Jazz Pharmaceuticals Announces Second Quarter 2020 Financial Results
DUBLIN, Aug. 4, 2020 /PRNewswire/ -- Jazz Pharmaceuticals plc (Nasdaq: JAZZ) today announced financial results for the second quarter of 2020 and updated its 2020 financial guidance.
"I am proud that we delivered strong financial and operational results above our expectations despite challenges arising from the COVID-19 pandemic," said Bruce Cozadd, chairman and chief executive officer of Jazz Pharmaceuticals. "With the strong performance of Xyrem and the recent FDA approval of Xywav, we are well-positioned to ensure the durability and growth of our oxybate business with differentiated products."
"The second quarter was highlighted by the approval of Zepzelca, and our subsequent strong launch, which was accomplished within six months of closing the licensing agreement with PharmaMar," continued Mr. Cozadd. "We also innovated around the challenges of the pandemic, pivoting to a timely virtual launch of Sunosi in Germany and implementing robust measures to facilitate continued progress of our clinical development programs and regulatory filings."
"Through the issuance of $1 billion of senior notes in the second quarter, we strengthened our financial position and increased our capacity for a broader set of corporate development opportunities," concluded Mr. Cozadd. "With multiple commercial launches, the expansion of our innovative pipeline, strategic capital allocation, and projected durable revenue growth and diversification, this is a transformative year for us, and we are excited about the opportunities ahead for patients and shareholders."
The company is on track to execute up to five key launches through 2020 and 2021:
- European rolling launch of Sunosi (initiated May 2020);
- U.S. launch of Zepzelca (initiated July 2020);
- U.S. launch of Xywav in the fourth quarter of 2020 following the implementation of the risk evaluation and mitigation strategy (REMS);
- U.S. launch of JZP-458 (recombinant Erwinia asparaginase) targeted for mid-2021, following a Biologics License Application (BLA) submission and approval; and
- U.S. launch of a new indication for Xywav in idiopathic hypersomnia (IH) targeted for late 2021 following a supplemental New Drug Application (sNDA) submission and approval.
The company expects these launches to enhance the durability and long-term growth of its neuroscience business and the significant near-term and long-term value of its oncology business.
Business Updates
COVID-19
- In the second quarter of 2020, the company experienced an impact to its business due to reduced patient and healthcare provider interactions, declines in sales representative access to healthcare providers, global government imposed stay-at-home orders, closure of sleep laboratories and treatment centers and the shift to caring for COVID-19 patients.
- Throughout the pandemic, the company has leveraged technology and innovation to continue to engage healthcare professionals. The company's field forces have resumed face-to-face engagement with healthcare providers where possible.
- The company's mid- and late-stage clinical trial activity has seen limited impact. The company has taken measures to implement remote and virtual approaches to its clinical trial activities, including remote data monitoring where possible, to maintain patient safety and trial continuity and preserve study integrity.
- The company currently expects to have adequate global supply of Xyrem, Sunosi, Defitelio, Vyxeos and Zepzelca for the remainder of 2020, as well as adequate commercial product availability for Xywav to support the planned U.S. launch later this year.
- Throughout the pandemic, the company has supported local communities and patient-focused organizations in COVID-19 relief efforts and remains focused on the safety and well-being of its employees.
Neuroscience
Xyrem:
- Xyrem net product sales increased 8% to $446.8 million in the second quarter of 2020 and 9% to $854.7 million in the first half of 2020, compared to the same periods in 2019.
- During the quarter, revenue bottle volume growth was 5% and average active patients on therapy grew 3% compared to the second quarter of 2019.
- New patient enrollment trended upwards beginning in the latter half of the second quarter following the COVID-19 related decline late in the first quarter of 2020.
Xywav™ (calcium, magnesium, potassium, and sodium oxybates) oral solution:
- In July 2020, the U.S. Food and Drug Administration (FDA) approved the NDA for Xywav, a new differentiated standard of oxybate therapy for the treatment of cataplexy or excessive daytime sleepiness (EDS) in narcolepsy patients 7 years of age and older.
- The approval of Xywav is the culmination of nearly a decade of research and development reflecting the company's ongoing efforts to address the needs of narcolepsy patients.
- The company believes Xywav will become the oxybate treatment of choice for patients.
- Xywav has 92 percent less sodium than Xyrem, which translates into a reduction of approximately 1,000 to 1,500 milligrams per day for a patient prescribed an oxybate product.
- The label for Xywav, unlike Xyrem, does not include a warning to prescribers to monitor patients sensitive to sodium intake, including patients with heart failure, hypertension or renal impairment.
- There is a well-accepted relationship between dietary sodium and blood pressure as well as published hypertension guidelines which underscore the independent association between excessive consumption of sodium and increased risk of stroke, cardiovascular disease and other adverse outcomes.
