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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM 8-K
 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
February 28, 2017
Date of Report (Date of earliest event reported)
 
 
JAZZ PHARMACEUTICALS PUBLIC LIMITED COMPANY
(Exact name of registrant as specified in its charter)
 
 
 
 
 
 
 
 
Ireland
 
001-33500
 
98-1032470
(State or Other Jurisdiction
of Incorporation)
 
(Commission
File No.)
 
(IRS Employer
Identification No.)
Fourth Floor, Connaught House, One Burlington Road, Dublin 4, Ireland
(Address of principal executive offices, including zip code)
011-353-1-634-7800
(Registrant's telephone number, including area code)
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





Item 2.02. Results of Operations and Financial Condition.
On February 28, 2017, Jazz Pharmaceuticals plc (the “Company”) issued a press release (the “Press Release”) announcing financial results for the Company for the full year and the fourth quarter ended December 31, 2016. A copy of the Press Release is furnished as Exhibit 99.1 to this current report.
The information in this Item 2.02 and in the Press Release furnished as Exhibit 99.1 to this current report shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. The information contained in this Item 2.02 and in the Press Release furnished as Exhibit 99.1 to this current report shall not be incorporated by reference into any filing with the U.S. Securities and Exchange Commission made by the Company whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Item 9.01. Financial Statements and Exhibits.
(d)
Exhibits
Exhibit
Number
Description
 
 
99.1
Press Release dated February 28, 2017.






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
JAZZ PHARMACEUTICALS PUBLIC LIMITED COMPANY
 
 
 
 
By:
/s/ Matthew P. Young
 
Name:
Matthew P. Young
 
Title:
Executive Vice President and Chief Financial Officer
Date: February 28, 2017








EXHIBIT INDEX
 
Exhibit
Number
Description
 
 
99.1
Press Release dated February 28, 2017.



Exhibit
Exhibit 99.1

https://cdn.kscope.io/25337b9b58e6310e94d8224c28e9fc5e-jazzlogo1a01a01a02a01a02.jpg

JAZZ PHARMACEUTICALS ANNOUNCES FULL YEAR AND FOURTH QUARTER 2016
FINANCIAL RESULTS
Total Revenues Increased 12% to $1.5 Billion in 2016
Completed Enrollment in Four Phase 3 Clinical Studies in 2016

DUBLIN, February 28, 2017 -- Jazz Pharmaceuticals plc (Nasdaq: JAZZ) today announced financial results for the full year and the fourth quarter of 2016 and provided financial guidance for 2017.
“In 2016, we delivered solid growth for two of our key products, Xyrem and Defitelio, completed multiple corporate development transactions, including the Celator acquisition, received NDA approval and launched Defitelio in the U.S., began the rolling NDA submission for Vyxeos, and advanced and expanded our development pipeline, including two new oxybate product candidates that may offer new therapeutic options for narcolepsy patients,” said Bruce Cozadd, chairman and chief executive officer of Jazz Pharmaceuticals. “We are looking forward to a busy and productive 2017, building on our investments in internal and acquired R&D programs over the last few years. We believe that 2017 will be an exciting year for Jazz as we remain focused on delivering new and improved therapeutic options for patients and value to shareholders through expansion of our business.”
GAAP net income attributable to Jazz Pharmaceuticals plc for 2016 was $396.8 million, or $6.41 per diluted share, compared to $329.5 million, or $5.23 per diluted share, for 2015. GAAP net income attributable to Jazz Pharmaceuticals plc for the fourth quarter of 2016 was $116.7 million, or $1.91 per diluted share, compared to $82.8 million, or $1.32 per diluted share, for the fourth quarter of 2015.
Adjusted net income attributable to Jazz Pharmaceuticals plc for 2016 was $627.2 million, or $10.14 per diluted share, compared to $595.5 million, or $9.45 per diluted share, for 2015. Adjusted net income attributable to Jazz Pharmaceuticals plc for the fourth quarter of 2016 was $165.6 million, or $2.71 per diluted share, compared to $176.5 million, or $2.81 per diluted share, for the fourth quarter of 2015. Reconciliations of applicable GAAP reported to non-GAAP adjusted information are included at the end of this press release.

