On February 23, 2021 Leidos Holdings, Inc. (NYSE: LDOS), a FORTUNE 500 science and technology leader, reported financial results for the fourth quarter and fiscal year 2020 (Press release, Leidos, FEB 23, 2021, View Source [SID1234575470]).

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Roger Krone, Leidos Chairman and Chief Executive Officer, commented: "Fourth quarter results reflect the resilience of our growing portfolio with new record levels of revenue and backlog, coupled with margin expansion and further balance sheet optimization. This performance positions us for above-market growth in 2021, fueled by our talented diverse workforce who continue to engineer and deliver technologically innovative and secure solutions for our customers’ evolving needs."

Fourth Quarter Summary Results

Revenues for the quarter were $3.25 billion, compared to $2.95 billion in the prior year quarter, reflecting a 10.1% increase. Revenues for the quarter included $300 million and $89 million related to the acquisitions of Dynetics, Inc. ("Dynetics") and L3Harris Technologies’ security detection and automation businesses (the "SD&A Businesses"), respectively.

Operating income for the quarter was $299 million, compared to $261 million in the prior year quarter. Operating income margin increased to 9.2% from 8.8% in the prior year quarter. Non-GAAP operating margin for the quarter was 10.7%, compared to 10.5% in the prior year quarter, primarily due to favorable margin performance on certain contracts and higher margins on certain program wins.

Diluted earnings per share ("EPS") attributable to Leidos common stockholders for the quarter was $1.37, compared to $1.26 in the prior year quarter. Non-GAAP diluted EPS for the fourth quarter was $1.63 compared to $1.51 in the prior year quarter. The weighted average diluted share count for the quarter was 144 million, consistent with the prior year quarter.

Defense Solutions

Defense Solutions revenues for the quarter of $1.93 billion increased $273 million, or 16.5%, compared to the prior year quarter. The revenue growth was primarily attributable to $300 million of revenues related to the acquisition of Dynetics and program wins, partially offset by a net decrease in volumes on certain programs and the completion of certain contracts.

Defense Solutions operating income margin for the quarter was 7.6%, compared to 8.9% in the prior year quarter. On a non-GAAP basis, operating margin for the quarter was 8.9%, compared to 9.8% in the prior year quarter, primarily attributable to the release of a contract reserve in the prior year quarter, a net decrease in volumes on certain programs and the completion of certain contracts, partially offset by higher margins on certain program wins.

Civil

Civil revenues for the quarter of $811 million increased $38 million, or 4.9%, compared to the prior year quarter. The revenue growth was primarily attributable to $89 million of revenues related to the acquisition of the SD&A Businesses and program wins, partially offset by a net decrease in volumes on certain programs, including negative impacts on certain contracts due to the coronavirus pandemic ("COVID-19"), and the completion of certain contracts.

Civil operating income margin for the quarter was 11.0%, compared to 9.6% in the prior year quarter. On a non-GAAP basis, operating margin for the quarter was 12.3%, compared to 12.0% in the prior year quarter, primarily attributable to favorable product mix and higher margins on certain program wins.

Health

Health revenues for the quarter of $513 million decreased $13 million, or 2.5%, as compared to the prior year quarter. The revenue decline was primarily attributable to a net decrease in volumes on certain programs and the completion of certain contracts, partially offset by recoveries on certain programs previously delayed due to COVID-19.

Health operating income margin for the quarter was 16.8%, compared to 13.9% in the prior year quarter. On a non-GAAP basis, operating margin for the quarter was 18.5%, compared to 16.0% in the prior year quarter, primarily attributable to favorable volume and margin performance on certain contracts.

Fiscal Year 2020 Summary Results

Revenues for fiscal year 2020 were $12.30 billion, compared to $11.09 billion in the prior year, reflecting a 10.8% increase. Revenues for the fiscal year included $937 million and $243 million related to the acquisitions of Dynetics and the SD&A Businesses, respectively.

Operating income for fiscal year 2020 was $998 million, compared to $912 million in the prior year. Operating income margin for fiscal year 2020 was 8.1%, compared to 8.2% in the prior year. Non-GAAP operating margin was 10.1%, compared to 9.9% in the prior year, primarily due to a net gain recognized upon the receipt of proceeds related to the VirnetX, Inc. ("VirnetX") legal matter, higher margins on certain program wins and lower indirect expenditures due to cost reduction efforts in response to COVID-19. This was partially offset by negative impacts from reduced volume on certain contracts due to COVID-19 and a net gain recognized upon the receipt of the Greek arbitration award in the prior year.

