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Jazz Pharmaceuticals Announces First Quarter 2018 Financial Results
Total Revenues Increased 18% to $445 Million
Supplemental New Drug Application Submitted to FDA for Xyrem in the Treatment of Pediatric Narcolepsy Patients with Cataplexy and Excessive Daytime Sleepiness

DUBLIN, May 8, 2018 /PRNewswire/ -- Jazz Pharmaceuticals plc (Nasdaq: JAZZ) today announced financial results for the first quarter of 2018 and updated financial guidance for 2018.

"The first quarter was highlighted by strong revenue growth, cash flow generation and execution across the organization that led to significant progress toward our 2018 goals," said Bruce Cozadd, chairman and chief executive officer of Jazz Pharmaceuticals.  "The recent submission of our supplemental NDA for Xyrem for pediatric narcolepsy patients and FDA acceptance of our NDA for solriamfetol for excessive sleepiness in patients with narcolepsy or OSA result from our focused investment in advancing our promising R&D pipeline.  Over the next 18 months, we look forward to fueling our portfolio with innovative product candidates and delivering on multiple regulatory milestones and product launches."

GAAP net income for the first quarter of 2018 was $46.0 million, or $0.75 per diluted share, compared to $86.5 million, or $1.41 per diluted share, for the first quarter of 2017.

Adjusted net income for the first quarter of 2018 was $182.4 million, or $2.98 per diluted share, compared to $141.2 million, or $2.31 per diluted share, for the first quarter of 2017. Reconciliations of applicable GAAP reported to non-GAAP adjusted information are included at the end of this press release.

Financial Highlights


Three Months Ended
March 31,



(In thousands, except per share amounts and percentages)

2018


2017


Change

Total revenues

$

444,613



$

376,053



18

%

GAAP net income

$

45,991



$

86,511



(47)

%

Adjusted net income

$

182,371



$

141,222



29

%

GAAP EPS

$

0.75



$

1.41



(47)

%

Adjusted EPS

$

2.98



$

2.31



29

%

Total Revenues


Three Months Ended
March 31,

(In thousands)

2018


2017

Xyrem® (sodium oxybate) oral solution

$

316,777



$

272,326


Erwinaze® / Erwinase® (asparaginase Erwinia chrysanthemi)

50,627



51,388


Defitelio® (defibrotide sodium) / defibrotide

35,061



35,900


Vyxeos® (daunorubicin and cytarabine) liposome for injection

26,228




Prialt® (ziconotide) intrathecal infusion

6,126



7,717


Other

6,028



6,347


Product sales, net

440,847



373,678


Royalties and contract revenues

3,766



2,375


Total revenues

$

444,613



$

376,053


Total revenues increased 18% in the first quarter of 2018 compared to the same period in 2017 due to an increase in net product sales of Xyrem and the launch of Vyxeos.

Xyrem net product sales increased 16% in the first quarter of 2018 compared to the same period in 2017.

Erwinaze/Erwinase net product sales in the first quarter were consistent with the same period in 2017. The company is currently experiencing supply disruptions and expects that there may be further supply challenges during 2018.

Defitelio/defibrotide net product sales in the first quarter of 2018 were consistent with the same period in 2017. The company continues to expect inter-quarter variability in Defitelio net sales given that veno-occlusive disease is an ultra-rare disease.

Vyxeos net product sales were $26.2 million in the first quarter of 2018. Vyxeos launched in the U.S. in August 2017.

Operating Expenses


Three Months Ended
March 31,

(In thousands, except percentages)

2018


2017

GAAP:




Cost of product sales

$

33,919



$

25,065


Gross margin

92.3

%


93.3

%

Selling, general and administrative

$

207,213



$

144,255


% of total revenues

46.6

%


38.4

%

Research and development

$

62,667



$

44,928


% of total revenues

14.1

%


11.9

%



Three Months Ended
March 31,

(In thousands, except percentages)

2018


2017

Non-GAAP adjusted:




