On August 8, 2017 Jazz Pharmaceuticals plc (Nasdaq: JAZZ) reported financial results for the second quarter of 2017 and affirmed financial guidance for 2017 (Press release, Jazz Pharmaceuticals, AUG 8, 2017, View Source;p=RssLanding&cat=news&id=2292679 [SID1234520180]).
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"Thus far, 2017 has been a highly productive year. We have executed on and delivered results of key clinical development programs, advanced multiple global regulatory efforts and received U.S. approval of Vyxeos for the treatment of adults with newly-diagnosed therapy-related AML or AML with myelodysplasia-related changes," said Bruce Cozadd, chairman and chief executive officer of Jazz Pharmaceuticals. "We continue to invest in our key products, product launches, R&D and corporate development activities to fuel our future growth and create long-term value."
GAAP net income for the second quarter of 2017 was $105.6 million, or $1.72 per diluted share, compared to $114.5 million, or $1.85 per diluted share, for the second quarter of 2016.
Adjusted net income for the second quarter of 2017 was $157.4 million, or $2.56 per diluted share, compared to $165.8 million, or $2.67 per diluted share, for the second quarter of 2016. Reconciliations of applicable GAAP reported to non-GAAP adjusted information are included at the end of this press release.
Financial Highlights
Three Months Ended
June 30,
Six Months Ended
June 30,
(In thousands, except per share amounts and percentages)
2017
2016
Change
2017
2016
Change
Total revenues
$
394,386
$
381,161
3%
$
770,439
$
717,171
7%
GAAP net income
$
105,604
$
114,502
(8)%
$
192,115
$
190,314
1%
Adjusted net income
$
157,354
$
165,804
(5)%
$
298,576
$
300,372
(1)%
GAAP EPS
$
1.72
$
1.85
(7)%
$
3.13
$
3.05
3%
Adjusted EPS
$
2.56
$
2.67
(4)%
$
4.87
$
4.82
1%
Total Revenues
Three Months Ended
June 30,
Six Months Ended
June 30,
(In thousands)
2017
2016
2017
2016
Xyrem (sodium oxybate) oral solution
$
298,026
$
280,968
$
570,352
$
530,505
Erwinaze / Erwinase (asparaginase Erwinia chrysanthemi)
49,024
49,748
100,412
100,921
Defitelio (defibrotide sodium) / defibrotide
30,238
33,246
66,138
51,143
Prialt (ziconotide) intrathecal infusion
5,656
8,073
13,373
14,282
Other
6,711
7,075
13,058
16,175
Product sales, net
389,655
379,110
763,333
713,026
Royalties and contract revenues
4,731
2,051
7,106
4,145
Total revenues
$
394,386
$
381,161
$
770,439
$
717,171
Net product sales increased 3% in the second quarter of 2017 compared to the same period in 2016 due to higher net product sales of Xyrem.
Xyrem net product sales increased 6% in the second quarter of 2017 compared to the same period in 2016.
Erwinaze/Erwinase net product sales in the second quarter of 2017 were consistent with net product sales in the same period in 2016. During the 2017 quarter, the company continued to experience supply challenges that resulted in temporary supply disruptions in certain markets, which the company expects will continue for the remainder of 2017.
Defitelio/defibrotide net product sales decreased 9% in the second quarter of 2017 compared to the same period in 2016 primarily due to inventory stocking in the second quarter of 2016, following the U.S. launch in that quarter, and the impact of unfavorable foreign exchange rates. The company continues to expect inter-quarter variability in Defitelio net sales given that veno-occlusive disease is an ultra-rare disease.