Diluted EPS attributable to Leidos common stockholders for fiscal year 2020 was $4.36, compared to $4.60 for the prior year. Non-GAAP diluted EPS for fiscal year 2020 was $5.83, compared to $5.17 in the prior year. The diluted share count was 144 million compared to 145 million in the prior year.

Defense Solutions

Defense Solutions revenues of $7.34 billion for fiscal year 2020 increased $1.04 billion, or 16.5%, compared to the prior year. The revenue growth was primarily attributable to $937 million of revenues related to the acquisition of Dynetics, program wins and a net increase in materials volume on certain programs. This was partially offset by the completion of certain contracts and negative impacts from reduced volume on certain contracts due to COVID-19.

Defense Solutions operating income margin for fiscal year 2020 was 6.9%, compared to 7.5% in the prior year. On a non-GAAP basis, operating margin for the year was 8.2% compared to 8.5% in the prior year, primarily attributable to negative impacts from reduced volume on certain contracts due to COVID-19, partially offset by higher margins on certain program wins and lower indirect expenditures.

Civil

Civil revenues of $2.99 billion for fiscal year 2020 increased $198 million, or 7.1%, compared to the prior year. The revenue growth was primarily attributable to $243 million of revenues related to the acquisition of the SD&A Businesses and program wins. This was partially offset by the completion of certain contracts and negative impacts from reduced volume on certain contracts due to COVID-19.

Civil operating income margin for fiscal year 2020 was 9.4%, compared to 8.3% in the prior year. On a non-GAAP basis, operating margin for the year was 11.7%, compared to 10.9% in the prior year, primarily attributable to a decrease in bad debt expense and higher margins on certain program wins, partially offset by the completion of certain contracts.

Health

Health revenues of $1.96 billion for fiscal year 2020 decreased $36 million, or 1.8%, compared to the prior year. The revenue decline was primarily attributable to the timing of program execution due to COVID-19, the impact from the sale of our health staff augmentation business in the prior year and the completion of certain contracts. This was partially offset by a net increase in volumes on certain programs, program wins and the impact from our acquisition of IMX Medical Management Services, Inc. ("IMX") in the prior year.

Health operating income margin for fiscal year 2020 was 12.0%, compared to 12.1% in the prior year. On a non-GAAP basis, operating margin for the year was 14.4%, compared to 14.3% in the prior year, primarily attributable to increased volume on certain higher margin contracts, partially offset by reduced volume on certain managed service contracts with fixed cost infrastructures that were impacted by COVID-19.

Cash Flow Summary

Net cash used in operating activities for the quarter were $52 million compared to $169 million net cash provided by operating activities in the prior year quarter. The higher operating cash outflows were primarily due to the sale of accounts receivable in the prior quarter that did not recur in the current quarter and the timing of payroll payments.

Net cash used in investing activities for the quarter were $101 million compared to $54 million in the prior year quarter. The higher cash outflows were primarily due to cash paid related to the acquisition of the SD&A Businesses.

Net cash provided by financing activities for the quarter were $98 million compared to $144 million net cash used in financing activities in the prior year quarter. The higher cash inflows were primarily due to proceeds received related to the issuance of our $1.0 billion senior notes and the timing of dividend payments, partially offset by principal payments related to refinancing of outstanding debt and higher stock repurchases in the current year quarter.

Net cash provided by operating activities for the fiscal year were $1,334 million compared to $992 million in the prior year. The higher operating cash inflows were primarily due to the timing of payroll payments, including the deferral of tax payments under the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"), and the receipt of proceeds related to the VirnetX legal matter.

Net cash used in investing activities for the fiscal year were $2,815 million compared to $65 million net cash provided by investing activities in the prior year. The higher cash outflows were primarily due to net cash paid related to the acquisitions of Dynetics and the SD&A Businesses, net proceeds received in the prior year for the disposition of our commercial cybersecurity and health staff augmentation businesses and the sale of real estate properties and higher purchases of equipment and leasehold improvements associated with our new global headquarters. This was partially offset by cash paid related to the acquisition of IMX in the prior year.

Net cash provided by financing activities for the fiscal year were $1,451 million compared to $709 million net cash used in financing activities in the prior year. The increase in financing cash inflows were primarily due to proceeds received related to the refinancing and issuance of new debt and higher stock repurchases in the prior year. This was partially offset by principal repayments of outstanding debt and the retirement of the $450 million senior notes in the current year.

As of January 1, 2021, the Company had $524 million in cash and cash equivalents and $4.7 billion in debt.

New Business Awards

Net bookings totaled $3.3 billion in the fourth quarter of fiscal year 2020 and $17.8 billion for fiscal year 2020, representing a book-to-bill ratio of 1.0 and 1.4 for the fourth quarter and fiscal year 2020, respectively.

