On February 25, 2020 Jazz Pharmaceuticals plc (Nasdaq: JAZZ) reported financial results for the full year and the fourth quarter of 2019 and provided financial guidance for 2020 (Press release, Jazz Pharmaceuticals, FEB 25, 2020, View Source [SID1234554760]).
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"With more than $2 billion of revenue and double-digit top- and bottom-line growth, we delivered strong 2019 financial results while making significant investments to support the continued robust evolution of our business," said Bruce Cozadd, chairman and chief executive officer of Jazz Pharmaceuticals. "Strong execution of our long-term sustainable growth strategy has led to six major product approvals in the past four years, and we look forward to further diversification of our revenue base through corporate development activities and by delivering on other key priorities, including the European launch of Sunosi, the anticipated U.S. launches of lurbinectedin and JZP-258, and pre-launch activities for JZP-458."
"Backed by a growing commitment to R&D, we have made significant progress strengthening and advancing our R&D pipeline with the goal of providing important new therapeutic options and improved patient outcomes in difficult-to-treat diseases," said Robert Iannone, M.D., M.S.C.E., executive vice president, research and development, of Jazz Pharmaceuticals. "Our R&D organization remains focused on optimizing and diversifying our portfolio through internal efforts and external opportunities, including utilizing innovative technologies, and working through partnerships and collaborations designed to bring new life-changing therapeutics to patients."
Financial Highlights
GAAP net income for 2019 was $523.4 million, or $9.09 per diluted share, compared to $447.1 million, or $7.30 per diluted share, for 2018. GAAP net income for the fourth quarter of 2019 was $74.0 million, or $1.29 per diluted share, compared to $159.5 million, or $2.64 per diluted share, for the fourth quarter of 2018. The decrease in GAAP net income and EPS in the fourth quarter of 2019 compared to the fourth quarter of 2018 was primarily due to the amortization of the $111.1 million cost of the priority review voucher utilized in connection with the company’s JZP-258 new drug application (NDA) submission.
Non-GAAP adjusted net income for 2019 was $934.2 million, or $16.23 per diluted share, compared to $838.6 million, or $13.70 per diluted share, for 2018. Non-GAAP adjusted net income for the fourth quarter of 2019 was $253.2 million, or $4.42 per diluted share, compared to $220.0 million, or $3.64 per diluted share, for the fourth quarter of 2018. Reconciliations of applicable GAAP reported to non-GAAP adjusted information are included at the end of this press release.
Key Corporate and R&D Updates
Corporate
The company announced today the appointment of Renée D. Galá as Executive Vice President and Chief Financial Officer (CFO) effective March 16, 2020. At this time, Ms. Galá will assume the duties and responsibilities of the company’s principal financial officer from Bruce Cozadd, Chairman and Chief Executive Officer, who has been serving in this role on an interim basis. Ms. Galá brings more than 25 years of extensive experience across finance, strategy, leadership development and corporate development and recently served at GRAIL, Inc. as CFO. Prior to this, Ms. Galá served as Senior Vice President and CFO of Theravance Biopharma, Inc. Ms. Galá serves on the board of directors of Gossamer Bio, Inc., a clinical-stage biopharmaceutical company, where she also chairs the audit committee. Ms. Galá holds a B.S. in Mathematics from Vanderbilt University and an M.B.A. from Columbia Business School.
The company announced today the appointment of Samantha Pearce as Senior Vice President, Europe/Rest of World effective March 2, 2020. From March 2010 to December 2019, Ms. Pearce held various global senior management positions with Celgene Corporation, most recently as Vice President and General Manager, International Markets. From August 2002 to March 2010, Ms. Pearce served in management positions at AstraZeneca plc, culminating in her role as Director, Specialist Care. Ms. Pearce received a B.Sc. from Birmingham University and an M.B.A. from Cranfield University.
Sunosi (solriamfetol)
In January 2020, the European Commission approved Sunosi to improve wakefulness and reduce excessive daytime sleepiness (EDS) in adults with narcolepsy (with or without cataplexy) or obstructive sleep apnea (OSA) whose EDS has not been satisfactorily treated by primary OSA therapy, such as continuous positive airway pressure. Sunosi is the only licensed therapy in the European Union (EU) for the treatment of EDS in adults living with OSA.
JZP-258
In January 2020, the company submitted an NDA to the U.S. Food and Drug Administration (FDA) for JZP-258 for the treatment of cataplexy and EDS in narcolepsy patients 7 years of age and older. The company redeemed its priority review voucher for the NDA submission.
Defitelio (defibrotide sodium) / defibrotide
In the fourth quarter of 2019, the company completed enrollment in its prevention of acute graft-vs-host disease (aGvHD) Phase 2 study.
Vyxeos (daunorubicin and cytarabine) liposome for injection
In the fourth quarter of 2019, the company activated sites for its Phase 1b master trial of Vyxeos in combination with various targeted agents in first-line, fit acute myeloid leukemia.
JZP-458
In the fourth quarter of 2019, FDA granted Fast Track designation to JZP-458 for the treatment of acute lymphoblastic leukemia (ALL)/lymphoblastic lymphoma (LBL) and the company activated sites and began enrollment in its single-arm, pivotal Phase 2/3 clinical study.
Lurbinectedin
In December 2019, the company announced that it had entered into an exclusive license agreement with Pharma Mar S.A. (PharmaMar) for U.S. commercialization and development rights to lurbinectedin. In January 2020, the transaction closed and the company made an upfront payment of $200 million to PharmaMar.
