On November 5, 2019 Jazz Pharmaceuticals plc (Nasdaq: JAZZ) reported financial results for the third quarter of 2019 and updated 2019 financial guidance (Press release, Jazz Pharmaceuticals, NOV 5, 2019, View Source [SID1234550501]).
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"In the third quarter, we delivered strong revenue and adjusted EPS growth ahead of our expectations. As a result, we are raising our revenue and adjusted EPS guidance for 2019," said Bruce Cozadd, chairman and chief executive officer of Jazz Pharmaceuticals. "Following the recent presentation of the positive JZP-258 Phase 3 data at the World Sleep Congress, we are looking forward to submitting the NDA in January 2020 and plan to redeem our priority review voucher for this submission. The quarter included our U.S. new product launch of Sunosi and execution on other key commercial, R&D and corporate development goals, further positioning us for long-term sustainable growth."
"We made significant progress during the quarter, advancing multiple development programs and expanding our pipeline with the acquisition of Cavion, including JZP-385, a Phase 2 investigational candidate for the treatment of essential tremor," said Robert Iannone, M.D., M.S.C.E., executive vice president, research and development, of Jazz Pharmaceuticals. "Importantly, given the urgent patient need, we finalized the protocol for the Phase 2/3 study of JZP-458, our recombinant Erwinia asparaginase, for acute lymphoblastic leukemia and one year after submitting our IND, we are working toward recruiting the first patient in this pivotal study."
GAAP net income for the third quarter of 2019 was $102.3 million, or $1.78 per diluted share, compared to $149.3 million, or $2.41 per diluted share, for the third quarter of 2018. GAAP net income and EPS for the third quarter of 2019 included the impact of acquired in-process research and development expense primarily related to the company’s acquisition of Cavion, Inc. (Cavion).
Non-GAAP adjusted net income for the third quarter of 2019 was $235.3 million, or $4.10 per diluted share, compared to $221.7 million, or $3.58 per diluted share, for the third 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
In August 2019, the company acquired Cavion in a merger transaction. Under the terms of the agreement, the former Cavion shareholders received an upfront payment of $52.5 million and have the potential to receive additional payments of up to $260.0 million upon the achievement of certain clinical, regulatory and commercial milestones, for a total potential consideration of $312.5 million. Cavion’s lead molecule, CX-8998, now JZP-385, has been evaluated in a Phase 2 randomized, placebo-controlled clinical study and demonstrated proof-of-concept as a potential treatment for essential tremor.
In September 2019, the company presented positive results from the Phase 3 study of JZP-258, which demonstrate the efficacy of JZP-258 for the treatment of cataplexy and excessive daytime sleepiness (EDS) in adults with narcolepsy. The JZP-258 study met its primary and key secondary endpoints demonstrating highly statistically significant differences in weekly number of cataplexy attacks and Epworth Sleepiness Scale scores compared to placebo. JZP-258 is a novel oxybate formulation with a unique composition of cations resulting in 92% less sodium, or approximately 1 to 1.5 grams less sodium per night, than Xyrem (sodium oxybate) oral solution.
In October 2019, the company announced that the first patient was enrolled in an exploratory Phase 2 clinical trial evaluating the ability of defibrotide to prevent neurotoxicity in patients with relapsed or refractory diffuse large B-cell lymphoma (DLBCL) receiving chimeric antigen receptor t-cell (CAR T-cell) therapy.
In October 2019, U.S. Food and Drug Administration (FDA) granted Fast Track designation to JZP-458 for the treatment of acute lymphoblastic leukemia (ALL)/lymphoblastic lymphoma (LBL).
Today, the company announced that it expects to submit the JZP-258 New Drug Application (NDA) in January 2020 and plans to redeem its priority review voucher for this submission.
Today, the company announced that Mike Miller will retire from his role as Executive Vice President, U.S. Commercial effective March 31, 2020. Mr. Miller will continue as an employee of the company through June 30, 2020, to ensure a smooth transition to new leadership. The company plans to begin a search for Mr. Miller’s successor soon.