Notable recent awards received include:

Next Generation Enterprise Network Service Management : The Company was awarded a prime contract by the Naval Information Warfare Systems Command, formerly known as the Space and Naval Warfare Systems Command, to provide global network services under the Next Generation Enterprise Network Re-compete Service Management, Integration & Transport contract. Under the contract, Leidos will unify, operate and maintain the shore-based networks and data management for the Department of the Navy’s Program Executive Office Digital to improve capability and service under one enterprise network construct. The single award, indefinite delivery/indefinite quantity, firm-fixed-price and cost-plus contract has a five-year base period of performance followed by three one-year option periods, and an approximate value of $7.7 billion, if all options are exercised.
Special Operations Command Tactical Airborne Multi-Sensor Platforms Support : The Company was awarded a task order by Army Contracting Command – Aberdeen Proving Ground under the Responsive Strategic Sourcing for Services indefinite delivery/indefinite quantity contract. Under the contract, Leidos will provide pilot services, airborne sensor operators, hub and spoke operations/excursion support, staffing for the Intelligence Coordination Center, system training, logistics, aircraft and primary mission equipment maintenance and integration, configuration management and engineering support services in support of the program’s DHC- 8 and King Air 300 aircraft. The award has a total value of $649 million and includes a one-year base period of performance followed by four one-year option periods.
U.S. Intelligence Community : The Company was awarded contracts valued at $304 million, if all options are exercised, by U.S. national security and intelligence clients. Though the specific nature of these contracts is classified, they all encompass mission-critical services that help to counter global threats and strengthen national security.
The Company’s backlog at the end of fiscal year 2020 was $31.9 billion, of which $6.6 billion was funded.

Intent to Acquire Gibbs & Cox, Inc.

Consistent with Leidos strategy to add capabilities and deepen customer relationships, the Company has entered into a definitive agreement to acquire Gibbs & Cox, Inc. ("Gibbs & Cox"), the largest, full-service independent engineering and design firm specializing in naval architecture and marine engineering, for $380 million in cash. Headquartered in Arlington, Virginia, Gibbs & Cox has 525 employees. Over its 90 plus year history, Gibbs & Cox has remained a leader in maritime innovation and is on the frontlines of providing maritime solutions. The deal extends Leidos into an attractive maritime market where Leidos is under-penetrated today, and adds valuable engineering talent (naval architects and digital engineers) to the team. It further positions Leidos for long-term growth in the maritime unmanned market – a market requiring tight integration of ship design and autonomy systems. The transaction is expected to close in the second quarter of fiscal year 2021, subject to satisfaction of customary closing conditions.

Forward Guidance

The Company’s outlook for fiscal year 2021, which excludes the announced acquisition of Gibbs & Cox, is as follows:

Revenues of $13.7 billion to $14.1 billion;
Adjusted EBITDA margins of 10.3% to 10.5%;
Non-GAAP diluted EPS of $6.15 to $6.45; and
Cash flows provided by operating activities at or above $850 million.
Non-GAAP diluted EPS excludes amortization of acquired intangible assets, asset impairment charges, acquisition, integration and restructuring costs, amortization of equity method investment, gain on sale of business, acquisition related financing costs, loss on debt modification and other tax adjustments. For additional information regarding non-GAAP diluted EPS and Leidos’ other non-GAAP financial measures, see the related explanations and reconciliations to GAAP measures included elsewhere in this release.

The Company does not provide a reconciliation of forward-looking adjusted EBITDA margins (non-GAAP) or non-GAAP diluted EPS to GAAP net income, due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation. Because certain deductions for non-GAAP exclusions used to calculate projected net income may vary significantly based on actual events, the Company is not able to forecast on a GAAP basis with reasonable certainty all deductions needed in order to provide a GAAP calculation of projected net income at this time. The amounts of these deductions may be material and, therefore, could result in projected GAAP net income and diluted EPS being materially less than projected adjusted EBITDA margins (non-GAAP) and non-GAAP diluted EPS.

COVID-19

The COVID-19 pandemic is affecting major economic and financial markets, and effectively all industries and governments are facing challenges, which has resulted in a period of business disruption, the length and severity of which cannot be predicted. The pandemic has resulted in significant travel restrictions, government orders to "shelter-in-place", quarantine restrictions and significant disruption of the financial markets. We have acted to protect the health and safety of our employees, comply with workplace health and safety regulations and work with our customers to minimize disruptions. The pandemic has impacted each of our groups, primarily in access to customer sites, travel restrictions, limitations of remote work and COVID-19 related costs.