Financial Highlights
 
Three Months Ended December 31,
 
 
 
Year Ended
December 31,
 
 
(In thousands, except per share amounts and percentages)
2016
 
2015
 
Change
 
2016
 
2015
 
Change
Total revenues
$
396,621

 
$
340,881

 
16.4
 %
 
$
1,487,973

 
$
1,324,803

 
12.3
%
GAAP net income attributable to Jazz Pharmaceuticals plc1
$
116,689

 
$
82,761

 
41.0
 %
 
$
396,831

 
$
329,535

 
20.4
%
Adjusted net income attributable to Jazz Pharmaceuticals plc1,2
$
165,637

 
$
176,516

 
(6.2
)%
 
$
627,162

 
$
595,484

 
5.3
%
GAAP EPS attributable to Jazz Pharmaceuticals plc1
$
1.91

 
$
1.32

 
44.7
 %
 
$
6.41

 
$
5.23

 
22.6
%
Adjusted EPS attributable to Jazz Pharmaceuticals plc1,2
$
2.71

 
$
2.81

 
(3.6
)%
 
$
10.14

 
$
9.45

 
7.3
%
____________________________

1

1.
In the fourth quarter of 2016, the company adopted Accounting Standards Update (ASU) No. 2016-09, “Improvements to Employee Share-Based Payment Accounting” effective as of January 1, 2016. See footnote 1 to the table titled "Reconciliations of GAAP Reported to Non-GAAP Adjusted Information" at the end of this press release.
2.
Commencing with the second quarter of 2016, the company modified the calculation of its non-GAAP income tax provision in connection with the Securities and Exchange Commission’s May 2016 guidance pertaining to non-GAAP financial measures. This modification is reflected in the company’s 2015 and 2016 non-GAAP period results in the table above. See “Non-GAAP Financial Measures” below.

Total Revenues

Three Months Ended
December 31,
 
Year Ended
December 31,
(In thousands)
2016
 
2015
 
2016
 
2015
Xyrem® (sodium oxybate) oral solution
$
291,204

 
$
251,752

 
$
1,107,616

 
$
955,187

Erwinaze® / Erwinase® (asparaginase Erwinia chrysanthemi)
56,771

 
50,440

 
200,678

 
203,261

Defitelio® (defibrotide sodium) / defibrotide
29,672

 
18,472

 
108,952

 
70,731

Prialt® (ziconotide) intrathecal infusion
6,055

 
6,496

 
29,120

 
26,440

Psychiatry
2,909

 
8,760

 
17,653

 
37,135

Other
6,003

 
3,004

 
13,242

 
24,065

Product sales, net
392,614

 
338,924

 
1,477,261

 
1,316,819

Royalties and contract revenues
4,007

 
1,957

 
10,712

 
7,984

Total revenues
$
396,621

 
$
340,881

 
$
1,487,973

 
$
1,324,803

Net product sales increased 12% in 2016 and 16% in the fourth quarter of 2016 compared to the same periods in 2015 primarily due to higher net product sales of Xyrem and Defitelio.
Xyrem net product sales increased 16% in both 2016 and in the fourth quarter of 2016 compared to the same periods in 2015.
Erwinaze/Erwinase net product sales decreased 1% in 2016 and increased 13% in the fourth quarter of 2016 compared to the same periods in 2015. In 2016, the company continued to experience supply challenges, which resulted in fluctuations in inventory levels and temporary disruptions to the company's ability to supply certain markets, including the U.S. The company expects that these temporary supply interruptions will continue in 2017.
Defitelio/defibrotide net product sales increased 54% in 2016 and 61% in the fourth quarter of 2016 compared to the same periods in 2015 primarily due to the U.S. launch of Defitelio in April 2016. Net sales in the U.S. were $26.3 million in 2016 and $9.7 million in the fourth quarter of 2016.