Select 2019 Milestones*
Xyrem (sodium oxybate) oral solution
Launched for the treatment of cataplexy or EDS in pediatric narcolepsy in March
JZP-258
Announced positive top-line results from Phase 3 narcolepsy study in March
Received Orphan Drug Designation from FDA for idiopathic hypersomnia indication
Presented positive results from Phase 3 narcolepsy study at World Sleep Congress meeting in September
NDA submission as early as year-end (now intend to submit January 2020)
Sunosi (solriamfetol)
Received FDA approval for EDS in narcolepsy or obstructive sleep apnea (OSA) in March
Received U.S. Drug Enforcement Agency scheduling decision in June
Launched in the U.S. in July
Identified EDS associated with Major Depressive Disorder as a new area of interest
Obtain EU approval for EDS in narcolepsy or OSA as early as year-end (now anticipate Committee for Medicinal Products for Human Use (CHMP) opinion November 2019; expect European Medicines Agency (EMA) decision early 2020)
Vyxeos (daunorubicin and cytarabine) liposome for injection
Positive data presented by Children’s Oncology Group (COG) in children and young adults with relapsed/refractory acute myeloid leukemia (AML) at American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) in June
Activated sites for Phase 1 attenuated dose finding study of Vyxeos in higher risk myelodysplastic syndrome (MDS) through MD Anderson collaboration (FPI 2Q19)
Activated sites for Phase 1b study of low intensity therapy of Vyxeos in combination with venetoclax in first-line, unfit AML (FPI 4Q19)
Activated sites for Phase 3 study in adult patients with newly diagnosed standard- and high-risk AML through the AML Study Group, a cooperative group (FPI 3Q19)
Activated sites for Phase 2 study in patients with high-risk MDS through the European Myelodysplastic Syndromes Cooperative Group (FPI 3Q19)
Activate sites for Phase 1b master trial of Vyxeos in combination with various targeted agents in first-line, fit AML
Potential interim combination data results from studies conducted through MD Anderson collaboration
Activate sites in the COG Phase 3 study in newly diagnosed pediatric patients with AML
Activate sites for Phase 2 study in newly diagnosed, fit, older adults with high-risk AML
Activate sites for Phase 2 study in a broader age range of adults with high-risk AML
Defitelio (defibrotide sodium) / defibrotide
Positive results from DEFIFrance study presented at European Society for Blood and Marrow Transplant meeting in March
Nippon Shinyaku Co., Ltd. received marketing authorization for Defitelio in Japan in June and launched in September
Activated sites for exploratory Phase 2 study in CAR T-cell therapy associated neurotoxicity (FPI 4Q19)
Completed enrollment in prevention of acute graft-vs-host disease Phase 2 study
Conduct interim analysis (IA) in the prevention of hepatic veno-occlusive disease (VOD) study (now expect to conduct 1H20)
Activate sites for Phase 2 study in transplant-associated thrombotic microangiopathy (activities discontinued)
JZP-458
FDA granted Fast Track designation to JZP-458 for the treatment of ALL/LBL
Activate sites for single-arm, pivotal Phase 2/3 clinical study in ALL/LBL
CombiPlex
Continue Investigational New Drug enabling activities for a solid tumor combination; progress exploratory activities for other hematology/oncology candidates
* Milestones denoted as ✔=completed, x=not completed, •=milestones planned for 2019. FPI = First Patient In
Total revenues increased 15% in the third quarter of 2019 compared to the same period in 2018.
Xyrem net product sales increased 19% in the third quarter of 2019 compared to the same period in 2018.
Erwinaze/Erwinase net product sales decreased 17% in the third quarter of 2019 compared to the same period in 2018 due to ongoing supply and manufacturing issues at the sole manufacturer, resulting in limited product availability during the quarter. The company anticipates ongoing manufacturing issues and supply disruptions for the fourth quarter of 2019 and in 2020.
Defitelio/defibrotide net product sales increased 4% in the third quarter of 2019 compared to the same period in 2018. The company continues to expect inter-quarter variability in Defitelio net sales.
Vyxeos net product sales increased 41% in the third quarter of 2019 compared to the same period in 2018 primarily due to the ongoing EU launch. The company continues to implement its education and outreach initiatives while advancing a development program to support potential expanded uses of Vyxeos.
Sunosi net product sales were $1.0 million in the third quarter of 2019, following the U.S. launch in July 2019.
Operating expenses changed over the prior year period primarily due to the following:
Selling, general and administrative (SG&A) expenses increased in the third quarter of 2019 compared to the same period 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 the third quarter of 2019 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 a milestone of $11.0 million payable to Pfenex, Inc. under a license and option agreement to develop and commercialize multiple early stage hematology product candidates.
Cash Flow and Balance Sheet
As of September 30, 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. During the nine months ended September 30, 2019, the company generated $688.6 million of cash from operations, used $191.1 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. and $56.0 million to Codiak BioSciences, Inc. (Codiak) under a collaboration agreement.
In the nine months ended September 30, 2019, the company repurchased approximately 1.5 million ordinary shares under the company’s share repurchase program at an average cost of $131.48 per ordinary share. As of September 30, 2019, the remaining amount authorized for share repurchases was $188.1 million. In October 2019, the company’s board of directors increased the share repurchase program by $500 million.
2019 Financial Guidance
Jazz Pharmaceuticals is updating its full year 2019 financial guidance as follows (in millions, except per share amounts and percentages):
Includes minimal net sales contribution from Sunosi in the U.S.
Excludes $6-$8 million of share-based compensation expense from estimated GAAP gross margin.
Excludes $82-$90 million of share-based compensation expense from estimated GAAP SG&A expenses.
Excludes $22-$27 million of share-based compensation expense from estimated GAAP R&D expenses.
Includes an income tax benefit of $112.3 million related to an intra-entity intellectual property asset transfer.
Excludes the income tax effect of adjustments between GAAP reported and non-GAAP adjusted net income and the income tax benefit related to an intra-entity intellectual property asset transfer.
Includes expected intangible asset amortization of $111 million in the fourth quarter of 2019 as a result of the Company’s notification to the FDA of its intention to redeem its priority review voucher for the planned NDA submission for JZP-258.
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 2019 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 third quarter results. 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 9398898.
A replay of the conference call will be available through November 12, 2019 by dialing +1 855 859 2056 in the U.S., or +1 404 537 3406 outside the U.S., and entering passcode 9398898. 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.