Consistent with federal, state and local guidance, we perform work that is essential to support the critical infrastructure of the United States, the Defense Industrial Base and healthcare sector, and we continue to operate in support of our customers. We have taken steps to support increased teleworking and safe workplace environments. We have some minor business operations that are not designated as critical infrastructure and therefore have been required to operate in minimal conditions.

For the quarter and fiscal year 2020, COVID-19 adversely impacted revenues by approximately $12 million and $198 million, respectively, and impacted operating income by approximately $8 million and $96 million, respectively, as compared to prior year results. Within our Health segment we saw recoveries in the fourth quarter of fiscal year 2020 and continue to expect to see further recoveries in fiscal year 2021. Our Defense Solutions segment experienced less of a negative impact in the fourth quarter of fiscal year 2020 than in previous quarters. We also experienced lower indirect expenditures for fiscal year 2020 as a result of COVID-19 which partially offset the operating income impact on our programs. The full extent of the impact of the COVID-19 pandemic on our operational and financial performance, including our ability to execute on programs in the expected timeframe, will depend on future developments, including the duration and spread of the pandemic and the distribution and efficacy of vaccines, all of which are uncertain and cannot be predicted.

The CARES Act, which is effective until March 31, 2021, enabled us to defer payment of the employer portion of social security taxes. As of January 1, 2021, we deferred $123 million of employer social security tax payments and received $12 million from the Employee Retention Credit.

We have taken measures to protect the health and well-being of our workforce and are working with our customers to minimize the delay and disruption of the award and performance on our contracts. Many of our employees continue to work remotely while our offices remain open with limited capacity.

Conference Call Information

Leidos management will discuss operations and financial results in an earnings conference call beginning at 8 A.M. eastern on February 23, 2021. Analysts and institutional investors may participate by dialing +1 (877) 869-3847 (U.S. dial-in) or +1 (201) 689-8261 (international dial-in).

A live audio broadcast of the conference call along with a supplemental presentation will be available to the public through links on the Leidos Investor Relations website (View Source).

On February 23, 2021 Cleveland BioLabs, Inc. (NASDAQ:CBLI), reported that it has entered into definitive agreements with certain healthcare-focused and institutional investors for the issuance and sale of 2,000,000 shares of its common stock at a purchase price of $7.00 per share in a registered direct offering (Press release, Cleveland BioLabs, FEB 23, 2021, View Source [SID1234575469]). The closing of the offering is expected to occur on or about February 23, 2021, subject to the satisfaction of customary closing conditions.

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H.C. Wainwright & Co. is acting as the exclusive placement agent for the offering.

The gross proceeds to the Company from the offering are expected to be approximately $14 million. The Company currently intends to use the net proceeds from the offering for general corporate purposes.

The shares described above are being offered and sold by the Company in a registered direct offering pursuant to a "shelf" registration statement on Form S-3 (Registration No. 333-238578), including an accompanying prospectus previously filed with, and declared effective by the Securities and Exchange Commission (the "SEC") on May 29, 2020. The offering will be made only by means of a prospectus supplement that forms a part of the registration statement. A final prospectus supplement and accompanying prospectus relating to the offering will be filed with the SEC and will be available on the SEC’s website located at View Source Electronic copies of the prospectus supplement and the accompanying prospectus may also be obtained by contacting H.C. Wainwright & Co., LLC at 430 Park Avenue, 3rd Floor, New York, NY 10022, by phone at 646-975-6996 or e-mail at [email protected].

This press release does not constitute an offer to sell or the solicitation of an offer to buy any of the securities described herein, nor shall there be any sale of these securities in any state or other jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or other jurisdiction.

On February 23, 2021 GlycoMimetics, Inc. (Nasdaq: GLYC), reported that it will host a conference call and webcast to report fourth quarter and year-end 2020 financial results on Tuesday, March 2, 2021, at 8:30 a.m. ET (Press release, GlycoMimetics, FEB 23, 2021, View Source [SID1234575468]).

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The dial-in number for the conference call is (844) 413-7154 for domestic participants or (216) 562-0466 for international participants, with participant code 1034166. Participants are encouraged to connect 15 minutes in advance of the call to ensure that all callers are able to connect.

A webcast replay will be available via the "Investors" tab on the GlycoMimetics website for 30 days following the call. A dial-in phone replay will be available for 24 hours after the close of the call by dialing (855) 859-2056 for domestic participants and (404) 537-3406 for international participants, participant code 1034166.

