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Jazz Pharmaceuticals Announces Second Quarter 2016 Financial Results

August 09, 2016
Strong Top- and Bottom-line Growth
Total Revenues of $381 Million Driven by Strong Sales of Xyrem, Erwinaze and Defitelio

DUBLIN, Aug. 9, 2016 /PRNewswire/ -- Jazz Pharmaceuticals plc (Nasdaq: JAZZ) today announced financial results for the second quarter of 2016 and updated financial guidance for 2016.

"We have made significant progress in 2016, as we continue to build the foundation for future growth by further diversifying and strengthening our hematology/oncology portfolio with the addition of Vyxeos, a late-stage product candidate for the treatment of acute myeloid leukemia, through the acquisition of Celator Pharmaceuticals," said Bruce Cozadd, chairman and chief executive officer of Jazz Pharmaceuticals. "We achieved strong organic sales growth of our key products, including a significant contribution from the U.S. launch of Defitelio, received FDA approval of our manufacturing facility in Athlone, Ireland and entered into additional corporate development transactions with the potential to bring innovative treatment options to patients."

GAAP net income attributable to Jazz Pharmaceuticals plc for the second quarter of 2016 was $111.3 million, or $1.80 per diluted share, compared to $88.1 million, or $1.40 per diluted share, for the second quarter of 2015.

The company has modified the calculation of its non-GAAP income tax provision and has reflected this modification in its 2015 and 2016 non-GAAP interim period results and full-year 2016 financial guidance in connection with the Securities and Exchange Commission'sMay 2016 guidance pertaining to non-GAAP financial measures.  The company's modified calculation no longer includes the cash tax benefits the company realizes during the year from net operating losses and credits and deductible share-based compensation and now includes other deferred taxes and changes in unrecognized tax benefits. This modification does not change the amount of cash taxes that the company expects to pay in 2016 or in the future, and therefore has no impact on the company's future expected cash flows. This modification does not reflect a change in the amount of cash taxes that the company expects to pay in 2016, or in the future, or a change to the company's expected future cash flows.

Adjusted net income attributable to Jazz Pharmaceuticals plc for the second quarter of 2016 was $162.6 million, or $2.63 per diluted share. Without giving effect to the modification described above, adjusted net income attributable to Jazz Pharmaceuticals plc for the second quarter of 2016 would have been $174.3 million, or $2.82 per diluted share. Adjusted net income attributable to Jazz Pharmaceuticals plc for the second quarter of 2015 was $144.2 million, or $2.28 per diluted share. Without giving effect to the modification described above, adjusted net income attributable to Jazz Pharmaceuticals plc for the second quarter of 2015 was previously reported as $152.2 million, or $2.41 per diluted share. Reconciliations of applicable GAAP reported to non-GAAP adjusted information are included in this press release.

Financial Highlights
























Three Months Ended
June 30,




Six Months Ended
June 30,



(In thousands, except per share amounts and percentages)

2016


2015


Change


2016


2015


Change

Total revenues

$

381,161



$

333,747



14.2

%


$

717,171



$

643,050



11.5

%

GAAP net income attributable to Jazz Pharmaceuticals plc

$

111,282



$

88,114



26.3

%


$

185,403



$

158,814



16.7

%

Adjusted net income attributable to Jazz Pharmaceuticals plc1

$

162,584



$

144,151



12.8

%


$

295,461



$

259,666



13.8

%

GAAP EPS attributable to Jazz Pharmaceuticals plc

$

1.80



$

1.40



28.6

%


$

2.98



$

2.52



18.3

%

Adjusted EPS attributable to Jazz Pharmaceuticals plc1

$

2.63



$

2.28



15.4

%


$

4.75



$

4.12



15.3

%

____________________________

1.

Without giving effect to the modification of the calculation of non-GAAP income tax provision described above, adjusted net income attributable to Jazz Pharmaceuticals plc would have been $174.3 million, or $2.82 per diluted share, and was previously reported as $152.2 million, or $2.41 per diluted share, for the three months ended June 30, 2016 and 2015, respectively. Without giving effect to the modification described above, adjusted net income attributable to Jazz Pharmaceuticals plc would have been $315.3 million, or $5.07 per diluted share, and was previously reported as $277.2 million, or $4.40 per diluted share, for the six months ended June 30, 2016 and 2015, respectively.

