On August 6, 2019 Jazz Pharmaceuticals plc (Nasdaq: JAZZ) reported financial results for the second quarter of 2019 and updated 2019 financial guidance (Press release, Jazz Pharmaceuticals, AUG 6, 2019, View Source [SID1234538229]).
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"2019 has been notable for significant execution and accomplishments across all aspects of our business, including strong financial results, the U.S. launch of Sunosi and further expansion and diversification of our development pipeline through internal and acquired R&D programs," said Bruce Cozadd, chairman and chief executive officer of Jazz Pharmaceuticals. "In the second half of the year, we are focused on continuing to deliver innovative therapies to patients and value to shareholders by preparing to file an NDA for JZP-258, our novel oxybate product candidate, advancing our R&D programs and planning for the potential approval of solriamfetol in the EU."
"We look forward to initiating multiple Vyxeos studies and to working with the Children’s Oncology Group to initiate a pivotal Phase 2/3 study this year for JZP-458, our recombinant crisantaspase product candidate for the treatment of acute lymphoblastic leukemia," said Robert Iannone, M.D., M.S.C.E., executive vice president, research and development, of Jazz Pharmaceuticals. "With the addition of the pan-RAF inhibitor program and our exosome therapeutics collaboration, we continue to grow and diversify our R&D pipeline."
Financial Highlights
Three Months Ended
June 30,
Six Months Ended
June 30,
(In thousands, except per share amounts and percentages)
2019
2018
Change
2019
2018
Change
Total revenues
$
534,133
$
500,479
7%
$
1,042,319
$
945,092
10%
GAAP net income
$
261,898
$
92,321
184%
$
347,099
$
138,312
151%
Adjusted net income
$
232,537
$
214,636
8%
$
445,710
$
397,007
12%
GAAP EPS
$
4.56
$
1.50
204%
$
6.01
$
2.26
166%
Adjusted EPS
$
4.05
$
3.49
16%
$
7.72
$
6.48
19%
GAAP net income for the second quarter of 2019 was $261.9 million, or $4.56 per diluted share, compared to $92.3 million, or $1.50 per diluted share, for the second quarter of 2018.
Non-GAAP adjusted net income for the second quarter of 2019 was $232.5 million, or $4.05 per diluted share, compared to $214.6 million, or $3.49 per diluted share, for the second quarter of 2018. Reconciliations of applicable GAAP reported to non-GAAP adjusted information are included at the end of this press release.
In the second quarter of 2019, the company recorded a one-time tax benefit of $112.3 million, or $1.96 per diluted share, on a GAAP basis, resulting from an intra-entity intellectual property asset transfer. This tax benefit has been excluded from adjusted net income and the related per share measures for the three and six months ended June 30, 2019. In the second quarter of 2018, GAAP net income included an impairment charge of $42.9 million resulting from the company’s sale of its rights related to Prialt (ziconotide) intrathecal infusion.
Corporate Updates
In July 2019, the company launched Sunosi (solriamfetol) in the U.S. after receiving a schedule IV designation from the U.S. Drug Enforcement Agency (DEA). Sunosi is the first and only dual-acting dopamine and norepinephrine reuptake inhibitor approved to improve wakefulness in adult patients with excessive daytime sleepiness (EDS) associated with narcolepsy or obstructive sleep apnea (OSA).
The company reported the appointment of Neena M. Patil as General Counsel. Ms. Patil will oversee all legal matters for the company. Ms. Patil has been practicing law for nearly 20 years and was most recently Senior Vice President, General Counsel and Corporate Secretary for Abeona Therapeutics Inc. Prior to Abeona, Ms. Patil was Vice President for Legal Affairs, Associate General Counsel and Assistant Corporate Secretary at Novo Nordisk and held various positions at other global pharmaceutical companies. Ms. Patil received a JD from the University of Michigan Law School, a Masters in Health Services Administration from the University of Michigan School of Public Health and an undergraduate Bachelor of Arts degree from Georgetown University.