On February 23, 2021 Halozyme Therapeutics, Inc. (NASDAQ: HALO) ("Halozyme" or the "Company"), a leader in converting IV biologics to subcutaneous delivery, reported that it intends to offer, subject to market conditions and other factors, $500 million aggregate principal amount of convertible senior notes due 2027 (the "Convertible Notes") (Press release, Halozyme, FEB 23, 2021, View Source [SID1234575467]). The Convertible Notes are to be offered and sold to "qualified institutional buyers" pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"). The Company also expects to grant a 30-day option to the initial purchasers to purchase up to an additional $75 million aggregate principal amount of Convertible Notes.

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The Convertible Notes will be senior, unsecured obligations of the Company and will accrue interest payable semiannually in arrears. The Convertible Notes will mature on March 1, 2027, unless earlier redeemed, repurchased or converted in accordance with their terms. Prior to September 1, 2026, the Convertible Notes will be convertible only upon the satisfaction of certain conditions and during certain periods, and on and after September 1, 2026, at any time prior to the close of business on the scheduled trading day immediately preceding the maturity date, the Convertible Notes will be convertible regardless of these conditions. The Company will settle conversions in cash and, if applicable, shares of the Company’s common stock. The initial conversion rate, interest rate and other terms of the Convertible Notes will be determined at the time of pricing in negotiations with the initial purchasers of the Convertible Notes.

The Company expects to use a portion of the net proceeds of the offering to enter into privately negotiated agreements with certain holders of its outstanding 1.25% convertible senior notes due 2024 (the "Existing Convertible Notes") to exchange their Existing Convertible Notes for a combination of cash and shares of its common stock through privately negotiated transactions entered into concurrently with or shortly after the pricing of the proposed offering (the "Note Repurchases"). In addition, the Company plans to use up to $75 million of the net proceeds of the offering to repurchase shares of its common stock under the existing stock repurchase program described below (the "Share Repurchases"), concurrently with, or shortly after, the pricing of the offering in privately negotiated transactions or otherwise, which may be effected through one or more of the initial purchasers or any affiliate thereof.

These Note Repurchases and Share Repurchases could increase (or reduce the size of any decrease in) the market price of Halozyme common stock or the Convertible Notes. We also expect that some existing noteholders may purchase or sell shares of the Company’s common stock in the market to hedge their exposure in connection with these transactions. The Note Repurchases, Share Repurchases and any associated hedging by holders could affect the market price of the Company’s common stock prior to, concurrently with or shortly after the pricing of the Convertible Notes and could also result in a higher effective conversion price for the Convertible Notes.

The Company intends to use the remainder of the net proceeds from the offering for general corporate purposes, including other repurchases of the Company’s common stock from time to time under the existing stock repurchase program described below, working capital, capital expenditures, potential acquisitions and strategic transactions. If the initial purchasers exercise their option to purchase additional notes, the Company intends to use net proceeds from the sale of additional notes for general corporate purposes.

This press release is neither an offer to sell nor a solicitation of an offer to buy the Convertible Notes or the shares of the Company’s common stock issuable upon conversion of the Convertible Notes, if any, nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state or jurisdiction. Any offer of these securities will be made only by means of a private offering memorandum.

The offer and sale of the Convertible Notes and the shares of the Company’s common stock issuable upon conversion of the Convertible Notes, if any, have not been registered under the Securities Act, or the securities laws of any other jurisdiction, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

Existing Stock Repurchase Program

In November 2019, the Board of Directors of the Company authorized a capital return program to repurchase up to $550.0 million of outstanding common stock over a three-year period. As of December 31, 2020, $200 million of Halozyme’s common stock remained available for repurchase under this program.

On February 23, 2021 Jazz Pharmaceuticals plc (Nasdaq: JAZZ) reported financial results for the full year and fourth quarter of 2020 and provided financial guidance for 2021 (Press release, Jazz Pharmaceuticals, FEB 23, 2021, View Source [SID1234575466]).

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"In 2020, we made meaningful progress toward our goal to significantly grow and diversify 2022 revenues from products launched since 2019, highlighted by the strong execution of our U.S. launches of both Zepzelca and Xywav. Despite the pandemic, we delivered important new treatment options for patients, ensured the well-being of employees and generated significant value for shareholders. We meaningfully increased revenues, executed three product launches, advanced early- and late-stage clinical trials and added multiple new novel product candidates to our expanding pipeline, all of which exemplifies our highly effective operational execution throughout 2020, while continuing our transformation as an innovative global biopharmaceutical company," said Bruce Cozadd, chairman and chief executive officer of Jazz Pharmaceuticals.

