the company's products in an increasingly challenging environment, including the need to obtain appropriate pricing and reimbursement approvals for Defitelio in European countries representing a significant market opportunity for Defitelio and the need to obtain and maintain reimbursement for Xyrem in the United States in an environment in which the company is subject to increasingly restrictive conditions for reimbursement required by third party payors; ongoing regulation and oversight by U.S. and non-U.S. regulatory agencies; the challenges of obtaining sustained acceptance of the company's products by patients, physicians and payors; the difficulty and uncertainty of pharmaceutical product development, including the timing thereof, and the uncertainty of clinical success, such as the risk that results from preclinical studies and/or early clinical trials may not be predictive of results obtained in later and larger clinical trials planned or anticipated to be conducted for the company's product candidates; the inherent uncertainty associated with the regulatory approval process, including the risks that the company may be required to conduct additional time-consuming and costly clinical trials as a condition of regulatory approval of defibrotide in the United States and that the company may otherwise be unable to obtain or maintain any regulatory approval for defibrotide in the United States; risks associated with business combination or product or product candidate acquisition transactions, such as the risks that the acquired businesses, including the acquired Gentium business, will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected, and that the company may otherwise fail to realize the anticipated benefits (commercial or otherwise) from such acquisition transactions, including the acquisition of Gentium and acquisition of the rights to defibrotide in the Americas; the company's ability to identify and acquire, in-license or develop additional products or product candidates to grow its business; and possible restrictions on the company's ability and flexibility to pursue certain future opportunities as a result of its substantial outstanding debt obligations; as well as risks related to future opportunities and plans, including the uncertainty of expected future financial performance and results; and those other risks detailed 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 Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 and future filings and reports by the company, including the Quarterly Report on Form 10-Q for the quarter ended September 30, 2014.
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