Cost of product sales

$

32,225



$

23,819


Gross margin

92.7

%


93.6

%

Selling, general and administrative

$

131,979



$

118,450


% of total revenues

29.7

%


31.5

%

Research and development

$

47,292



$

40,786


% of total revenues

10.6

%


10.8

%

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

  • Selling, general and administrative (SG&A) expenses increased in the first quarter of 2018 compared to the same period in 2017 on a GAAP and on a non-GAAP adjusted basis due to higher expenses resulting from expansion of the company's business, including expenses supporting the potential EU launch of Vyxeos and U.S. launch of solriamfetol. SG&A expenses in the first quarter of 2018 on a GAAP basis also included an estimated loss contingency of $57.0 million related to an ongoing U.S. Department of Justice (DOJ) investigation of our support of 501(c)(3) organizations that provide financial assistance to Medicare patients. In April 2018, the company reached an agreement in principle with the DOJ on a proposal for a civil settlement of potential claims relating to the investigation, subject to negotiation of a definitive settlement agreement and other contingencies.
  • Research and development (R&D) expenses increased in the first quarter of 2018 compared to the same period in 2017 on a GAAP and on a non-GAAP adjusted basis due to an increase in expenses related to the company's ongoing pre-clinical and clinical development programs and regulatory activities. R&D expenses in the first quarter of 2018 on a GAAP basis also included milestone payments of $11.0 million related to the U.S. Food and Drug Administration's (FDA) acceptance for filing of the company's New Drug Application (NDA) for solriamfetol.

Cash Flow and Balance Sheet

As of March 31, 2018, cash, cash equivalents and investments were $708.2 million, and the outstanding principal balance of the company's long-term debt was $1.8 billion. During the first quarter of 2018, we generated $162.4 million of cash from operations, used $34.5 million to repurchase approximately 238,000 ordinary shares under the company's share repurchase program at an average cost of $145.34 per ordinary share and made milestone payments totaling $11.0 million.

Recent Developments

In March 2018, the FDA accepted for filing with standard review the company's NDA seeking marketing approval for solriamfetol, an investigational medicine for the treatment of excessive sleepiness in adult patients with narcolepsy or obstructive sleep apnea (OSA). The Prescription Drug User Fee Act (PDUFA) date for an FDA decision is December 20, 2018.

In April 2018, the company entered into an agreement with Spark Therapeutics, Inc. to purchase a rare pediatric disease priority review voucher (PRV) for $110 million that will allow the company to accelerate the review process by the FDA for one of its future regulatory submissions.

In April 2018, the company submitted a supplemental NDA to the FDA seeking marketing approval for Xyrem in the treatment of pediatric narcolepsy patients with cataplexy and excessive daytime sleepiness.

2018 Financial Guidance

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

Revenues*

$1,880-$1,930

Total net product sales*

$1,865-$1,910

-Xyrem net sales*

$1,320-$1,350

-Erwinaze/Erwinase net sales

$190-$220

-Defitelio/defibrotide net sales

$145-$165

-Vyxeos net sales

$130-$155

GAAP gross margin %

93%

Non-GAAP adjusted gross margin %1,5

93%

GAAP SG&A expenses*

$660-$699

Non-GAAP adjusted SG&A expenses2,5

$525-$555

GAAP R&D expenses*

$232-$255

Non-GAAP adjusted R&D expenses3,5

$205-$225

GAAP effective tax rate

18%-21%

Non-GAAP adjusted effective tax rate4,5

17%-19%

GAAP net income per diluted share*

$6.60-$7.70

Non-GAAP adjusted net income per diluted share*5

$12.75-$13.25

________________________________

*

Updated May 8, 2018

1.

Excludes $6-$9 million of share-based compensation expense from estimated GAAP gross margin.

2.

Excludes $78-$87 million of share-based compensation expense and $57 million of estimated loss contingency from estimated GAAP SG&A expenses.

3.

Excludes $16-$19 million of share-based compensation expense and $11 million of milestone payments from estimated GAAP R&D expenses.

4.

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

5.

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

Conference Call Details

Jazz Pharmaceuticals will host an investor conference call and live audio webcast today at 4:30 p.m. EDT (9:30 p.m. IST) to provide a business and financial update and discuss its 2018 first quarter results. The live webcast may be accessed from the Investors section of the company's website at www.jazzpharmaceuticals.com. Please connect to the website prior to the start of the conference call to ensure adequate time for any software downloads that may be necessary. Investors may participate in the conference call by dialing +1 855 353 7924 in the U.S., or +1 503 343 6056 outside the U.S., and entering passcode 9868758.

A replay of the conference call will be available through May 15, 2018 by dialing +1 855 859 2056 in the U.S., or +1 404 537 3406 outside the U.S., and entering passcode 9868758. An archived version of the webcast will be available for at least one week in the Investors section of the company's website at www.jazzpharmaceuticals.com.

