On May 10, 2016 Jazz Pharmaceuticals plc (Nasdaq: JAZZ) reported financial results for the first quarter of 2016 and updated financial guidance for 2016 (Filing, Q1, Jazz Pharmaceuticals, 2016, MAY 10, 2016, View Source [SID:1234512492]).
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"During the first quarter of 2016, we executed on our business model by delivering strong top- and bottom-line growth and commenced promotion of Defitelio in the U.S. immediately following FDA approval. Defitelio is the first and only approved treatment in the U.S. for patients who develop hepatic VOD with renal or pulmonary dysfunction following hematopoietic stem-cell transplantation," said Bruce C. Cozadd, chairman and chief executive officer of Jazz Pharmaceuticals plc. "For 2016, we will continue to invest in the organic growth of our key products, including new indications, and the advancement of our development pipeline. Diversification of our product portfolio through internal and corporate development efforts remains a high priority as we seek to identify and acquire differentiated and long-lived therapeutic options for patients."
Adjusted net income for the first quarter of 2016 was $141.0 million, or $2.26 per diluted share, compared to $125.1 million, or $1.99 per diluted share, for the first quarter of 2015.
GAAP net income for the first quarter of 2016 was $74.1 million, or $1.19 per diluted share, compared to $70.7 million, or $1.12 per diluted share, for the first quarter of 2015. Reconciliations of applicable GAAP reported to non-GAAP adjusted information are included in this press release.
Financial Highlights
Three Months Ended March 31,
(In thousands, except per share amounts and percentages)
2016
2015
Change
Total revenues
$
336,010
$
309,303
8.6
%
Adjusted net income
$
140,995
$
125,068
12.7
%
GAAP net income
$
74,121
$
70,700
4.8
%
Adjusted EPS
$
2.26
$
1.99
13.6
%
GAAP EPS
$
1.19
$
1.12
6.3
%
Total Revenues
Total revenues were as follows:
Three Months Ended March 31,
(In thousands)
2016
2015
Xyrem (sodium oxybate) oral solution
$
249,537
$
212,690
Erwinaze / Erwinase (asparaginase Erwinia chrysanthemi)
51,173
50,353
Defitelio (defibrotide sodium) / defibrotide
17,897
17,363
Prialt (ziconotide) intrathecal infusion
6,209
6,764
Psychiatry
7,002
9,093
Other
2,098
10,772
Product sales, net
333,916
307,035
Royalties and contract revenues
2,094
2,268
Total revenues
$
336,010
$
309,303
Net product sales increased by 9% in the first quarter of 2016 compared to the same period in 2015 primarily due to higher net product sales of Xyrem.
Erwinaze/Erwinase net product sales increased by 2% in the first quarter of 2016 compared to the same period in 2015. Although Erwinaze net product sales increased, as a consequence of constrained manufacturing capacity, the company has had a limited ability to build sufficient inventory levels that can be used to absorb supply disruptions. In the first quarter of 2016, the company experienced supply challenges that temporarily disrupted its ability to supply certain markets.
Defitelio/defibrotide product sales increased by 3% in the first quarter of 2016 compared to the same period in 2015. The increase in net product sales was partially offset by the impact of foreign exchange on sales made in euro.
Operating Expenses
Operating expenses were as follows:
Three Months Ended March 31,
(In thousands, except percentages)
2016
2015
GAAP:
Cost of product sales
$
23,439
$
28,298
Gross margin
93.0
%
90.8
%
Selling, general and administrative
$
128,765
$
112,388
% of total revenues
38.3
%
36.3
%
Research and development
$
31,252
$
27,181
% of total revenues
9.3
%
8.8
%
Acquired in-process research and development
$
8,750
$
—
Non-GAAP adjusted:
Cost of product sales
$
22,640
$
27,603
Gross margin
93.2
%
91.0
%
Selling, general and administrative
$
102,611
$
95,041
% of total revenues
30.5
%
30.7
%
Research and development
$
27,962
$
23,696
% of total revenues
8.3
%
7.7
%
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 2016 compared to the same period in 2015, on a GAAP and 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 first quarter of 2016 compared to the same period in 2015, on a GAAP and 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.
•
Acquired in-process research and development (IPR&D) expense in the first quarter of 2016 related to an upfront payment of $8.8 million the company made in connection with its acquisition of intellectual property and know-how related to recombinant crisantaspase.
Cash Flow and Balance Sheet
As of March 31, 2016, cash, cash equivalents and investments were $980.5 million, and the outstanding principal balance of the company’s long-term debt was $1.3 billion. Cash, cash equivalents and investments decreased during the quarter primarily due to repurchases under the company’s share repurchase program, partially offset by cash generated by the business. During the first quarter of 2016, the company repurchased 1.1 million ordinary shares for $134.4 million, at an average cost of $123.77 per ordinary share.
In March 2016, the company recorded a $150.0 million milestone owed to Sigma-Tau Pharmaceuticals, Inc., which was triggered by the U.S. Food and Drug Administration approval of Defitelio on March 30, 2016. The milestone was capitalized as an intangible asset and was paid by the company in April 2016.
2016 Financial Guidance
Jazz Pharmaceuticals is updating its full year 2016 financial guidance, which is as follows (in millions, except per share amounts and percentage):
Revenues
$1,490-$1,550
Total net product sales
$1,482-$1,542
-Xyrem net sales
$1,095-$1,130
-Erwinaze/Erwinase net sales
$200-$225
-Defitelio/defibrotide net sales
$100-$125
Adjusted gross margin %1,4
93%
Adjusted SG&A expenses2,4
$390-$410
Adjusted R&D expenses3,4
$115-$130
GAAP net income per diluted share
$6.76-$7.41
Non-GAAP adjusted net income per diluted share*,4
$11.10-$11.50
_____________________________
*
Updated May 10, 2016 to reflect a decrease in weighted-average shares to 62 million.
1.
Excludes $6 million of share-based compensation expense from estimated GAAP gross margin of 93%.
2.
Excludes $87-$95 million of share-based compensation expense and $6 million of expenses related to certain legal proceedings and restructuring from estimated GAAP SG&A expenses of $483-$511 million.
3.
Excludes $17-$19 million of share-based compensation expense from estimated GAAP R&D expenses of $132-$149 million.
4.
See "Non-GAAP Financial Measures" below. Reconciliations of non-GAAP adjusted guidance measures are included above and in the tables accompanying this press release.