Operating Expenses
 
Three Months Ended
December 31,
 
Year Ended
December 31,
(In thousands, except percentages)
2016
 
2015
 
2016
 
2015
GAAP:
 
 
 
 
 
 
 
Cost of product sales
$
33,656

 
$
24,030

 
$
105,386

 
$
102,526

Gross margin
91.4
%
 
92.9
%
 
92.9
%
 
92.2
%
Selling, general and administrative
$
127,141

 
$
125,555

 
$
502,892

 
$
449,119

% of total revenues
32.1
%
 
36.8
%
 
33.8
%
 
33.9
%
Research and development
$
44,158

 
$
29,455

 
$
162,297

 
$
135,253

% of total revenues
11.1
%
 
8.6
%
 
10.9
%
 
10.2
%
Acquired in-process research and development
$
—

 
$
—

 
$
23,750

 
$
—

Impairment charges
$
—

 
$
31,523

 
$
—

 
$
31,523


2


 
Three Months Ended
December 31,
 
Year Ended
December 31,
(In thousands, except percentages)
2016
 
2015
 
2016
 
2015
Non-GAAP adjusted:
 
 
 
 
 
 
 
Cost of product sales
$
32,177

 
$
22,209

 
$
100,797

 
$
98,452

Gross margin
91.8
%
 
93.4
%
 
93.2
%
 
92.5
%
Selling, general and administrative
$
108,204

 
$
87,409

 
$
404,837

 
$
355,422

% of total revenues
27.3
%
 
25.6
%
 
27.2
%
 
26.8
%
Research and development
$
39,619

 
$
26,017

 
$
146,466

 
$
96,678

% of total revenues
10.0
%
 
7.6
%
 
9.8
%
 
7.3
%
Operating expenses changed over the prior year periods primarily due to the following:
•
Selling, general and administrative (SG&A) expenses increased in 2016 and in the fourth quarter of 2016 compared to the same periods 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, and included a one-time contract termination fee of $11.6 million to eliminate potential future royalty payments related to VyxeosTM (cytarabine and daunorubicin liposome injection).
•
Research and development (R&D) expenses increased in 2016 and in the fourth quarter of 2016 compared to the same periods in 2015 on a GAAP and on a non-GAAP adjusted basis primarily due to increased expenses for the development of JZP-110; increased investments in oxybate-related R&D programs; the initiation of a clinical study of defibrotide for the prevention of veno-occlusive disease (VOD); costs related to the rolling new drug application (NDA) submission for Vyxeos; and an increase in headcount required to support these activities. GAAP R&D expenses for 2015 included a $25.0 million milestone in connection with the acceptance for filing by the U.S. Food and Drug Administration (FDA) of the NDA for defibrotide.
•
Acquired in-process research and development expense in 2016 related to upfront and option payments totaling $15.0 million to Pfenex Inc. under an agreement in which the company was granted worldwide rights to develop and commercialize multiple early-stage hematology product candidates and an upfront payment of $8.8 million that the company made in connection with its acquisition of intellectual property and know-how related to recombinant crisantaspase.
•
Impairment charges of $31.5 million in 2015 resulted from the termination of the JZP-416 study.

Cash Flow and Balance Sheet
As of December 31, 2016, cash, cash equivalents and investments were $426.0 million, and the outstanding principal balance of the company’s long-term debt was $2.1 billion. Cash, cash equivalents and investments decreased from December 31, 2015 primarily due to the acquisition of Celator for approximately $1.5 billion, repurchases of $278.3 million under the company’s share repurchase program and a $150.0 million milestone payment triggered by FDA approval of Defitelio on March 30, 2016, partially offset by net borrowings of $850.0 million under the company's revolving credit facility and cash flows from operations of $590.5 million. During 2016, the company repurchased 2.2 million ordinary shares at an average cost of $124.09 per ordinary share.

