On November 9, 2021 Jazz Pharmaceuticals plc (Nasdaq: JAZZ) reported financial results for the third quarter of 2021 and updated financial guidance for 2021 (Press release, Jazz Pharmaceuticals, NOV 9, 2021, View Source [SID1234594912]).
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"Last year, we set the ambitious corporate objective of completing five key commercial launches through 2020 and 2021. With the launch of Xywav for idiopathic hypersomnia earlier this month, we have now accomplished this goal, demonstrating our significant execution capabilities and commitment to bring important new medicines forward for patients," said Bruce Cozadd, chairman and chief executive officer of Jazz Pharmaceuticals. "The successful integration of GW underscores our ability to deliver on transformative M&A to grow our business. While there’s more work to be done, I’m confident we have the right strategy, teams and capabilities in place to realize the blockbuster potential of Epidiolex and to discover, develop and launch additional novel, innovative medicines leveraging cannabinoid science. Our commercial execution, productive R&D engine and culture of commitment to patients and their families provide a strong foundation for significant and sustained growth."
Renée Galá, executive vice president and chief financial officer, added, "This is an exciting time of transformation for Jazz, underpinned by operational execution, financial discipline and strategic capital allocation across our business. We continue to deliver on our business and financial targets which has enabled us to rapidly reduce our net leverage ratio to 4.41 times in just five months following the close of the GW transaction. We have also delivered on revenue growth and diversification. Recently launched or acquired products now make up over 50% of net product sales, and we remain on track to meet our goal of at least 65% in 2022. In addition, our prior investments in corporate development are translating into near-term catalysts as we advance JZP385, JZP150 and Zepzelca into important new clinical trials. We will continue to prioritize disciplined capital allocation to assets and activities that drive growth and value, while remaining focused on achieving our net leverage ratio target of less than 3.51 times by the end of next year."
Key Highlights
Total revenues increased 39% to $838.1 million compared to 3Q20
52% of net product sales from recently launched or acquired products
Exceptional Xywav adoption in narcolepsy with approximately 6,000 active patients exiting 3Q21
Xywav for idiopathic hypersomnia (IH) launched November 1, 2021
Continued Epidiolex revenue growth of 21% compared to 3Q20 despite COVID-19 pressure
Top-tier launch has established Zepzelca as second-line SCLC treatment of choice
Rylaze launch progressing well; positive feedback from key stakeholders
Pipeline advancing with key trial initiations underway for JZP385, JZP150 and Zepzelca
Raising full year 2021 earnings guidance
Net leverage ratio reduced by 0.5x to 4.4×1 in the five months following GW transaction close
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1.
On a pro forma, non-GAAP adjusted basis
Business Updates
Neuroscience
Oxybate (Xyrem and Xywav):
Net product sales for the combined oxybate business increased 3% to $460.4 million in 3Q21 compared to the same period in 2020.
Average active oxybate patients on therapy was approximately 16,000 in 3Q21, an increase of approximately 6% compared to the same period in 2020.
Xywav for Narcolepsy (calcium, magnesium, potassium, and sodium oxybates) oral solution:
The Company continues to drive market-leading adoption of Xywav in narcolepsy.
Xywav net product sales were $153.1 million in 3Q21.
There were approximately 6,000 active patients on Xywav exiting 3Q21.
In June 2021, FDA recognized seven years of Orphan Drug Exclusivity, through July 2027, for Xywav and published its summary of clinical superiority findings stating that "Xywav is clinically superior to Xyrem by means of greater safety because Xywav provides a greatly reduced chronic sodium burden compared to Xyrem." Further, FDA stated that "the differences in the sodium content of the two products at the recommended doses will be clinically meaningful in reducing cardiovascular morbidity in a substantial proportion of patients for whom the drug is indicated."
Xywav for Idiopathic Hypersomnia
On August 12, 2021, FDA approved Xywav for the treatment of IH in adults.
The Company launched Xywav for IH on November 1, 2021.
Xywav is the first-and-only medicine approved by FDA for the treatment of IH in adults, underscoring the Company’s patient-focused R&D strategy and concept-to-commercial capabilities.
Xywav for IH is a significant value driver, with initial launch efforts focused on the approximately 37,000 currently diagnosed patients in the U.S. who are actively seeking healthcare.
Xywav demonstrated robust clinical data with statistically significant improvements across all primary and secondary endpoints in the Phase 3 clinical trial.
Xywav has broad patent protection to 2033 and is eligible for Orphan Drug Exclusivity for IH.
Xyrem (sodium oxybate) oral solution:
Xyrem net product sales decreased 31% to $307.3 million in 3Q21 compared to the same period in 2020, reflecting the continued strong adoption of Xywav.