Key Regulatory/R&D Updates
In June 2019, the Children’s Oncology Group (COG) presented positive Phase 1/2 Vyxeos data at the American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) annual meeting in children and young adults with relapsed/refractory acute myeloid leukemia (AML). Overall response rate1 was 81.1%, with 70% of patients achieving best response after cycle 1 with Vyxeos and the percent of patients who achieved minimal residual disease (MRD) negative status was 75% post-cycle 1 and 84% overall. Given the robust overall response rate, the company intends to discuss the data and its plans for regulatory submissions with health authorities.
In June 2019, Nippon Shinyaku Co., Ltd. announced that Japan’s Ministry of Health, Labour and Welfare approved the marketing authorization of Defitelio injection 200mg (defibrotide sodium) for the treatment of sinusoidal obstruction syndrome/hepatic veno-occlusive disease.
In July 2019, the company acquired Redx Pharma plc’s (Redx) pan-RAF inhibitor program for the potential treatment of RAF and RAS mutant tumors. Under the terms of the agreement, the company made an upfront payment of $3.5 million. Redx is eligible to receive up to $203 million in development, regulatory and commercial milestone payments from the company, and incremental tiered mid-single digit royalties, based on any future net sales.
In August 2019, the company announced positive results of a Phase 1 study for JZP-458, its recombinant crisantaspase product candidate, and plans to initiate a single-arm, pivotal Phase 2/3 study. JZP-458 is being evaluated as a potential treatment option for patients with acute lymphoblastic leukemia (ALL)/lymphoblastic lymphoma (LBL) who have had hypersensitivity to E. coli- based asparaginase products.
1 Comprised of complete remission + complete remission with incomplete platelet recovery + complete remission with incomplete hematologic recovery (CR+CRp+CRi).
Select 2019 Milestones
Programs
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 the Phase 3 narcolepsy study in March
✔
Received Orphan Drug Designation from FDA for the idiopathic hypersomnia indication
•
Top-line results from the Phase 3 narcolepsy study to be presented at the World Sleep Congress meeting in September
•
NDA submission as early as year-end
Sunosi (solriamfetol)
✔
Received FDA approval for EDS in narcolepsy or OSA in March
✔
Received DEA 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
Vyxeos (daunorubicin and cytarabine) liposome for injection
✔
Positive data presented by COG in children and young adults with relapsed/refractory AML at 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
✔
Activated sites for Phase 1b study of low intensity therapy of Vyxeos in combination with venetoclax in first-line, unfit AML
✔
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
✔
Activated sites for Phase 2 study in patients with high-risk MDS through the European Myelodysplastic Syndromes Cooperative Group
•
Potential interim combination data results from studies conducted through MD Anderson collaboration
•
Activate sites for Phase 3 study in newly diagnosed pediatric patients with AML (COG)
•
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
•
Provide an update regarding the timing of the interim analysis in the prevention of hepatic veno-occlusive disease (VOD) study
•
Complete enrollment in prevention of acute graft-vs-host disease Phase 2 study
•
Activate sites for exploratory Phase 2 study in chimeric antigen receptor t-cell therapy associated neurotoxicity
•
Activate sites for Phase 2 study in transplant-associated thrombotic microangiopathy
JZP-458
•
Activate sites for single-arm, pivotal Phase 2/3 clinical study later this year in ALL/LBL
CombiPlex
•
Continue Investigational New Drug enabling activities for one solid tumor combination and progress exploratory activities for other hematology/oncology candidates
* Milestones denoted as ✔ have been completed; all other milestones are planned or expected in 2019 unless otherwise noted.
Total Revenues
Three Months Ended
June 30,
Six Months Ended
June 30,
(In thousands)
2019
2018
2019
2018
Xyrem (sodium oxybate) oral solution
$
413,212
$
356,008
$
781,529
$
672,785
Erwinaze / Erwinase (asparaginase Erwinia chrysanthemi)
27,622
58,713
88,521
109,340
Defitelio (defibrotide sodium) / defibrotide
46,055
40,498
87,555
75,559
Vyxeos (daunorubicin and cytarabine) liposome for injection
31,362
27,951
60,305
54,179
Other
5,172
12,925
8,844
25,079
Product sales, net
523,423
496,095
1,026,754
936,942
Royalties and contract revenues
10,710
4,384
15,565
8,150
Total revenues
$
534,133
$
500,479
$
1,042,319
$
945,092
Total revenues increased 7% in the second quarter of 2019 compared to the same period in 2018.