Recent Developments
In January 2017, the company enrolled the first patient in a Phase 3 clinical study comparing the efficacy and safety of defibrotide versus best supportive care in the prevention of VOD in adult and pediatric patients undergoing hematopoietic stem cell transplant who are at high risk or at very high risk of developing VOD.


3


In February 2017, the company enrolled the first patient in a Phase 2 clinical study evaluating the safety and efficacy of JZP-110 for the treatment of excessive sleepiness associated with Parkinson's disease.

2017 Financial Guidance
Jazz Pharmaceuticals' full year 2017 financial guidance is as follows (in millions, except per share amounts and percentages):
Revenues
$1,625-$1,700
Total net product sales
$1,617-$1,692
-Xyrem net sales
$1,220-$1,250
-Erwinaze/Erwinase net sales
$205-$225
-Defitelio/defibrotide net sales
$130-$150
-Vyxeos (CPX-351) net sales1
$10-$20
GAAP gross margin %
93%
Non-GAAP adjusted gross margin %2,5
93%
GAAP SG&A expenses
$515-$550
Non-GAAP adjusted SG&A expenses3,5
$440-$460
GAAP R&D expenses
$195-$220
Non-GAAP adjusted R&D expenses4,5
$165-$180
GAAP net income per diluted share
$6.55-$7.55
Non-GAAP adjusted net income per diluted share5
$10.70-$11.30
____________________________
1.
Guidance assumes FDA approval and launch of Vyxeos (CPX-351) in the U.S. in 2017.
2.
Excludes $5 million of share-based compensation expense from estimated GAAP gross margin.
3.
Excludes $75-$90 million of share-based compensation expense from estimated GAAP SG&A expenses.
4.
Excludes $20-$25 million of share-based compensation expense and $10-$15 million of milestone payments from estimated GAAP R&D expenses.
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 2017 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. EST (9:30 p.m. GMT) to provide a business and financial update and discuss its 2016 full year and fourth quarter results and provide 2017 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 +1 855 353 7924 in the U.S., or +1 503 343 6056 outside the U.S., and entering passcode 58716969.
A replay of the conference call will be available through March 7, 2017 by dialing +1 855 859 2056 in the U.S., or +1 404 537 3406 outside the U.S., and entering passcode 58716969. 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.


4


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 income 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 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. In this regard, the company modified the calculation of its non-GAAP income tax provision commencing in the second quarter of 2016, and accordingly, the income tax effect of the adjustments

5


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 2017 financial guidance, potential FDA approval and launch of Vyxeos in the U.S. in 2017, the company’s goals of developing and commercializing new therapies for patients and building shareholder value, the company’s expectation for continuing Erwinaze supply interruptions 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, including in connection with the recent approval and tentative approvals by the FDA of generic versions of Xyrem; regulatory restrictions and requirements applicable to Xyrem; ongoing patent litigation and related proceedings; effectively commercializing the company’s other products and product candidates; the regulatory approval process, including the risk that the company may be unable to obtain FDA approval for Vyxeos in the U.S. in 2017 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; obtaining and maintaining appropriate pricing and reimbursement for the company’s products; 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; 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; and 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’s Securities 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 September 30, 2016 and future filings and reports by the company, including the company’s Annual Report on Form 10-K for the year ended December 31, 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.


6


JAZZ PHARMACEUTICALS PLC
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)

 
Three Months Ended
December 31,
 
Year Ended
December 31,
 
2016
 
2015
 
2016
 
2015
Revenues:
 
 
 
 
 
 
 
Product sales, net
$
392,614

 
$
338,924

 
$
1,477,261

 
$
1,316,819

Royalties and contract revenues
4,007

 
1,957

 
10,712

 
7,984

Total revenues
396,621

 
340,881

 
1,487,973

 
1,324,803

Operating expenses:
 
 
 
 
 
 
 
Cost of product sales (excluding amortization and impairment of intangible assets)
33,656

