JAZZ PHARMACEUTICALS ANNOUNCES SECOND QUARTER 2013 FINANCIAL RESULTS

DUBLIN, Aug. 6, 2013 /PRNewswire/ -- Jazz Pharmaceuticals plc (Nasdaq: JAZZ) today announced financial results for the second quarter ended June 30, 2013 and updated 2013 financial guidance.

"During the second quarter, we continued our track record of delivering strong top and bottom line growth fueled by increasing sales of Xyrem^® and Erwinaze^®," said Bruce Cozadd, chairman and chief executive officer of Jazz Pharmaceuticals plc. "We remain committed to creating long-term shareholder value through disciplined investments to support expansion in our research and development, commercial and operational capacities and pursuit of promising corporate development opportunities."

Adjusted net income for the second quarter of 2013 was $88.3 million, or $1.43 per diluted share, compared to $66.2 million, or $1.09 per diluted share, for the second quarter of 2012. 

GAAP net income for the second quarter of 2013 was $42.2 million, or $0.69 per diluted share.  GAAP income from continuing operations for the second quarter of 2012 was $31.1 million, or $0.51 per diluted share, and GAAP net income for the second quarter of 2012 was $27.1 million, or $0.45 per diluted share.  GAAP net income for the second quarter of 2012 included GAAP loss from discontinued operations of $4.0 million, or $0.06 per diluted share.   

Reconciliations of applicable GAAP to non-GAAP adjusted information are included with this press release.

Second Quarter 2013 Revenues and Product Sales

Total revenues for the second quarter of 2013 were $208.3 million, compared to total revenues of $124.2 million for the second quarter of 2012.  The increase in total revenues for the quarter ended June 30, 2013 was driven primarily by increased net sales of Xyrem and the inclusion of Erwinaze product sales for the full reporting period in 2013.

Total revenues for the quarter ended June 30, 2013 included net sales, royalties and contract revenues.  Tables showing net sales for the three and six months ended June 30, 2013 compared to actual and pro forma net sales for the same periods in 2012 are included in this press release.

Net sales for the second quarter of 2013 were as follows:

• Xyrem® (sodium oxybate) oral solution:  Xyrem net sales increased by 50% to $133.7 million in the second quarter of 2013 compared to $89.1 million in the second quarter of 2012.  During the second quarter of 2013, the average number of active Xyrem patients was approximately 10,700.
• Erwinaze®/Erwinase® (asparaginase Erwinia chrysanthemi):  Erwinaze/ Erwinase worldwide net sales increased to $44.9 million in the second quarter of 2013 compared to pro forma net sales of $32.9 million in the second quarter of 2012, or an increase of 36% on a pro forma basis.  Erwinaze/Erwinase pro forma net sales represent net product sales as if the acquisition of EUSA Pharma had been completed on January 1, 2012.
• Prialt® (ziconotide) intrathecal infusion:  Net sales of Prialt were $4.7 million in the second quarter of 2013 compared to net sales of $5.6 million for the same period of 2012.  During the second quarter of 2013, net sales were impacted by the transition to an exclusive specialty pharmacy, which is accessed through our Navigator Reimbursement and Access Program™ for Prialt.
• Psychiatry Products:  Net sales of the company's psychiatry products were $11.8 million in the second quarter of 2013 compared to net sales of $19.8 million for the same period of 2012.  Second quarter 2013 net sales of the psychiatry products were impacted by continued generic competition.
• Other:  Net sales of other products for the second quarter of 2013 were $11.5 million compared to pro forma net sales of $12.4 million in the same period of 2012.  "Other" includes products acquired in the EUSA Pharma and Azur Pharma transactions that are not mentioned above. 