About Jazz Pharmaceuticals plc

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

Non-GAAP Financial Measures

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

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

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

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

This press release contains forward-looking statements, including, but not limited to, statements related to Jazz Pharmaceuticals' future financial and operating results, including 2018 financial guidance, the company's expectations for advancing its promising R&D pipeline, fueling its portfolio with innovative product candidates and delivering on multiple regulatory milestones and product launches, the company's expectations for future Erwinaze supply challenges and inter-quarter variability in Defitelio net sales, the company's potential use of the PRV to accelerate the review process by the FDA for one of its future regulatory submissions and other statements that are not historical facts.  These forward-looking statements are based on the company's current plans, objectives, estimates, expectations and intentions and inherently involve significant risks and uncertainties.  Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks and uncertainties associated with: maintaining or increasing sales of and revenue from Xyrem, such as the potential U.S. introduction of a generic version of Xyrem before the entry dates specified in the company's settlements with certain companies that have filed abbreviated new drug applications with the FDA seeking approval to market a generic version of Xyrem or on terms that are different from those contemplated by the settlements; ongoing patent litigation and related proceedings; effectively commercializing the company's other products and product candidates; the time-consuming and uncertain regulatory approval process, including the risk that the company's regulatory submissions, including the solriamfetol NDA, the Xyrem supplemental NDA and the marketing authorization application for Vyxeos in the European Union, may not be approved by applicable regulatory authorities in a timely manner or at all; protecting and enhancing the company's intellectual property rights; delays or problems in the supply or manufacture of the company's products and product candidates; complying with applicable U.S. and non-U.S. regulatory requirements; government investigations and other actions, including the risk that the company may not ultimately reach a final settlement with the DOJ to resolve an investigation relating to the company's support of 501(c)(3) organizations that provide financial assistance to Medicare patients; obtaining and maintaining appropriate pricing and reimbursement for the company's products; pharmaceutical product development and the uncertainty of clinical success, including risks related to failure or delays in initiating or completing clinical trials; identifying and acquiring, in-licensing or developing additional products or product candidates, financing these transactions and successfully integrating acquired businesses; potential restrictions on the company's ability and flexibility to pursue share repurchases and future strategic opportunities as a result of its substantial outstanding debt obligations; the ability to achieve expected future financial performance and results and the uncertainty of future tax and other provisions and estimates; and other risks and uncertainties affecting the company, including those described from time to time under the caption "Risk Factors" and elsewhere in Jazz Pharmaceuticals plc's Securities and Exchange Commission filings and reports (Commission File No. 001-33500), including the company's Annual Report on Form 10-K for the year ended December 31, 2017 and future filings and reports by the company, including the company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2018.  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 the 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
March 31,


2018


2017

Revenues:




Product sales, net

$

440,847



$

373,678


Royalties and contract revenues

3,766



2,375


Total revenues

444,613



376,053


Operating expenses:




Cost of product sales (excluding amortization of intangible assets)

33,919



25,065


Selling, general and administrative

207,213



144,255


Research and development

62,667



44,928


Intangible asset amortization

53,007



25,665


Total operating expenses

356,806



239,913


Income from operations

87,807



136,140


Interest expense, net

(20,605)



(18,844)


Foreign exchange loss

(1,728)



(1,464)


Income before income tax provision and equity in loss of investees

65,474



115,832


Income tax provision

19,146



29,160


Equity in loss of investees

337



161


Net income

$

45,991



$

86,511






Net income per ordinary share:




Basic

$

0.77



$

1.44


Diluted

$

0.75



$

1.41


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

59,928



59,880


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

61,178



61,178


 

JAZZ PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)










March 31,
2018


December 31,
2017

ASSETS




Current assets:




Cash and cash equivalents

$

453,169



$

386,035


Investments

255,000



215,000


Accounts receivable, net of allowances

281,424



224,129


Inventories

46,384



43,245


Prepaid expenses

27,476



23,182


Other current assets

62,868



76,686


Total current assets

1,126,321



968,277


Property, plant and equipment, net

178,920



170,080


Intangible assets, net

2,953,146



2,979,127


Goodwill

960,509



947,537


Deferred tax assets, net

38,103



34,559


Deferred financing costs

7,144



7,673


Other non-current assets

22,985



16,419


Total assets

$

5,287,128



$

5,123,672


LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

46,933



$

24,368


Accrued liabilities

240,544



198,779


Current portion of long-term debt

45,117



40,605


Income taxes payable

36,048



21,577


Deferred revenue

6,977



8,618


Total current liabilities

375,619



293,947


Deferred revenue, non-current

13,641



16,115


Long-term debt, less current portion

1,537,044



1,540,433


Deferred tax liabilities, net

382,072



383,472


Other non-current liabilities

192,181



176,608


Total shareholders' equity

2,786,571



2,713,097


Total liabilities and shareholders' equity

$

5,287,128



$

5,123,672


 