Bruce Cozadd continued, "We expect 2021 to be another catalyst-rich year as we focus on our ambitious set of objectives, including continued growth of our marketed products, especially our recent launches of Xywav and Zepzelca, the next phase of Sunosi growth, two U.S. planned product launches, and the close of the GW Pharmaceuticals (GW) acquisition. We are excited about this transformative opportunity, which will bring together two innovative biopharmaceutical companies, to create a global neuroscience leader. We have long admired what the GW team has done to revolutionize cannabinoid-based medicine and look forward to combining our highly complementary neuroscience expertise across sleep medicine, epilepsies, movement disorders and psychiatry. We expect the GW transaction to provide accelerated, double-digit revenue growth through the addition of a near-term potential blockbuster product, provide a robust pipeline of complementary programs, and deliver substantial value to both shareholders and patients."

Robert Iannone, M.D., M.S.C.E., executive vice president, research and development, added, "2020 was a year of significant advancements as we initiated FDA submissions for JZP-458 in acute lymphoblastic leukemia (ALL) and lymphoblastic lymphoma (LBL) under Real-Time Oncology Review (RTOR) and JZP-258 in idiopathic hypersomnia. We also continued to expand our innovative oncology and neuroscience pipelines through both internal and external collaborations, with a focus on building a highly differentiated portfolio of products to drive long-term sustainable growth. We look forward to an exciting 2021, with the opportunity for additional regulatory approvals, initiation of mid- and late-stage clinical development studies across the neuroscience and oncology therapeutic areas and the addition of a new and innovative neuroscience pipeline with the anticipated closing of the GW acquisition."

The company successfully executed on its prioritized objectives across its business during 2020. Achievements include:

Launched Xywav in the U.S. in November 2020 for the treatment of cataplexy or excessive daytime sleepiness (EDS) in narcolepsy;
Launched Zepzelca in the U.S. for the treatment of metastatic small cell lung cancer (SCLC) on or after platinum based chemotherapy in July 2020, six months after acquiring the U.S. licensing rights;
Initiated the European rolling launch for Sunosi in May 2020 to reduce excessive daytime sleepiness (EDS) in narcolepsy and obstructive sleep apnea (OSA);
Announced positive top-line results in the JZP-258 Phase 3 study in idiopathic hypersomnia (IH) in October 2020, and subsequently, completed the rolling supplemental New Drug Application (sNDA) submission under Fast Track Designation to the Food and Drug Administration (FDA) in February 2021, with potential launch in the fourth quarter of 2021; and
Initiated a Biologics License Application (BLA) submission to FDA for JZP-458 in ALL and LBL in December 2020, with potential launch in mid-2021.
Business Updates

Corporate Development

On February 3, 2021, the company announced that it had entered into a definitive agreement to acquire GW for $220.00 per American Depositary Share, in the form of $200 in cash and $20 in Jazz ordinary shares, for a total value of approximately $7.2 billion, or $6.7 billion net of GW cash. The transaction, which has been unanimously approved by the Boards of Directors of both companies, is expected to close in the second quarter of 2021, subject to satisfaction or waiver of closing conditions including regulatory approvals and the approval of GW shareholders.

Corporate Updates

In December 2020, the company appointed Jennifer Cook and Mark D. Smith, M.D. to the company’s Board of Directors.

Neuroscience

Oxybate (Xyrem and Xywav):

Following the launch of Xywav in the fourth quarter of 2020, the company will provide certain oxybate business performance metrics on a combined basis throughout the Xywav launch. Net product sales will be reported on both a combined and individual product level.

Net product sales for the combined oxybate business increased 7% to $1,757.0 million in 2020 and increased 4% to $454.5 million in the fourth quarter of 2020 compared to the same periods in 2019. Oxybate revenue bottle volume increased 4% in 2020 and 2% in the fourth quarter of 2020 compared to the same periods in 2019. Average active oxybate patients on therapy was approximately 15,300 in the fourth quarter of 2020, an increase of 2% compared to the same period in 2019.

Xyrem (sodium oxybate) oral solution:

Xyrem net product sales increased 6% to $1,741.8 million in 2020 and increased 1% to $439.3 million in the fourth quarter of 2020 compared to the same periods in 2019.
Xywav (calcium, magnesium, potassium, and sodium oxybates) oral solution:

Xywav net product sales were $15.3 million in the fourth quarter of 2020.
There were approximately 1,900 active patients on Xywav at the end of the fourth quarter of 2020, following the U.S. launch in November.
The company has entered into agreements that provide coverage for two of the three largest pharmacy benefit managers, with total commercial coverage now exceeding 60% of lives and remains on track to deliver broad commercial payor coverage within the first six to nine months following launch.
JZP-258

The company completed the rolling submission of an sNDA for JZP-258 for the treatment of IH in February 2021, with an objective of launching in the fourth quarter of 2021.
The company expects the Phase 3 results to be presented at an upcoming medical meeting in the second quarter of 2021.
Sunosi (solriamfetol):