Operating Expenses and Other

Operating expenses for the second quarter of 2013 increased to $131.2 million compared to $84.8 million for the second quarter of 2012.  Operating expenses increased over the prior year period for the following reasons:

• Cost of product sales for the second quarter of 2013 was $25.0 million compared to $12.3 million for the same period in 2012.  The increase in the 2013 period was primarily due to higher net sales and a change in product mix. Gross margin for the second quarter of 2013, as a percentage of product sales, was 87.9% compared to 90.0% for the same period in 2012.  Our gross margin percentage in the second quarter of 2013 as compared to the same period in 2012 was lower primarily due to lower gross margins on products acquired as part of the EUSA Pharma acquisition.
• Selling, general and administrative ("SG&A") and research and development ("R&D") expenses for the second quarter of 2013 totaled $86.8 million on a GAAP basis compared to $59.5 million for the same period of 2012.  The increase reflected higher headcount and related expenses due primarily to the expansion of our business and an increase in the fair value of contingent consideration related to the EUSA Pharma acquisition, partially offset by lower transaction and integration costs.  Adjusted SG&A and R&D expenses for the second quarter of 2013 totaled $70.6 million compared to $44.0 million for the same period in 2012.
• Intangible asset amortization for the second quarter of 2013 was $19.4 million compared to $13.0 million for the same period in 2012.  The increase was primarily related to amortization of intangible assets acquired as part of the EUSA Pharma acquisition.

Second quarter of 2013 net interest expense was $7.1 million, and the loss on extinguishment and modification of debt was $3.7 million.  As of June 30, 2013, our cash and cash equivalents were $504.3 million, and the balance of our term loans was $552.3 million. The balance of cash and cash equivalents increased from December 31, 2012 primarily due to the cash generated from our business and the net proceeds of the new term loans, offset in part by funds used to repurchase our ordinary shares under our share repurchase program and increases in working capital.

In May 2013, our board of directors authorized the use of up to $200 million to repurchase the company's ordinary shares.  As of June 30, 2013, we had repurchased 846,197 shares for $53.6 million at an average cost of $63.32 per share. 

On June 13, 2013, we amended our credit agreement, increased the principal amount of the term loans to $557.2 million, an increase of $100 million from the remaining principal amount of the original term loans, and increased the revolving credit facility from $100 million to $200 million.  The interest rate on our term loans is currently 3.5% based on a 0.75% LIBOR floor plus a margin of 2.75% per annum, compared to an interest rate of 5.25% prior to the amended credit agreement. Our revolving credit facility remains undrawn.

During the fourth quarter of 2012, the company sold its women's health business.  Financial results from the women's health business are reported as discontinued operations for the 2012 periods.

2013 Financial Guidance

Jazz Pharmaceuticals is providing the following updated 2013 guidance:

1. Excludes $4 million of acquisition accounting inventory fair value step-up and $3 million in share-based compensation expense from estimated GAAP gross margin of 87-89%.
2. Excludes $42-$44 million of share-based compensation expense, $15 million related to a change in fair value of contingent consideration, $3 million of depreciation expense, $4 million of upfront license fees and $3 million of transaction, integration and restructuring costs from estimated GAAP combined SG&A and R&D expenses of $347-$359 million.
3. See "Non‑GAAP Financial Measures" below.  Reconciliations of non-GAAP adjusted guidance measures are included above and elsewhere in this press release.

Other Announcements

• We received Fast Track designation for Asparec (mPEG-r-crisantaspase) from the U.S. Food and Drug Administration ("FDA") for the treatment of acute lymphoblastic leukemia.
• We continue our efforts to strengthen and broaden our intellectual property related to Xyrem.  Two new patents issued in June 2013.  Thirteen U.S. patents have now been issued related to Xyrem's stable and microbially resistant formulation, its manufacturing process and its method of use, including its restricted distribution system.
• In August 2013, we received a close-out letter from the FDA with respect to the October 2011 warning letter regarding certain aspects of our adverse event reporting system for Xyrem and drug safety procedures. 
• For Prialt, we expanded our collaboration with Medtronic—the market leader in intrathecal pumps.  The partnership now includes a sales force collaboration that is focused on targeted activities at the field level.