 
24,030

 
105,386

 
102,526

Selling, general and administrative
127,141

 
125,555

 
502,892

 
449,119

Research and development
44,158

 
29,455

 
162,297

 
135,253

Acquired in-process research and development
—

 
—

 
23,750

 
—

Intangible asset amortization
26,162

 
23,690

 
101,994

 
98,162

Impairment charges
—

 
31,523

 
—

 
31,523

Total operating expenses
231,117

 
234,253

 
896,319

 
816,583

Income from operations
165,504

 
106,628

 
591,654

 
508,220

Interest expense, net
(19,131
)
 
(12,210
)
 
(61,942
)
 
(56,917
)
Foreign currency gain
4,940

 
2,091

 
3,372

 
1,445

Loss on extinguishment and modification of debt
—

 
—

 
(638
)
 
(16,815
)
Income before income tax provision and equity in loss of investee
151,313

 
96,509

 
532,446

 
435,933

Income tax provision
34,348

 
13,748

 
135,236

 
106,399

Equity in loss of investee
276

 
—

 
379

 
—

Net income
116,689

 
82,761

 
396,831

 
329,534

Net loss attributable to noncontrolling interests
—

 
—

 
—

 
(1
)
Net income attributable to Jazz Pharmaceuticals plc
$
116,689

 
$
82,761

 
$
396,831

 
$
329,535

 
 
 
 
 
 
 
 
Net income attributable to Jazz Pharmaceuticals plc per ordinary share:
 
 
 
 
 
 
 
Basic
$
1.95

 
$
1.35

 
$
6.56

 
$
5.38

Diluted
$
1.91

 
$
1.32

 
$
6.41

 
$
5.23

Weighted-average ordinary shares used in per share calculations - basic
59,930

 
61,492

 
60,500

 
61,232

Weighted-average ordinary shares used in per share calculations - diluted
61,033

 
62,928

 
61,870

 
63,036







7


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

 
December 31,
 
2016
 
2015
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
365,963

 
$
988,785

Investments
60,000

 
—

Accounts receivable, net of allowances
234,244

 
209,685

Inventories
34,051

 
19,451

Prepaid expenses
24,501

 
20,699

Other current assets
29,310

 
19,047

Total current assets
748,069

 
1,257,667

Property and equipment, net
107,490

 
85,572

Intangible assets, net
3,012,001

 
1,185,606

Goodwill
893,810

 
657,139

Deferred tax assets, net, non-current
15,060

 
130,148

Deferred financing costs
9,737

 
7,209

Other non-current assets
14,060

 
9,271

Total assets
$
4,800,227

 
$
3,332,612

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
22,415

 
$
21,807

Accrued liabilities
193,268

 
164,070

Current portion of long-term debt
36,094

 
37,587

Income taxes payable
4,506

 
1,808

Deferred revenue
1,123

 
1,370

Total current liabilities
257,406

 
226,642

Deferred revenue, non-current
2,601

 
3,721

Long-term debt, less current portion
1,993,531

 
1,150,857

Deferred tax liability, net, non-current
556,733

 
283,493

Other non-current liabilities
112,617

 
69,253

Total shareholders’ equity
1,877,339

 
1,598,646

Total liabilities and shareholders’ equity
$
4,800,227

 
$
3,332,612


8


JAZZ PHARMACEUTICALS PLC
RECONCILIATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
(In thousands, except per share amounts)
(Unaudited)
 
Three Months Ended
December 31,
 
Year Ended
December 31,
 
2016
 
2015
 
2016
 
2015
GAAP reported net income attributable to Jazz Pharmaceuticals plc (1)
$
116,689

 
$
82,761

 
$
396,831

 
$
329,535

Intangible asset amortization
26,162

 
23,690

 
101,994

 
98,162

Share-based compensation expense
24,281

 
24,317

 
98,771

 
91,550

Impairment charges
—

 
31,523

 
—

 
31,523

Upfront and milestone payments
—

 
—

 
23,750

 
25,000

Transaction and integration related costs
674

 
18,000

 
13,644

 
18,155

Expenses related to certain legal proceedings and restructuring
—

 
1,088

 
6,060

 
1,641

Non-cash interest expense
5,715

 
5,390

 
22,133

 
22,738

Loss on extinguishment and modification of debt
—

 
—

 
638

 
16,815

Income tax effect of adjustments (2)
(7,884
)
 