 

Total Revenues


















Three Months Ended
June 30,


Six Months Ended
June 30,

(In thousands)

2016


2015


2016


2015

Xyrem® (sodium oxybate) oral solution

$

280,968



$

247,846



$

530,505



$

460,536


Erwinaze® / Erwinase® (asparaginase Erwinia chrysanthemi)

49,748



46,151



100,921



96,504


Defitelio® (defibrotide sodium) / defibrotide

33,246



15,257



51,143



32,620


Prialt® (ziconotide) intrathecal infusion

8,073



7,138



14,282



13,902


Psychiatry

3,867



9,372



10,869



18,465


Other

3,208



6,342



5,306



17,114


Product sales, net

379,110



332,106



713,026



639,141


Royalties and contract revenues

2,051



1,641



4,145



3,909


Total revenues

$

381,161



$

333,747



$

717,171



$

643,050


 

Net product sales increased 14% in the second quarter of 2016 compared to the same period in 2015 due to higher net product sales of Xyrem, Erwinaze and Defitelio.

Xyrem net product sales increased 13% in the second quarter of 2016 compared to the same period in 2015.

Erwinaze/Erwinase net product sales increased 8% in the second quarter of 2016 compared to the same period in 2015. While Erwinaze net product sales increased, the company expects to continue to experience inventory and supply challenges, which may result in temporary disruptions in the company's ability to supply certain markets, including the U.S., from time to time.  The company continues to work with distributors to prioritize delivery of drug to institutions for the treatment of patients who have been prescribed Erwinaze. 

Defitelio/defibrotide net product sales increased $18.0 million in the second quarter of 2016 compared to the same period in 2015. The increase in net product sales was due to net sales of $9.5 million following the April 2016 launch of Defitelio in the U.S. and a significant increase in net product sales outside of the U.S.

Operating Expenses


















Three Months Ended
June 30,


Six Months Ended
June 30,

(In thousands, except percentages)

2016


2015


2016


2015

GAAP:








Cost of product sales

$

23,980



$

21,813



$

47,419



$

50,111


Gross margin

93.7

%


93.4

%


93.3

%


92.2

%

Selling, general and administrative

$

122,618



$

107,132



$

251,383



$

219,520


% of total revenues

32.2

%


32.1

%


35.1

%


34.1

%

Research and development

$

39,091



$

27,833



$

70,343



$

55,014


% of total revenues

10.3

%


8.3

%


9.8

%


8.6

%

Acquired in-process research and development

$



$



$

8,750



$










Non-GAAP adjusted:








Cost of product sales

$

23,017



$

21,041



$

45,657



$

48,644


Gross margin

93.9

%


93.7

%


93.6

%


92.4

%

Selling, general and administrative

$

99,488



$

88,470



$

202,099



$

183,511


% of total revenues

26.1

%


26.5

%


28.2

%


28.5

%

Research and development

$

35,562



$

23,967



$

63,524



$

47,663


% of total revenues

9.3

%


7.2

%


8.9

%


7.4

%

 

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

  • Selling, general and administrative (SG&A) expenses increased in the second quarter of 2016 compared to the same period in 2015, on a GAAP and on a non-GAAP adjusted basis, primarily due to higher headcount and other expenses resulting from the expansion of the company's business.
  • Research and development (R&D) expenses increased in the second quarter of 2016 compared to the same period in 2015, on a GAAP and on a non-GAAP adjusted basis, primarily due to higher costs for clinical studies and outside services for the development of JZP-110 and line extensions for the company's existing products.

Cash Flow and Balance Sheet

As of June 30, 2016, cash, cash equivalents and investments were $916.4 million, and the outstanding principal balance of the company's long-term debt was $1.3 billion. Cash, cash equivalents and investments decreased from December 31, 2015 primarily due to repurchases under the company's share repurchase program and a $150.0 million milestone payment triggered by the U.S. Food and Drug Administration (FDA) approval of Defitelio on March 30, 2016, partially offset by cash generated by the business. During the six months ended June 30, 2016, the company repurchased 1.3 million ordinary shares for $163.2 million, at an average cost of $126.74 per ordinary share.

Recent Developments

In June 2016, the company received FDA approval for its manufacturing facility in Athlone, Ireland. Xyrem and certain development product candidates will be manufactured in this facility.

On July 12, 2016, the company completed its acquisition of Celator Pharmaceuticals, Inc. for approximately $1.5 billion.