Operating Expenses
Three Months Ended
June 30,
Six Months Ended
June 30,
(In thousands, except percentages)
2017
2016
2017
2016
GAAP:
Cost of product sales
$
28,672
$
23,980
$
53,737
$
47,419
Gross margin
92.6%
93.7%
93.0%
93.3%
Selling, general and administrative
$
132,328
$
122,618
$
276,583
$
251,383
% of total revenues
33.6%
32.2%
35.9%
35.1%
Research and development
$
40,157
$
39,091
$
85,085
$
70,343
% of total revenues
10.2%
10.3%
11.0%
9.8%
Three Months Ended
June 30,
Six Months Ended
June 30,
(In thousands, except percentages)
2017
2016
2017
2016
Non-GAAP adjusted:
Cost of product sales
$
27,145
$
23,017
$
50,964
$
45,657
Gross margin
93.0%
93.9%
93.3%
93.6%
Selling, general and administrative
$
111,454
$
99,488
$
229,904
$
202,099
% of total revenues
28.3%
26.1%
29.8%
28.2%
Research and development
$
35,298
$
35,562
$
76,084
$
63,524
% of total revenues
9.0%
9.3%
9.9%
8.9%
Operating expenses changed over the prior year period primarily due to the following:
Selling, general and administrative (SG&A) expenses increased in the second quarter of 2017 compared to the same period in 2016 on a GAAP and on a non-GAAP adjusted basis due to higher headcount and other expenses resulting from the expansion of the company’s business, the company’s narcolepsy disease awareness campaign and pre-launch activities related to the U.S. launch of VyxeosTM (daunorubicin and cytarabine) liposome for injection.
Research and development (R&D) expenses were consistent on a GAAP and on a non-GAAP adjusted basis in the second quarter of 2017 compared to the same period in 2016. The 2017 quarter included expenses related to regulatory activities for Vyxeos, increased expenses for continued investments in sleep-related R&D programs, an increase in headcount to support these activities and a decrease in costs related to JZP-110 studies for excessive sleepiness associated with obstructive sleep apnea and with narcolepsy due to the completion of three Phase 3 studies.
Cash Flow and Balance Sheet
As of June 30, 2017, cash, cash equivalents and investments were $319.2 million, and the outstanding principal balance of the company’s long-term debt was $1.8 billion. During the six months ended June 30, 2017, the company repaid $350.0 million of borrowings under the company’s revolving credit facility and used $30.9 million to repurchase approximately 230,000 ordinary shares under the company’s share repurchase program at an average cost of $134.10 per ordinary share.
Recent Developments
In June 2017, the company presented positive efficacy results from its global multi-center studies evaluating Xyrem for the treatment of cataplexy in pediatric patients with narcolepsy and JZP-110 in adult patients with excessive sleepiness associated with obstructive sleep apnea and with narcolepsy.
In July 2017, the company entered into a license agreement with XL-protein GmbH (XLp) for the rights to develop, manufacture and commercialize products using XLp’s PASylation technology to extend the plasma half-life of selected asparaginase product candidates.
On August 3, 2017, the U.S. Food and Drug Administration (FDA) approved Vyxeos for the treatment of adults with newly-diagnosed therapy-related AML or AML with myelodysplasia-related changes.
2017 Financial Guidance
Jazz Pharmaceuticals is affirming its full year 2017 financial guidance 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
$1,200-$1,230
-Erwinaze/Erwinase net sales
$205-$225
-Defitelio/defibrotide net sales
$130-$150
-Vyxeos net sales
$10-$20
GAAP gross margin %
93%
Non-GAAP adjusted gross margin %1,4
93%
GAAP SG&A expenses
$521-$556
Non-GAAP adjusted SG&A expenses2,4
$440-$460
GAAP R&D expenses
$185-$216
Non-GAAP adjusted R&D expenses3,4
$165-$180
GAAP net income per diluted share
$6.55-$7.55
Non-GAAP adjusted net income per diluted share4
$10.70-$11.30
1.
Excludes $5 million of share-based compensation expense from estimated GAAP gross margin.
2.
Excludes $75-$90 million of share-based compensation expense and $6 million of expenses related to certain legal proceedings and restructuring from estimated GAAP SG&A expenses.
3.
Excludes $20-$25 million of share-based compensation expense and $0-$11 million of milestone payments from estimated GAAP R&D expenses.
4.
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.
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