(10,253
)
 
(36,659
)
 
(39,633
)
Adjustments for amount attributable to noncontrolling interests (3)
—

 
—

 
—

 
(2
)
Non-GAAP adjusted net income attributable to Jazz Pharmaceuticals plc (1)(4)
$
165,637

 
$
176,516

 
$
627,162

 
$
595,484

 
 
 
 
 
 
 
 
GAAP reported net income attributable to Jazz Pharmaceuticals plc per diluted share (1)
$
1.91

 
$
1.32

 
$
6.41

 
$
5.23

Non-GAAP adjusted net income attributable to Jazz Pharmaceuticals plc per diluted share (1)(4)
$
2.71

 
$
2.81

 
$
10.14

 
$
9.45

Weighted-average ordinary shares used in diluted per share calculations
61,033

 
62,928

 
61,870

 
63,036

_____________________________
(1)
In the fourth quarter of 2016, the company early adopted ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting”, which requires that all excess tax benefits and tax deficiencies be recognized as income tax benefit or expense in the income statement and no longer delays recognition of a tax benefit until the tax benefit is realized through a reduction to taxes payable. Upon adoption, we recorded a $107.7 million cumulative-effect adjustment to opening retained earnings and non-current deferred tax assets as of January 1, 2016 for previously unrecognized excess tax benefits and recognized excess tax benefits of $7.7 million in our income tax provision for the year ended December 31, 2016. As a result, both GAAP reported net income and non-GAAP adjusted net income increased by $7.7 million, and GAAP reported net income per diluted share and non-GAAP adjusted net income per diluted share increased by $0.11 and $0.10, respectively, for the year ended December 31, 2016.

The following table sets forth the effect of the adoption of ASU No. 2016-09 on amounts previously reported:
 
2016
 
March 31
 
June 30
 
September 30
GAAP net income, as previously reported
$
74,121

 
$
111,282

 
$
87,145

Adoption of ASU No. 2016-09
1,691

 
3,220

 
2,683

GAAP net income, as recast
$
75,812

 
$
114,502

 
$
89,828

 
 
 
 
 
 
GAAP net income per diluted share, as previously reported
$
1.19

 
$
1.80

 
$
1.41

Adoption of ASU No. 2016-09
0.02

 
0.05

 
0.04

GAAP net income per diluted share, as recast
$
1.21

 
$
1.85

 
$
1.45



9


 
2016
 
March 31
 
June 30
 
September 30
Non-GAAP adjusted net income, as previously reported
$
132,877

 
$
162,584

 
$
158,470

Adoption of ASU No. 2016-09
1,691

 
3,220

 
2,683

Non-GAAP adjusted net income, as recast
$
134,568

 
$
165,804

 
$
161,153

 
 
 
 
 
 
Non-GAAP adjusted net income per diluted share, as previously reported
$
2.13

 
$
2.63

 
$
2.57

Adoption of ASU No. 2016-09
0.02

 
0.04

 
0.04

Non-GAAP adjusted net income per diluted share, as recast
$
2.15

 
$
2.67

 
$
2.61


(2)
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).
(3)
The noncontrolling interests’ share of the above adjustments, as applicable.
(4)
Commencing with the second quarter of 2016, the company modified the calculation of its non-GAAP income tax provision in connection with the Securities and Exchange Commission’s May 2016 guidance pertaining to non-GAAP financial measures. This modification is reflected in the company’s 2015 and 2016 non-GAAP period results in the table above. See “Non-GAAP Financial Measures”.