On July 12, 2016, the company amended its existing credit agreement by increasing the revolving credit facility to $1.25 billion from $750 million and extending the maturity date of the term loan facility and revolving credit facility to July 2021 from June 2020. The company used borrowings of $1.0 billion under the company's revolving credit facility, together with cash on hand, to fund the Celator acquisition, resulting in an increase of the outstanding principal balance of long-term debt to approximately $2.3 billion.

On August 2, 2016, the U.S. Centers for Medicare and Medicaid Services approved a New Technology Add-on Payment (NTAP) for Defitelio after determining that Defitelio met the NTAP criteria for newness, substantial clinical improvement relative to existing therapies and specific cost thresholds.  Beginning October 1, 2016, NTAP will provide incremental reimbursement to the standard diagnosis-related group based reimbursement for Defitelio, which should support Medicare beneficiaries' access to Defitelio when treated in certain inpatient hospital settings.

2016 Financial Guidance*

Jazz Pharmaceuticals is updating its full year 2016 financial guidance primarily due to the acquisition of Celator Pharmaceuticals and modification of the calculation of non-GAAP income tax provision, as follows (in millions, except per share amounts and percentage):



Revenues

$1,485-$1,530

Total net product sales

$1,477-$1,522

-Xyrem net sales

$1,095-$1,130

-Erwinaze/Erwinase net sales

$190-$215

-Defitelio/defibrotide net sales

$105-$125

GAAP gross margin %

93%

Non-GAAP adjusted gross margin %1,4

93%

GAAP SG&A expenses

$499-$529

Non-GAAP adjusted SG&A expenses2,4

$400-$415

GAAP R&D expenses

$149-$161

Non-GAAP adjusted R&D expenses3,4

$135-$145

GAAP net income per diluted share

$5.66-$6.56

Non-GAAP adjusted net income per diluted share4

$9.90-$10.30

____________________________

*  

Updated August 9, 2016. The company's 2016 financial guidance remains subject to final acquisition accounting adjustments for the acquisition of Celator Pharmaceuticals.



1.

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

2.

Excludes $78-$86 million of share-based compensation expense, $15-$22 million of transaction and integration related costs and $6 million of expenses related to certain legal proceedings and restructuring from estimated GAAP SG&A expenses.

3.

Excludes $14-$16 million of share-based compensation expense from estimated GAAP 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 2016 Net Income Guidance" provided on the last page 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. EDT (9:30 p.m. IST) to provide a business and financial update and discuss its 2016 second quarter results. 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 +1 855 353 7924 in the U.S., or +1 503 343 6056 outside the U.S., and entering passcode 44700140.

A replay of the conference call will be available through August 16, 2016 by dialing +1 855 859 2056 in the U.S., or +1 404 537 3406 outside the U.S., and entering passcode 44700140. An archived version of the webcast will be available for at least one week in the Investors & Media 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) and Defitelio® (defibrotide sodium) in the U.S. and markets Erwinase® and Defitelio® (defibrotide) in 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. In particular, the company presents non-GAAP adjusted net income attributable to Jazz Pharmaceuticals plc (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 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 tax effect of non-GAAP adjustments and, for the comparable 2015 periods, adjust for the amount attributable to noncontrolling interests. In this regard, the components of non-GAAP adjusted net income attributable to Jazz Pharmaceuticals plc, 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 information to management, investors and analysts by excluding items that may not be indicative of the company's core operating results and business outlook, such as intangible asset amortization, share-based compensation expense, upfront and milestone payments, expenses related to certain legal proceedings and restructuring, transaction and integration related costs, non-cash interest and loss on extinguishment and modification of debt, and by including the above-mentioned tax effect and noncontrolling interest adjustments. Jazz Pharmaceuticals' management 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. In addition, Jazz Pharmaceuticals believes that these non-GAAP financial measures are useful to investors because they enhance investors' ability to compare the company's results from period to period; allow for greater transparency with respect to key financial metrics the company uses in making operating decisions; and are regularly used by investors and analysts to model and track the company's financial performance.