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 update and discuss its second quarter 2013 results and updated 2013 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 +1 877 280 4953 in the U.S., or +1 857 244 7310 outside the U.S., and entering passcode 10594339.

A replay of the conference call will be available through August 13, 2013 by dialing +1 888 286 8010 in the U.S., or +1 617 801 6888 outside the U.S., and entering passcode 72340817.

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

Jazz Pharmaceuticals plc is a specialty biopharmaceutical company focused on improving patients' lives by identifying, developing and commercializing innovative products that address unmet medical needs.  The company has a diverse portfolio of products in the areas of narcolepsy, 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 and FazaClo^® (clozapine, USP) HD.  Outside of the U.S., Jazz Pharmaceuticals also has a number of products marketed by its EUSA Pharma division. For further information, see www.jazzpharmaceuticals.com.

Non-GAAP Financial Measures

To supplement Jazz Pharmaceuticals' financial results and guidance presented on a GAAP basis, the company uses certain non-GAAP adjusted financial measures.  The company believes that these non-GAAP financial measures are 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 during 2012.  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 measures.  In addition, Jazz Pharmaceuticals believes that the use of these non-GAAP measures enhances the ability of investors to compare its results from period to period.  The non-GAAP adjusted financial measures as used by Jazz Pharmaceuticals in this press release 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 exclude from GAAP income from continuing operations, as applicable, amortization of intangible assets, share-based compensation expense, acquisition accounting inventory fair value step-up adjustments, transaction and integration costs, restructuring charges, change in fair value of contingent consideration, upfront license fees, depreciation expense, loss on extinguishment and modification of debt and other non-cash expense, and adjust the income tax provision to the estimated amount of taxes that are payable in cash; (ii) the historical adjusted combined SG&A and R&D expenses exclude from GAAP combined SG&A and R&D expenses, as applicable, share-based compensation expense, change in fair value of contingent consideration, transaction, integration and restructuring costs, depreciation expense and upfront license fees; (iii) the adjusted net income guidance measures exclude from estimated GAAP net income amortization of intangible assets and depreciation expense, share-based compensation expense, acquisition accounting inventory fair value step-up adjustments, transaction, integration and restructuring costs, change in fair value of contingent consideration, upfront license fees, loss on extinguishment and modification of debt and other non-cash expense, and adjust the income tax provision to the estimated amount of taxes that are payable in cash; (iv) the adjusted gross margin percentage guidance excludes from estimated GAAP gross margin percentage acquisition accounting inventory fair value step-up and share-based compensation expense; and (v) the adjusted combined SG&A and R&D expenses guidance excludes from estimated GAAP combined SG&A and R&D expenses share-based compensation expense, change in fair value of contingent consideration, depreciation expense, upfront license fees and transaction, integration and restructuring costs.

"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 and growth potential, including 2013 financial guidance, plans to pursue investment and corporate development opportunities, efforts to strengthen and broaden intellectual property protection 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 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 Prialt; protecting and expanding the company's intellectual property rights; obtaining appropriate pricing and reimbursement for the company's products in an increasingly challenging environment; ongoing regulation and oversight by U.S. and non-U.S. regulatory agencies; dependence on key customers and sole source suppliers, including the risk that the company may not be able to timely resolve potential product supply shortages and meet product demand; the difficulty and uncertainty of pharmaceutical product development and the uncertainty of clinical success and regulatory approval; 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 in the Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 and future filings and reports by the company.  Jazz Pharmaceuticals undertakes no duty or obligation to update any forward-looking statements contained in this press release as a result of new information, future events or changes in its expectations.

 

The following compares actual net product sales for the three and six months ended June 30, 2013 to unaudited pro forma information representing combined net product sales for the three and six months ended June 30, 2012, as if the merger with Azur Pharma, the acquisition of EUSA Pharma and the disposition of the women's health business had each been completed on January 1, 2012:

 

 

 

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, Laurie Hurley, Vice President, Corporate Affairs, Jazz Pharmaceuticals plc, Ireland, + 353 1 634 7894 , U.S., + 1 650 496 2796