Epidiolex/Epidyolex (cannabidiol):
Epidiolex/Epidyolex net product sales were $160.4 million in 3Q21, an increase of 21% compared to the same period of 2020 on a pro-forma basis, despite short-term COVID-19 pressure.
Recent market research indicates approximately 40% of prescribers are moving Epidiolex up in their treatment algorithm.
The Company has made significant progress on its European rollout with launches in Spain, Italy and Switzerland in 3Q21. Epidyolex is now commercially available and fully reimbursed in four of the five key European markets: United Kingdom, Germany, Italy and Spain, with an anticipated launch in France in 2022.
The Company expects to initiate a Phase 3 pivotal trial of Epidiolex for Epilepsy with Myoclonic-Atonic Seizures (EMAS), the fourth target indication for Epidiolex, in 1H22.
The Company continues to strengthen the durability of Epidiolex, and expects a composition of matter-like patent, extending through 2039, to be issued later this year.
Sunosi (solriamfetol):
Sunosi net product sales increased by 111% to $19.3 million in 3Q21 compared to the same period of 2020.
In 3Q21, U.S. prescriptions increased by 8% compared to 2Q21.
Nabiximols:
The Company has initiated the third Phase 3 nabiximols clinical trial in multiple sclerosis (MS)-related spasticity. This is a randomized, double-blind, placebo-controlled trial with a primary endpoint of muscle tone, expected to enroll approximately 190 patients.
The Company expects data from its first Phase 3 trial in 1H22, followed by data from the two additional Phase 3 trials in late 2022 and early 2023.
The Company anticipates that if the results of the first trial are positive, there is potential for regulatory submission to FDA in the next 18-24 months.
JZP385:
The Company has initiated a Phase 2b trial and expects top-line data to read out in 1H24.
JZP385, a highly selective modulator of T-type calcium channels, is in clinical development for the potential treatment of essential tremor.
JZP150:
The Company is on track to initiate a Phase 2 trial this year.
JZP150, a fatty acid amide hydrolase (FAAH) inhibitor, is in clinical development for the potential treatment of post-traumatic stress disorder.
Oncology
Zepzelca (lurbinectedin):
Zepzelca net product sales increased 94% to $71.7 million in 3Q21 compared to the same period in 2020.
Zepzelca net product sales in 3Q21 were favorably impacted by approximately $10 million, relating to a reduction in the returns accrual rate, due to lower than estimated actual returns. Excluding this impact, net product sales in 3Q21 increased by 10% compared to 2Q21.
The Company has established Zepzelca as the treatment of choice in the second-line small cell lung cancer (SCLC) setting. Zepzelca has near-term growth opportunities, as the Company expects that it will continue to gain share among patients being re-challenged with platinum-based chemotherapies or receiving other chemotherapy regimens.
Zepzelca development program updates:
Jazz and collaborator F. Hoffmann-La Roche Ltd (Roche) have initiated a Phase 3 trial to evaluate first-line use of Zepzelca in combination with Tecentriq (atezolizumab), compared to Tecentriq alone, as maintenance therapy, in patients with extensive stage SCLC after induction chemotherapy. The trial is now listed on clinicaltrials.gov (NCT05091567); enrollment of the first patient is anticipated later this year.
The Company’s partner, PharmaMar, plans to initiate a confirmatory trial in second-line SCLC later this year. If positive, this trial would confirm the benefit of Zepzelca in the treatment of SCLC when patients progress following first-line treatment with a platinum-based regimen.
Rylaze (asparaginase erwinia chrysanthemi (recombinant)-rywn):
Rylaze net product sales were $20.7 million in 3Q21, following commercial launch on July 15, 2021.
The Company has been granted Real-Time Oncology Review by FDA and plans to submit a supplemental Biologics License Application (sBLA) with additional data in support of a Monday/Wednesday/Friday (M/W/F) intramuscular dosing schedule in early 2022.
The Company is presenting data, for the first time, from the Phase 2/3 study of Rylaze in patients with ALL/LBL who developed hypersensitivity or silent inactivation to a long-acting E. coli–derived asparaginase, at the 63rd American Society of Hematology (ASH) (Free ASH Whitepaper) Annual Meeting, which will be held December 11-14, 2021.
The Company anticipates that data from the current development program will support regulatory filings in Europe in mid-2022, with potential for approval in 2023. The Company is also working with a partner to advance the program for potential filing, approval and launch in Japan.
Rylaze is the only recombinant Erwinia asparaginase manufactured product that maintains a clinically meaningful level of asparaginase activity throughout the entire duration of treatment. It was developed by the Company to address the needs of patients and healthcare providers for an innovative, high-quality Erwinia asparaginase with reliable supply.