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. In this regard, the company has modified the calculation of its non-GAAP income tax provision and accordingly, commencing with the company's presentation of non-GAAP adjusted net income (and the related per share measures) for the three and six months ended June 30, 2016, the income tax effect of the adjustments between GAAP reported and non-GAAP adjusted results takes into account the tax treatment and related tax rate(s) that apply to each adjustment in the applicable tax jurisdiction(s). For purposes of comparability, the non-GAAP income tax provision and the corresponding income tax adjustment to arrive at non-GAAP adjusted net income attributable to Jazz Pharmaceuticals plc (and the related per share measures) for the comparable 2015 periods are presented on the same basis. 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 2016 financial guidance, the company's manufacturing plans, the expected impact of NTAP designation for Defitelio, 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 introduction of generic competition or other competitive products; regulatory restrictions and requirements applicable to Xyrem and ongoing patent litigation and related proceedings; effectively commercializing the company's other products and product candidates; 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; the difficulty and uncertainty of pharmaceutical product development and the uncertainty of clinical success; identifying and acquiring, in-licensing or developing additional products or product candidates, financing these transactions and successfully integrating acquired businesses such as Celator Pharmaceuticals, Inc.; the extent to which hospitals will take advantage of the NTAP program with respect to Defitelio; the ability to achieve expected future financial performance and results; 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'sSecurities 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 March 31, 2016 and future filings and reports by the company, including the company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2016.  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
June 30,


Six Months Ended
June 30,


2016


2015


2016


2015

Revenues:








Product sales, net

$

379,110



$

332,106



$

713,026



$

639,141


Royalties and contract revenues

2,051



1,641



4,145



3,909


Total revenues

381,161



333,747



717,171



643,050


Operating expenses:








Cost of product sales (excluding amortization of intangible assets)

23,980



21,813



47,419



50,111


Selling, general and administrative

122,618



107,132



251,383



219,520


Research and development

39,091



27,833



70,343



55,014


Acquired in-process research and development





8,750




Intangible asset amortization

26,737



23,668



49,379



48,345


Total operating expenses

212,426



180,446



427,274



372,990


Income from operations

168,735



153,301



289,897



270,060


Interest expense, net

(12,121)



(15,812)



(24,313)



(32,057)


Foreign currency gain (loss)



(1,914)



(819)



331


Loss on extinguishment and modification of debt



(16,815)





(16,815)


Income before income tax provision

156,614



118,760



264,765



221,519


Income tax provision

45,332



30,647



79,362



62,706


Net income

111,282



88,113



185,403



158,813


Net loss attributable to noncontrolling interests, net of tax



(1)





(1)


Net income attributable to Jazz Pharmaceuticals plc

$

111,282



$

88,114



$

185,403



$

158,814










Net income attributable to Jazz Pharmaceuticals plc per ordinary share:








Basic

$

1.84



$

1.44



$

3.05



$

2.60


Diluted

$

1.80



$

1.40



$

2.98



$

2.52


Weighted-average ordinary shares used in per share calculations - basic

60,499



61,190



60,821



60,998


Weighted-average ordinary shares used in per share calculations - diluted

61,833



63,090



62,154



63,028


 

JAZZ PHARMACEUTICALS PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)










June 30,
2016


December 31,
2015

ASSETS




Current assets:




Cash and cash equivalents

$

867,966



$

988,785


Investments

48,409




Accounts receivable, net of allowances

231,837



209,685


Inventories

33,291



19,451


Prepaid expenses

23,143



20,699


Other current assets

26,244



19,047


Total current assets

1,230,890



1,257,667


Property and equipment, net

93,476



85,572


Intangible assets, net

1,300,761



1,185,606


Goodwill

661,845



657,139


Deferred tax assets, net, non-current

117,507



122,863


Deferred financing costs

6,610



7,209


Other non-current assets

37,005



27,548


Total assets

$

3,448,094



$

3,343,604


LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

28,406



$

21,807


Accrued liabilities

157,622



164,070


Current portion of long-term debt

37,500



37,587


Income taxes payable

1,761



1,808


Deferred revenue

1,432



1,370


Total current liabilities

226,721



226,642


Deferred revenue, non-current

3,161



3,721


Long-term debt, less current portion

1,141,652



1,150,857


Deferred tax liability, net, non-current

289,906



294,485


Other non-current liabilities

94,196



69,253


Total shareholders' equity

1,692,458



1,598,646


Total liabilities and shareholders' equity

$

3,448,094



$

3,343,604


 

JAZZ PHARMACEUTICALS PLC
RECONCILIATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
(In thousands, except per share amounts)
(Unaudited)


















Three Months Ended
June 30,


Six Months Ended
June 30,


2016


2015


2016


2015

GAAP reported net income attributable to Jazz Pharmaceuticals plc

$

111,282



$

88,114



$

185,403



$

158,814


Intangible asset amortization

26,737



23,668



49,379



48,345


Share-based compensation expense

25,433



23,300



49,616



44,119


Upfront and milestone payments





8,750




Expenses related to certain legal proceedings and restructuring





6,060



553


Transaction and integration related costs

2,189





2,189



155


Non-cash interest expense

5,414



6,032



10,776



12,048


Loss on extinguishment and modification of debt



16,815





16,815


Income tax effect of adjustments (1)