10


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
 
December 31, 2016
 
December 31, 2015
 
GAAP Reported
 
Adjustments
 
Non-GAAP Adjusted
 
GAAP Reported
 
Adjustments
 
Non-GAAP Adjusted
Total revenues
$
396,621

 
$
—

 
$
396,621

 
$
340,881

 
$
—

 
$
340,881

Cost of product sales (excluding amortization and impairment of intangible assets)
33,656

 
(1,479
)
(a) 
32,177

 
24,030

 
(1,821
)
(a) 
22,209

Selling, general and administrative
127,141

 
(18,937
)
(b) 
108,204

 
125,555

 
(38,146
)
(b) 
87,409

Research and development
44,158

 
(4,539
)
(c) 
39,619

 
29,455

 
(3,438
)
(c) 
26,017

Intangible asset amortization
26,162

 
(26,162
)
 
—

 
23,690

 
(23,690
)
 
—

Impairment charges
—

 
—

 
—

 
31,523

 
(31,523
)
 
—

Interest expense, net
19,131

 
(5,715
)
(d) 
13,416

 
12,210

 
(5,390
)
(d) 
6,820

Foreign currency gain
(4,940
)
 
—

 
(4,940
)
 
(2,091
)
 
—

 
(2,091
)
Income before income tax provision and equity in loss of investee
151,313

 
56,832

(e) 
208,145

 
96,509

 
104,008

(e) 
200,517

Income tax provision
34,348

 
7,884

(f) 
42,232

 
13,748

 
10,253

(f) 
24,001

Effective tax rate (g)
22.7
%
 
 
 
20.3
%
 
14.2
%
 
 
 
12.0
%
Equity in loss of investee
276

 
—

 
276

 
—

 
—

 
—

Net income
$
116,689

 
$
48,948

(h) 
$
165,637

 
$
82,761

 
$
93,755

(h) 
$
176,516

Net income per diluted share
$
1.91

 
 
 
$
2.71

 
$
1.32

 
 
 
$
2.81


11


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)

 
Year Ended
 
December 31, 2016
 
December 31, 2015
 
GAAP Reported
 
Adjustments
 
Non-GAAP Adjusted
 
GAAP Reported
 
Adjustments
 
Non-GAAP Adjusted
Total revenues
$
1,487,973

 
$
—

 
$
1,487,973

 
$
1,324,803

 
$
—

 
$
1,324,803

Cost of product sales (excluding amortization and impairment of intangible assets)
105,386

 
(4,589
)
(i) 
100,797

 
102,526

 
(4,074
)
(i) 
98,452

Selling, general and administrative
502,892

 
(98,055
)
(j) 
404,837

 
449,119

 
(93,697
)
(j) 
355,422

Research and development
162,297

 
(15,831
)
(k) 
146,466

 
135,253

 
(38,575
)
(k) 
96,678

Acquired in-process research and development
23,750

 
(23,750
)
 
—

 
—

 
—

 
—

Intangible asset amortization
101,994

 
(101,994
)
 
—

 
98,162

 
(98,162
)
 
—

Impairment charges
—

 
—

 
—

 
31,523

 
(31,523
)
 
—

Interest expense, net
61,942

 
(22,133
)
(d) 
39,809

 
56,917

 
(22,738
)
(d) 
34,179

Foreign currency gain
(3,372
)
 
—

 
(3,372
)
 
(1,445
)
 
—

 
(1,445
)
Loss on extinguishment and modification of debt
638

 
(638
)
 
—

 
16,815

 
(16,815
)
 
—

Income before income tax provision and equity in loss of investee
532,446

 
266,990

(l) 
799,436

 
435,933

 
305,584

(l) 
741,517

Income tax provision
135,236

 
36,659

(f) 
171,895

 
106,399

 
39,633

(f) 
146,032

Effective tax rate (g)
25.4
%
 
 
 
21.5
%
 
24.4
%
 
 
 
19.7
%
Equity in loss of investee
379

 
—

 
379

 
—

 
—

 
—

Net income
396,831

 
230,331

(m) 
627,162

 
329,534

 
265,951

(m) 
595,485

Net income (loss) attributable to noncontrolling interests
—

 
—

(n) 
—

 
(1
)
 