Xyrem net product sales increased 16% in the second quarter of 2019 compared to the same period in 2018.
Erwinaze/Erwinase net product sales decreased 53% in the second quarter of 2019 compared to the same period in 2018 due to ongoing quality and supply issues at the sole manufacturer resulting in minimal supply during the quarter. The company anticipates inter-quarter variability in Erwinaze net sales due to expected supply disruptions during the second half of 2019.
Defitelio/defibrotide net product sales increased 14% in the second quarter of 2019 compared to the same period in 2018 primarily due to an increase in volumes. The second quarter included a shipment to Nippon Shinyaku following the recent approval of Defitelio in Japan. The company continues to expect inter-quarter variability in Defitelio net sales.
Vyxeos net product sales increased 12% in the second quarter of 2019 compared to the same period in 2018 primarily due to the ongoing EU launch. The company continues to implement its intensive education and outreach initiatives while advancing a broad development program to support potential expanded uses of Vyxeos.
Operating Expenses
Three Months Ended
June 30,
Six Months Ended
June 30,
(In thousands, except percentages)
2019
2018
2019
2018
GAAP:
Cost of product sales
$
27,676
$
34,714
$
61,182
$
68,633
Gross margin
94.7%
93.0%
94.0%
92.7%
Selling, general and administrative
$
176,014
$
158,579
$
343,961
$
365,792
% of total revenues
33.0%
31.7%
33.0%
38.7%
Research and development
$
62,384
$
56,132
$
122,489
$
118,799
% of total revenues
11.7%
11.2%
11.8%
12.6%
Impairment charges
$
—
$
42,896
$
—
$
42,896
Acquired in-process research and development
$
2,200
$
—
$
58,200
$
—
Income tax provision (benefit)
$
(78,650)
$
36,524
$
(49,534)
$
55,670
Effective tax rate
(42.7)%
28.2%
(16.5)%
28.6%
Three Months Ended
June 30,
Six Months Ended
June 30,
(In thousands, except percentages)
2019
2018
2019
2018
Non-GAAP adjusted:
Cost of product sales
$
25,968
$
32,911
$
57,815
$
65,136
Gross margin
95.0%
93.4%
94.4%
93.0%
Selling, general and administrative
$
155,329
$
137,706
$
302,906
$
269,685
% of total revenues
29.1%
27.5%
29.1%
28.5%
Research and development
$
56,488
$
51,423
$
111,070
$
98,715
% of total revenues
10.6%
10.3%
10.7%
10.4%
Acquired in-process research and development
$
2,200
$
—
$
2,200
$
—
Income tax provision
$
52,027
$
50,336
$
104,741
$
89,029
Effective tax rate
18.2%
19.0%
19.0%
18.3%
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 2019 compared to the same period in 2018 on a GAAP and on a non-GAAP adjusted basis primarily due to higher expenses related to the U.S. launch of Sunosi and an increase in headcount and other expenses to support expansion of the business.
Research and development (R&D) expenses increased in the second quarter of 2019 on a GAAP and on a non-GAAP adjusted basis primarily due to expenses related to the company’s pre-clinical and clinical development programs and its partner programs.
Cash Flow and Balance Sheet
As of June 30, 2019, cash, cash equivalents and investments were $882.7 million and the outstanding principal balance of the company’s long-term debt was $1.8 billion. During the six months ended June 30, 2019, the company generated $351.1 million of cash from operations, used $171.1 million to repurchase shares, made an upfront payment of $56.0 million to Codiak BioSciences, Inc. under a collaboration agreement and made milestone payments totaling $25.5 million related to Sunosi.
In the six months ended June 30, 2019, the company repurchased approximately 1.3 million ordinary shares under the company’s share repurchase program at an average cost of $131.17 per ordinary share. As of June 30, 2019, the remaining amount authorized for share repurchases was $208.0 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 and $0-$11 million of milestone payments from estimated GAAP R&D expenses.
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.
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. EDT (9:30 p.m. IST) to provide a business and financial update and discuss its 2019 second 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 5590569.
A replay of the conference call will be available through August 13, 2019 by dialing +1 855 859 2056 in the U.S., or +1 404 537 3406 outside the U.S., and entering passcode 5590569. 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.