(8,471)



(13,776)



(16,712)



(21,181)


Adjustments for amount attributable to noncontrolling interests (2)



(2)





(2)


Non-GAAP adjusted net income attributable to Jazz Pharmaceuticals plc

$

162,584



$

144,151



$

295,461



$

259,666










GAAP reported net income attributable to Jazz Pharmaceuticals plc per diluted share

$

1.80



$

1.40



$

2.98



$

2.52


Non-GAAP adjusted net income attributable to Jazz Pharmaceuticals plc per diluted share (3)

$

2.63



$

2.28



$

4.75



$

4.12


Weighted-average ordinary shares used in diluted per share calculations

61,833



63,090



62,154



63,028




























(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).

(2) The noncontrolling interests' share of the above adjustments as applicable.

(3) Commencing with the company's earnings release for the second quarter of 2016, the company modified the calculation of its non-GAAP income tax provision. The following table sets forth the impact of the modification on non-GAAP adjusted net income attributable to Jazz Pharmaceuticals plc per diluted share and is provided for informational purposes only during the periods affected by the modification.




















Three Months Ended
June 30,


Six Months Ended
June 30,


2016


2015


2016


2015

Non-GAAP adjusted net income attributable to Jazz Pharmaceuticals plc per diluted share

$

2.63



$

2.28



$

4.75



$

4.12


Impact attributable to the modified calculation of non-GAAP income tax provision

0.19



0.13



0.32



0.28



$

2.82



$

2.41



$

5.07



$

4.40


 

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


June 30, 2016


June 30, 2015


GAAP Reported


Adjustments


Non-GAAP Adjusted


GAAP Reported


Adjustments


Non-GAAP Adjusted

Total revenues

$

381,161



$



$

381,161



$

333,747



$



$

333,747


Cost of product sales (excluding amortization of intangible assets)

23,980



(963)


(a) 

23,017



21,813



(772)


(a) 

21,041


Selling, general and administrative

122,618



(23,130)


(b) 

99,488



107,132



(18,662)


(b) 

88,470


Research and development

39,091



(3,529)


(c) 

35,562



27,833



(3,866)


(c) 

23,967


Intangible asset amortization

26,737



(26,737)





23,668



(23,668)




Interest expense, net

12,121



(5,414)


(d) 

6,707



15,812



(6,032)


(d) 

9,780


Foreign currency loss







1,914





1,914


Loss on extinguishment and modification of debt







16,815



(16,815)




Income before income tax provision

156,614



59,773


(e) 

216,387



118,760



69,815


(e) 

188,575


Income tax provision

45,332



8,471


(f) 

53,803



30,647



13,776


(f) 

44,423


Effective tax rate (g)

28.9

%




24.9

%


25.8

%




23.6

%

Net income

111,282



51,302


(h) 

162,584



88,113



56,039


(h) 

144,152


Net income (loss) attributable to noncontrolling interests, net of tax




(i) 



(1)



2


(i) 

1


Net income attributable to Jazz Pharmaceuticals plc

$

111,282



$

51,302


(j) 

$

162,584



$

88,114



$

56,037


(j) 

$

144,151


Net income attributable to Jazz Pharmaceuticals plc per diluted share

$

1.80





$

2.63



$

1.40





$

2.28


 

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)


























Six Months Ended


June 30, 2016


June 30, 2015


GAAP Reported


Adjustments


Non-GAAP Adjusted


GAAP Reported


Adjustments


Non-GAAP Adjusted

Total revenues

$

717,171



$



$

717,171



$

643,050



$



$

643,050


Cost of product sales (excluding amortization of intangible assets)

47,419



(1,762)


(k) 

45,657



50,111



(1,467)


(k) 

48,644


Selling, general and administrative

251,383



(49,284)


(l) 

202,099



219,520



(36,009)


(l) 

183,511


Research and development

70,343



(6,819)


(m) 

63,524



55,014



(7,351)


(m) 

47,663


Acquired in-process research and development

8,750



(8,750)










Intangible asset amortization

49,379



(49,379)





48,345



(48,345)




Interest expense, net

24,313



(10,776)