2

(n) 
1

Net income attributable to Jazz Pharmaceuticals plc
$
396,831

 
$
230,331

(o) 
$
627,162

 
$
329,535

 
$
265,949

(o) 
$
595,484

Net income attributable to Jazz Pharmaceuticals plc per diluted share
$
6.41

 
 
 
$
10.14

 
$
5.23

 
 
 
$
9.45

_____________________________
Explanation of Adjustments and Certain Line Items (in thousands):
(a)
Share-based compensation expense of $1,479 and $1,288 and expenses related to certain legal proceedings and restructuring of $0 and $533 for the three months ended December 31, 2016 and 2015, respectively.
(b)
Share-based compensation expense of $18,373 and $19,810, transaction and integration related costs of $564 and $18,000 and expenses related to certain legal proceedings and restructuring of $0 and $336 for the three months ended December 31, 2016 and 2015, respectively.
(c)
Share-based compensation expense of $4,429 and $3,219, transaction and integration related costs of $110 and $0 and expenses related to certain legal proceedings and restructuring of $0 and $219 for the three months ended December 31, 2016 and 2015, respectively.
(d)
Non-cash interest expense associated with debt discount and debt issuance costs for the respective three- and twelve-month periods.
(e)
Sum of adjustments (a) through (d) plus the adjustments for intangible asset amortization and impairment charges 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 twelve-month periods.
(g)
Income tax provision divided by income before income tax provision and equity in loss of investee for the respective three- and twelve-month periods.
(h)
Net of adjustments (e) and (f) for the respective three-month period.
(i)
Share-based compensation expense of $4,438 and $3,541, expenses related to certain legal proceedings and restructuring of $110 and $533 and transaction and integration related costs of $41 and $0 for the years ended December 31, 2016 and 2015, respectively.

12


(j)
Share-based compensation expense of $79,037 and $74,653, expenses related to certain legal proceedings and restructuring of $5,950 and $889 and transaction and integration related costs of $13,068 and $18,155 for the years ended December 31, 2016 and 2015, respectively.
(k)
Share-based compensation expense of $15,296 and $13,356, transaction and integration related costs of $535 and $0, milestone of $0 and $25,000 and expenses related to certain legal proceedings and restructuring of $0 and $219 for the years ended December 31, 2016 and 2015, respectively.
(l)
Sum of adjustments (i), (j), (k) and (d) plus the adjustments for acquired in-process research and development expenses, intangible asset amortization, impairment charges and loss on extinguishment and modification of debt, as applicable, for the respective twelve-month period.
(m)
Net of adjustments (l) and (f) for the respective twelve-month period.
(n)
Adjustments for amount attributable to noncontrolling interests for the respective twelve-month period.
(o)
Net of adjustments (m) and (n) for the respective twelve-month period.

13


JAZZ PHARMACEUTICALS PLC
RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED 2017 NET INCOME GUIDANCE
(In millions, except per share amounts)
(Unaudited)
GAAP net income
$400 - $460
Intangible asset amortization
130 - 165
Share-based compensation expense
100 - 120
Milestone payments
10 - 15
Non-cash interest expense
20 - 25
Income tax effect of adjustments
(40) - (60)
Non-GAAP adjusted net income
$650 - $690
 
 
GAAP net income per diluted share
$6.55-$7.55
Non-GAAP adjusted net income per diluted share 
$10.70-$11.30
 
 
Weighted-average ordinary shares used in per share calculations
61





Contacts:
Investors
Kathee Littrell
Vice President, Investor Relations
Jazz Pharmaceuticals plc
Ireland, +353 1 634 7887
U.S., +1 650 496 2717

Jacqueline Kirby
Vice President, Corporate Affairs & Government Relations
Jazz Pharmaceuticals plc
Ireland, +353 1 634 7894
U.S., +1 215 867 4910


14