Sunosi net product sales were $28.3 million in 2020 and $8.7 million in the fourth quarter of 2020, compared to $3.7 million and $2.7 million in the same periods of 2019 following the U.S. launch in July 2019.
In the fourth quarter of 2020, U.S. prescriptions increased 9% compared to the third quarter of 2020.
JZP-385:

JZP-385, a highly selective modulator of T-type calcium channels, is in clinical development for the potential treatment of essential tremor.
The company expects to initiate a Phase 2b trial in mid-2021.
JZP-150:

JZP-150, a fatty acid amide hydrolase (FAAH) inhibitor, is in clinical development for the potential treatment of post-traumatic stress disorder (PTSD).
The company expects to initiate a Phase 2 study in late 2021.
Oncology

Zepzelca (lurbinectedin):

Zepzelca net product sales were $90.4 million in 2020 and $53.4 million in the fourth quarter of 2020. Zepzelca launched in the U.S. in July 2020.
The company anticipates the 2021 initiation of a Phase 3 study evaluating immunotherapy plus lurbinectedin maintenance therapy, compared to immunotherapy alone, in patients with extensive-stage SCLC after induction chemotherapy.
The company continues to engage with FDA regarding the confirmatory data package.
In December 2020, the company initiated a New Drug Submission for Zepzelca in SCLC with Health Canada’s Therapeutic Products Directorate.
Erwinaze / Erwinase (asparaginase Erwinia chrysanthemi):

Erwinaze/Erwinase net product sales decreased 17% to $147.1 million in 2020 compared to $177.5 million in 2019 due to ongoing supply and manufacturing issues at the owner and sole manufacturer of the product, Porton Biopharma Limited (PBL). Erwinaze/Erwinase net product sales increased 3% to $56.6 million in the fourth quarter of 2020 compared to $54.9 million for the same period in 2019 due to timing and availability of supply. The company continues to expect inter-quarter variability in Erwinaze net product sales due to timing and availability of supply.
The company’s agreement with PBL terminated on December 31, 2020. The company has the right to sell certain Erwinaze inventory post-termination and expects to distribute this Erwinaze inventory during the first half of 2021. Once sales of available inventory are complete, the company will cease recording net sales of Erwinaze.
JZP-458 (recombinant Erwinia asparaginase):

In December 2020, the company initiated the submission of a BLA to FDA for JZP-458 for use as a component of a multi-agent chemotherapeutic regimen for the treatment of ALL or LBL in adult and pediatric patients who have developed hypersensitivity or silent inactivation to E. coli-derived asparaginase. The BLA will be reviewed under the RTOR pilot program, an initiative of the FDA’s Oncology Center of Excellence designed to expedite the delivery of safe and effective cancer treatments to patients.
The company continues to prioritize development of JZP-458 with the objective of ensuring that ALL/LBL patients have access to a reliable, high-quality recombinant asparaginase.
Enrollment in the pivotal Phase 2/3 trial continues.
The company is targeting a mid-2021 launch in the U.S., subject to anticipated FDA approval.
Defitelio (defibrotide sodium) / defibrotide:

Defitelio/defibrotide net product sales increased 13% to $195.8 million in 2020 and increased 16% to $55.5 million in the fourth quarter of 2020 compared to the same periods in 2019.
Vyxeos (daunorubicin and cytarabine) liposome for injection:

Vyxeos net product sales of $121.1 million in 2020 were in line with 2019. In the fourth quarter of 2020, net sales decreased 2% to $31.0 million compared to the same period in 2019. Vyxeos net product sales in 2020 and the fourth quarter of 2020 were negatively impacted by recommendations to increase use of oral oncology products to avoid hospitalizations and use of intensive care beds during the COVID-19 pandemic.

Commencing in 2020, following consultation with the staff of the Division of Corporation Finance of the U.S. Securities and Exchange Commission, the company no longer excludes upfront and milestone payments from the company’s non-GAAP adjusted net income, its line item components and non-GAAP adjusted EPS. For purposes of comparability, non-GAAP adjusted financial measures for the three months and year ended December 31, 2019 have been updated to reflect this change. See "Non-GAAP Financial Measures" below.

GAAP net income for 2020 was $238.6 million, or $4.22 per diluted share, compared to $523.4 million, or $9.09 per diluted share, for 2019. GAAP net income for the fourth quarter of 2020 was $133.4 million, or $2.33 per diluted share, compared to $74.0 million, or $1.29 per diluted share, for the fourth quarter of 2019.