In February 2020, FDA accepted the NDA and granted priority review for lurbinectedin for the treatment of relapsed small cell lung cancer (SCLC) with a Prescription Drug User Fee Act (PDUFA) action date of August 16, 2020.
Select 2020 Objectives
Sleep and Neuroscience
Sunosi
Initiate European rolling launch in Germany mid-2020
Initiate Phase 3 study for EDS in major depressive disorder mid-2020
JZP-258
Submit NDA for cataplexy and EDS in narcolepsy patients 7 years and older January 2020
Obtain U.S. approval as early as 3Q20
Launch as early as 4Q20
Complete enrollment in Phase 3 study in idiopathic hypersomnia 2H20
JZP-385
Initiate Phase 2b study in essential tremor 4Q20
Hematology and Oncology
Defitelio
Conduct interim analysis in Phase 3 study for prevention of hepatic veno-occlusive disease study to determine final enrollment 1H20
Report top-line results from Phase 2 study for prevention of aGvHD 2H20
Lurbinectedin
Obtain U.S. accelerated approval for relapsed SCLC and launch 3Q20
JZP-458
Conduct interim analysis in pivotal Phase 2/3 clinical study in ALL/LBL
Submit Biologics License Application (BLA) to FDA as early as 4Q20
Corporate Development
Expand portfolio through multiple acquisitions or partnerships
Total revenues increased 14% in 2019 and 22% in the fourth quarter of 2019 compared to the same periods in 2018.
Xyrem net product sales increased 17% in 2019 and 16% in the fourth quarter of 2019 compared to the same periods in 2018.
Erwinaze/Erwinase net product sales in 2019 were consistent with net product sales in 2018 and higher in the fourth quarter of 2019 compared to the same period of 2018 due to the timing of supply availability. The company experienced limited product availability during 2019 and 2018 due to ongoing supply and manufacturing issues at the sole manufacturer.
Defitelio/defibrotide net product sales increased 16% in 2019 and 27% in the fourth quarter of 2019 compared to the same periods in 2018. The company continues to expect inter-quarter variability in Defitelio net sales.
Vyxeos net product sales increased 20% in 2019 and 23% in the fourth quarter of 2019 compared to the same periods in 2018 primarily due to the ongoing European launch.
Sunosi net product sales were $3.7 million in 2019 following the U.S. launch in July 2019.
Operating Expenses and Effective Tax Rate
Operating expenses increased over the prior year periods primarily due to the following:
Selling, general and administrative (SG&A) expenses increased in 2019 and in the fourth quarter of 2019 compared to the same periods in 2018 on a GAAP and on a non-GAAP adjusted basis primarily due to expenses related to the expansion of the company’s business, including the U.S. launch of Sunosi.
Research and development (R&D) expenses increased in 2019 and in the fourth quarter of 2019 compared to the same periods in 2018 on a GAAP and on a non-GAAP adjusted basis primarily due to expenses related to the company’s expanding pre-clinical and clinical development programs and support of its partner programs, including milestone payments of $26.0 million in 2019 to Pfenex, Inc. under a license and option agreement to develop and commercialize multiple early stage hematology product candidates.
The effective tax rate for the fourth quarter of 2019 on both a GAAP and on a non-GAAP adjusted basis included a benefit of $31.6 million for the years 2015 to 2019 resulting from the application of the Italian patent box incentive. The effective tax rate for 2019 on a GAAP basis included a one-time tax benefit of $112.3 million resulting from an intra-entity intellectual property asset transfer.
Cash Flow and Balance Sheet
As of December 31, 2019, cash, cash equivalents and investments were $1.1 billion, and the outstanding principal balance of the company’s long-term debt was $1.8 billion. In 2019, the company generated $776.4 million of cash from operations, used $301.5 million to repurchase shares under the company’s share repurchase program, made milestone payments totaling $80.5 million related to Sunosi, and made upfront payments of $52.5 million to acquire Cavion, Inc. (Cavion) and $56.0 million to Codiak BioSciences, Inc. (Codiak) under a collaboration agreement.
In 2019, the company repurchased approximately 2.3 million ordinary shares under the company’s share repurchase program at an average cost of $133.97 per ordinary share. As of December 31, 2019, the remaining amount authorized for share repurchases under the company’s share repurchase program was $577.7 million.
2020 Financial Guidance
Jazz Pharmaceuticals’ full year 2020 financial guidance as follows (in millions, except per share amounts and percentages):
Excludes $8-$9 million of share-based compensation expense from estimated GAAP gross margin.
Excludes $85-$93 million of share-based compensation expense from estimated GAAP SG&A expenses.
Excludes $27-$33 million of share-based compensation expense from estimated GAAP R&D expenses.
Beginning with the presentation of the company’s financial guidance for 2020, following consultation with the staff of the Division of Corporation Finance of the U.S. Securities and Exchange Commission, the company will no longer exclude upfront and milestone payments from the company’s non-GAAP adjusted net income, its line item components and non-GAAP adjusted EPS. The impact of this change to the company’s 2020 non-GAAP adjusted net income and non-GAAP adjusted EPS guidance is approximately $175 million or $3.13 per diluted share, respectively, related to the post-tax impact of the $200 million upfront payment made to PharmaMar in January 2020.
Excludes the income tax effect of adjustments between GAAP reported and non-GAAP adjusted net income.
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 2020 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 2019 full year and fourth quarter results and provide 2020 financial guidance. 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 9837779.
A replay of the conference call will be available through March 3, 2020 by dialing +1 855 859 2056 in the U.S., or +1 404 537 3406 outside the U.S., and entering passcode 9837779. 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.