Vyxeos (daunorubicin and cytarabine) liposome for injection:
Vyxeos net product sales increased 13% to $34.7 million in 3Q21 compared to the same period in 2020.
Defitelio (defibrotide sodium) / defibrotide:
Defitelio/defibrotide net product sales increased 15% to $57.7 million in 3Q21 compared to the same period in 2020.
GAAP net income (loss) for 3Q21 was ($52.8 million), or ($0.86) per diluted share, compared to $148.2 million, or $2.64 per diluted share, for 3Q20.
Non-GAAP adjusted net income for 3Q21 was $261.4 million, or $4.20 per diluted share, compared to $242.1 million, or $4.31 per diluted share, for 3Q20.
Reconciliations of applicable GAAP reported to non-GAAP adjusted information are included at the end of this press release.
Total revenues increased 39% in 3Q21 compared to the same period in 2020.
Products launched or acquired since 2019 comprised 52% of total net product sales in 3Q21.
Neuroscience net product sales in 3Q21 increased 41% to $646.1 million compared to the same period in 2020. In 3Q21, oxybate net product sales increased to $460.4 million led by strong Xywav net product sales of $153.1 million partially offset by a decrease in Xyrem net product sales as a result of the strong adoption of Xywav by existing Xyrem patients. Epidiolex/Epidyolex net product sales in 3Q21 were $160.4 million, following the GW Acquisition in 2Q21.
Oncology net product sales in 3Q21 increased 34% to $184.8 million compared to the same period in 2020 primarily driven by an increase in Zepzelca net product sales of $34.8 million. Zepzelca launched in the U.S. in July 2020.
Operating expenses changed over the prior year period primarily due to the following:
Cost of product sales increased in 3Q21 compared to the same period in 2020, on a GAAP and on a non-GAAP adjusted basis, due to increased net product sales as a result of the GW Acquisition. In addition, an acquisition accounting inventory fair value step-up expense of $82.6 million impacted GAAP cost of product sales.
Selling, general and administrative (SG&A) expenses increased in 3Q21 compared to the same period in 2020, on a GAAP and on a non-GAAP adjusted basis, primarily due to an increase in compensation-related expenses driven by higher headcount as a result of the GW Acquisition and the addition of costs related to Epidiolex, as well as an increase in other expenses related to the expansion of our business including investments to support the Company’s recent product launches. SG&A expenses in 3Q21 on a GAAP basis also included transaction and integration related expenses of $53.4 million related to the GW Acquisition.
Research and development expenses increased in 3Q21 compared to the same period in 2020, on a GAAP and on a non-GAAP adjusted basis, primarily due to the addition of costs related to clinical programs for Epidiolex, nabiximols and cannabinoids and an increase in compensation-related expenses due to higher headcount primarily driven by the GW Acquisition.
Cash Flow and Balance Sheet
As of September 30, 2021, cash and cash equivalents were $671.8 million, and the outstanding principal balance of the Company’s long-term debt was $6.6 billion compared to $7.1 billion as of June 30, 2021. In addition, the Company had undrawn borrowing capacity under a revolving credit facility of $500.0 million.
For the nine months ended September 30, 2021, the Company generated $600.8 million of cash from operations.
During the third quarter, and aligned to its stated deleveraging target, the Company made significant debt repayments of $477.6 million which included the repayment on maturity of the remaining balance on its 1.875% exchangeable senior notes due 2021 and a voluntary payment on its term loan B.
2021 Financial Guidance1
Jazz Pharmaceuticals is updating its full year 2021 financial guidance. This guidance reflects the Company’s current and future expected operational performance, including COVID-19 related impacts, the strength of its underlying operations and the prioritization of new and ongoing value creating development projects.
The Company is raising its full-year earnings guidance, resulting in a reduced GAAP net loss and increased non-GAAP adjusted net income (ANI) on an absolute and per share basis. The updated non-GAAP ANI range exceeds the upper end of the prior range. The Company is reducing both SG&A and R&D expense guidance on a GAAP and non-GAAP adjusted basis, reflecting progress within its transformation initiatives, improved financial discipline and strategic capital allocation. The Company is narrowing its net sales guidance range for neuroscience and oncology, with a reduced mid-point for oncology net sales guidance which reflects the ongoing impacts of COVID-19 on our legacy products and the Rylaze competitive landscape at launch in 3Q21, resulting in a reduced mid-point for total revenues guidance.
Conference Call Details
Jazz Pharmaceuticals will host an investor conference call and live audio webcast today at 4:30 p.m. ET (9:30 p.m. GMT) to provide a business and financial update and discuss its 3Q21 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 5888822.
A replay of the conference call will be available through November 16, 2021 by dialing +1 855 859 2056 in the U.S., or +1 404 537 3406 outside the U.S., and entering passcode 5888822. 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.