Non-GAAP adjusted net income for 2020 was $704.0 million, or $12.46 per diluted share, compared to $885.2 million, or $15.38 per diluted share, for 2019. Non-GAAP adjusted net income for the fourth quarter of 2020 was $228.7 million, or $4.00 per diluted share, compared to $253.2 million, or $4.42 per diluted share, for the fourth quarter of 2019. Reconciliations of applicable GAAP reported to non-GAAP adjusted information are included at the end of this press release.

Total revenues increased 9% in 2020 and 14% in the fourth quarter of 2020 compared to the same periods in 2019.

Neuroscience net product sales in 2020 increased 8% to $1,785.4 million compared to 2019 led by continued strong growth in Xyrem net product sales, which increased by $99.2 million and a $24.6 million increase in Sunosi net product sales. Neuroscience net product sales in the fourth quarter of 2020 increased 6% to $463.2 million compared to the same period in 2019 led by the launch of Xywav in November 2020 and a $6.0 million increase in Sunosi net product sales.
Oncology net product sales in 2020 increased 18% to $554.5 million compared to 2019 led by strong post-launch Zepzelca net product sales of $90.4 million and a $22.9 million increase in Defitelio net product sales, partially offset by a decrease in Erwinaze net product sales of $30.3 million. Oncology net product sales in the fourth quarter of 2020 increased 46% to $196.5 million compared to the same period in 2019 led by strong Zepzelca net product sales of $53.4 million and a $7.7 million increase in Defitelio net product sales.
Operating expenses changed over the prior year periods primarily due to the following:

Selling, general and administrative (SG&A) expenses increased in 2020 and in the fourth quarter of 2020 compared to the same periods in 2019 on a GAAP and on a non-GAAP adjusted basis primarily due to increased investment in sales, marketing and launch activities related to the launches of Zepzelca and Xywav in the U.S., and the continuation of the launch of Sunosi in the U.S., as well as an increase in other expenses related to the expansion of the company’s business.
Research and development (R&D) expenses increased in 2020 compared to 2019, on a GAAP and on a non-GAAP adjusted basis, primarily due to an increase in expenses related to the progress made on the company’s clinical programs, including JZP-458 and JZP-385, partially offset by a decrease in milestone expense of $25.0 million. R&D expenses decreased in the fourth quarter of 2020 compared to the same period in 2019, on a GAAP and on a non-GAAP adjusted basis, primarily due to milestone expense of $15.0 million in the fourth quarter of 2019, partially offset by an increase in expenses related to the progress made on the company’s clinical programs, including JZP-458 and JZP-385.
Acquired in-process research and development (IPR&D) expense in 2020 on a GAAP and on a non-GAAP adjusted basis primarily related to a $200.0 million upfront payment to PharmaMar for the exclusive U.S. commercialization and development rights to Zepzelca and a $35.0 million upfront payment to SpringWorks Therapeutics, Inc., in the fourth quarter, for a FAAH inhibitor program. Acquired IPR&D expense in 2019 on a GAAP and on a non-GAAP adjusted basis included an upfront payment of $56.0 million to Codiak BioSciences, Inc. under a collaboration agreement. Acquired IPR&D expenses in 2019 on a GAAP basis also included $48.3 million related to the acquisition of Cavion, Inc. (Cavion).
In 2020, the company recorded an impairment charge of $136.1 million on a GAAP basis following the company’s decision to stop enrollment in its Phase 3 clinical study of defibrotide for the prevention of VOD due to an Independent Data Monitoring Committee determination that it is highly unlikely that the study will reach its primary endpoint.
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. Excluding this effect, the increase in the effective tax rate for 2020 on both a GAAP and on a non-GAAP adjusted basis compared to 2019 was primarily due to the benefit recognized in 2019 from the application of the Italian patent box incentive regime and the impact in 2020 of the disallowance of certain interest deductions and a provision for a proposed settlement reached with the French tax authorities.

Cash Flow and Balance Sheet

As of December 31, 2020, cash, cash equivalents and investments were $2.1 billion, and the outstanding principal balance of the company’s long-term debt was $2.4 billion.

In 2020, the company generated $899.6 million of cash from operations, made upfront and milestone payments totaling $301.0 million to PharmaMar under a license agreement and used $146.5 million to repurchase ordinary shares under the company’s share repurchase program.

In 2020, the company repurchased approximately 1.2 million ordinary shares under the company’s share repurchase program at an average cost of $121.98 per ordinary share. As of December 31, 2020, the remaining amount authorized for share repurchases under the company’s share repurchase program was $431.2 million.

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 2020 full year and fourth quarter results and provide 2021 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 3093553.

A replay of the conference call will be available through March 2, 2021 by dialing +1 855 859 2056 in the U.S., or +1 404 537 3406 outside the U.S., and entering passcode 3093553. 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.