(d) 

13,537



32,057



(12,048)


(d) 

20,009


Foreign currency (gain) loss

819





819



(331)





(331)


Loss on extinguishment and modification of debt







16,815



(16,815)




Income before income tax provision

264,765



126,770


(n) 

391,535



221,519



122,035


(n) 

343,554


Income tax provision

79,362



16,712


(f) 

96,074



62,706



21,181


(f) 

83,887


Effective tax rate (g)

30.0

%




24.5

%


28.3

%




24.4

%

Net income

185,403



110,058


(o) 

295,461



158,813



100,854


(o) 

259,667


Net income (loss) attributable to noncontrolling interests, net of tax




(i) 



(1)



2


(i) 

1


Net income attributable to Jazz Pharmaceuticals plc

$

185,403



$

110,058


(p) 

$

295,461



$

158,814



$

100,852


(p) 

$

259,666


Net income attributable to Jazz Pharmaceuticals plc per diluted share

$

2.98





$

4.75



$

2.52





$

4.12


_____________________________

 

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



(a)

Share-based compensation expense of $963 and $772 for the three months ended June 30, 2016 and 2015, respectively.

(b)

Share-based compensation expense of $20,949 and $18,662 and transaction and integration related costs of $2,181 and $0 for the three months ended June 30, 2016 and 2015, respectively.

(c)

Share-based compensation expense of $3,521 and $3,866 and transaction and integration related costs of $8 and $0 for the three months ended June 30, 2016 and 2015, respectively.

(d)

Non-cash interest expense associated with debt discount and debt issuance costs for the respective three- and six-month periods.

(e) 

Sum of adjustments (a) through (d) plus the adjustments for intangible asset amortization and loss on extinguishment and modification of debt, as applicable, 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) in the respective three-and six-month periods.

(g)

Income tax provision divided by income before income tax provision for the respective three- and six-month periods.

(h)

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

(i) 

Adjustments for amount attributable to noncontrolling interests for the respective three- and six-month periods.

(j)

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

(k) 

Share-based compensation expense of $1,652 and $1,467 and expenses related to certain legal proceedings and restructuring of $110 and $0 for the six months ended June 30, 2016 and 2015, respectively.

(l) 

Share-based compensation expense of $41,153 and $35,301, expenses related to certain legal proceedings and restructuring of $5,950 and $553 and transaction and integration related costs of $2,181 and $155 for the six months ended June 30, 2016 and 2015, respectively.

(m)

Share-based compensation expense of $6,811 and $7,351 and transaction and integration related costs of $8 and $0 for the six months ended June 30, 2016 and 2015, respectively.

(n)

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

(o)

Net of adjustments (n) and (f) for the respective six-month period.

(p) 

Net of adjustments (o) and (i) for the respective six-month period.

 

JAZZ PHARMACEUTICALS PLC
RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED 2016 NET INCOME GUIDANCE*
(In millions, except per share amounts)
(Unaudited)



GAAP net income

$351 - $407

Intangible asset amortization

100 - 110

Share-based compensation expense

97 - 107

Upfront and milestone payments

24

Transaction and integration related costs

15 - 22

Expenses related to certain legal proceedings and restructuring

6

Non-cash interest expense

20 - 24

Income tax effect of adjustments

(37) - (27)

Non-GAAP adjusted net income

$615 - $640



GAAP net income per diluted share1

$5.66-$6.56

Non-GAAP adjusted net income per diluted share 1

$9.90-$10.30



Weighted-average ordinary shares used in per share calculations

62

_____________________________

Updated August 9, 2016. The company's 2016 financial guidance remains subject to final acquisition accounting adjustments for the acquisition of Celator Pharmaceuticals.



1.

The change in GAAP guidance from the company's May 10, 2016 guidance is primarily due to the acquisition of Celator, which increased estimated SG&A and R&D expenses, and net interest expense. The change in non-GAAP guidance is primarily due to the acquisition of Celator, and the modification of the calculation of the company's non-GAAP income tax provision of approximately $0.55 per share.

 

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SOURCE Jazz Pharmaceuticals plc

Investors, Kathee Littrell, Vice President, Investor Relations, Jazz Pharmaceuticals plc, Ireland, + 353 1 634 7887, U.S., + 1 650 496 2717; Media, Laurie Hurley, Vice President, Corporate Affairs, Jazz Pharmaceuticals plc, Ireland, + 353 1 634 7894, U.S., + 1 650 496 2796