JAZZ PHARMACEUTICALS PLC

SUMMARY OF CASH FLOWS

(In thousands)

(Unaudited)










Three Months Ended
March 31,


2018


2017

Net cash provided by operating activities

$

162,359



$

164,540


Net cash used in investing activities

(47,149)



(3,574)


Net cash used in financing activities

(47,575)



(181,674)


Effect of exchange rates on cash and cash equivalents

(501)



1,740


Net increase (decrease) in cash and cash equivalents

$

67,134



$

(18,968)


 

JAZZ PHARMACEUTICALS PLC

RECONCILIATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION

(In thousands, except per share amounts)

(Unaudited)










Three Months Ended
March 31,


2018


2017

GAAP reported net income

$

45,991



$

86,511


Intangible asset amortization

53,007



25,665


Share-based compensation expense

24,303



25,193


Estimated loss contingency

57,000




Upfront and milestone payments

11,000




Expenses related to certain legal proceedings



6,000


Non-cash interest expense

10,617



5,615


Income tax effect

(19,547)



(7,762)


Non-GAAP adjusted net income

$

182,371



$

141,222






GAAP reported net income per diluted share

$

0.75



$

1.41


Non-GAAP adjusted net income per diluted share

$

2.98



$

2.31


Weighted-average ordinary shares used in diluted per share calculations

61,178



61,178


 

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


March 31, 2018


March 31, 2017


GAAP
Reported


Adjustments


Non-GAAP
Adjusted


GAAP
Reported


Adjustments


Non-GAAP
Adjusted

Total revenues

$

444,613



$



$

444,613



$

376,053



$



$

376,053


Cost of product sales (excluding amortization of intangible assets)

33,919



(1,694)


(a) 

32,225



25,065



(1,246)


(a) 

23,819


Selling, general and administrative

207,213



(75,234)


(b) 

131,979



144,255



(25,805)


(b) 

118,450


Research and development

62,667



(15,375)


(c) 

47,292



44,928



(4,142)


(c) 

40,786


Intangible asset amortization

53,007



(53,007)





25,665



(25,665)




Interest expense, net

20,605



(10,617)


(d) 

9,988



18,844



(5,615)


(d) 

13,229


Foreign exchange loss

1,728





1,728



1,464





1,464


Income before income tax provision and equity in loss of investees

65,474



155,927


(e) 

221,401



115,832



62,473


(e) 

178,305


Income tax provision

19,146



19,547


(f) 

38,693



29,160



7,762


(f) 

36,922


Effective tax rate (g)

29.2

%




17.5

%


25.2

%




20.7

%

Equity in loss of investees

337





337



161





161


Net income

$

45,991



$

136,380


(h) 

$

182,371



$

86,511



$

54,711


(h) 

$

141,222


Net income per diluted share

$

0.75





$

2.98



$

1.41





$

2.31


________________________________

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


(a)

Share-based compensation expense of $1,694 and $1,246 for the three months ended March 31, 2018 and 2017, respectively.

(b)

Share-based compensation expense of $18,234 and $19,805, estimated loss contingency of $57,000 and $0 and expenses related to certain legal proceedings of $0 and $6,000 for the three months ended March 31, 2018 and 2017, respectively.

(c)

Upfront and milestone payments of $11,000 and $0 and share-based compensation expense of $4,375 and $4,142 for the three months ended March 31, 2018 and 2017, respectively.

(d)

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

(e)

Sum of adjustments (a) through (d) plus the adjustment for intangible asset amortization for the respective three-month period.

(f)

Income tax effect of adjustments between GAAP reported and non-GAAP adjusted net income for the respective three-month period.

(g)

Income tax provision divided by income before income tax provision and equity in loss of investees for the respective three-month period.

(h)

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

 

JAZZ PHARMACEUTICALS PLC

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

(In millions, except per share amounts)

(Unaudited)



GAAP net income

$405 - $470

Intangible asset amortization

200 - 220

Share-based compensation expense

100 - 115

Estimated loss contingency

57

Milestone payments

11

Non-cash interest expense

40 - 50

Income tax effect of adjustments

(60) - (75)

Non-GAAP adjusted net income

$780 - $815



GAAP net income per diluted share

$6.60-$7.70

Non-GAAP adjusted net income per diluted share 

$12.75-$13.25



Weighted-average ordinary shares used in per share calculations

61

 

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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, or Media: Jacqueline Kirby, Vice President, Corporate Affairs & Government Relations, Jazz Pharmaceuticals plc, Ireland, +353 1 697 2141, U.S., +1 215 867 4910