- Multiple and flexible Xywav dosing options are available for adult and pediatric patients and existing Xyrem patients can readily cross over to Xywav at the same dose level.
- The joint Xywav and Xyrem REMS implementation is on schedule to support the launch of Xywav in the fourth quarter of 2020.
- To ensure timely and broad patient access, Xywav will be priced at parity to Xyrem.
- The company expects top-line data in the Xywav Phase 3 pivotal study for the treatment of IH in the fourth quarter of 2020 and submission of a sNDA to FDA as early as the first quarter of 2021. The company is targeting a late 2021 launch.
Sunosi:
- Sunosi net product sales were $8.6 million in the second quarter of 2020, compared to $1.9 million in the first quarter of 2020. The company launched Sunosi in the U.S. in July 2019.
- Net sales in the second quarter of 2020 benefited from lower gross-to-net deductions, and a 12% increase in U.S. prescriptions compared to the first quarter of 2020. Sunosi was approved by the European Medicines Agency (EMA) in January 2020 and launched in Germany in May 2020.
- At the end of the second quarter, approximately 85% of commercially insured U.S. patients had access to coverage for Sunosi.
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 is initiating a new healthy volunteer study in August 2020 to evaluate a modified release formulation.
- Study start-up activities will begin later this year to enable initiation of a Phase 2b study in early 2021.
Oncology
Zepzelca™ (lurbinectedin):
- In June 2020, Zepzelca received accelerated approval by FDA for the treatment of adult patients with metastatic small cell lung cancer (SCLC) with disease progression on or after platinum-based chemotherapy.
- In July 2020, the company launched Zepzelca in the U.S. and the National Comprehensive Cancer Network (NCCN) added Zepzelca to the Clinical Practice Guidelines in Oncology for SCLC as a preferred treatment in patients who relapse in six months or less after prior systemic therapy and as a recommended regimen in patients who relapse more than six months after prior systemic therapy.
- All contracts with distributors and GPOs were in place at launch.
- The company is experiencing strong initial physician reception and uptake of Zepzelca across academic and community accounts and the sales force is actively engaging with target prescribers through live and virtual interactions.
Erwinaze:
- Erwinaze/Erwinase net product sales increased by $5.1 million to $32.7 million in the second quarter of 2020 compared to the same period in 2019.
- Erwinaze availability continues to be impacted by ongoing supply and manufacturing issues at the owner and sole manufacturer of the product, Porton Biopharma Limited (PBL), and the company continues to expect inter-quarter variability in Erwinaze net product sales due to timing and availability of supply.
- The company's current agreement with PBL will terminate on December 31, 2020. The company has the right to sell certain Erwinaze inventory post-termination and expects to distribute available Erwinaze supply through the first half of 2021.
JZP-458 (recombinant Erwinia asparaginase):
- The company continues to progress development of JZP-458 to ensure that acute lymphoblastic leukemia patients have access to a reliable, high-quality recombinant product.
- The pivotal Phase 2/3 study is continuing, with nearly all planned clinical sites activated and patient enrollment progressing well.
- The company expects to submit a BLA as early as year-end, with an objective of launching in the U.S. in mid-2021.
Defitelio:
- Defitelio/defibrotide net product sales decreased 7% to $42.7 million in the second quarter of 2020 compared to the same period in 2019. During the second quarter of 2020, demand was impacted by a reduction in the number of hematopoietic stem cell transplants performed due to COVID-19. The company observed a recovery in demand towards the end of the second quarter.
- The company expects top-line results from the Phase 2 proof-of-concept study for prevention of acute graft-versus-host disease in late 2020.
Vyxeos:
- Vyxeos net product sales decreased 15% to $26.6 million in the second quarter of 2020 compared to the same period in 2019. During the second quarter of 2020, Vyxeos sales were impacted by COVID-19 treatment recommendations to opt for oral or less intensive outpatient therapies for cancer patients. The company observed a recovery in demand late in the second quarter, particularly as hospitals adopted procedures to accommodate the care of non-COVID-19 patients.
- At the American Society of Clinical Oncology Annual Meeting in May, the 5-year overall survival data from the Phase 3 pivotal study demonstrated that improved survival with Vyxeos was maintained in the overall study population. These data support prior evidence that Vyxeos has the ability to contribute to durable remissions in older patients with newly diagnosed high-risk/secondary acute myeloid leukemia.
Corporate
- In June 2020, following FDA approval of Zepzelca, the company made a milestone payment of $100.0 million to Pharma Mar, S.A. (PharmaMar) in accordance with its exclusive U.S. license agreement. The company capitalized the payment, resulting in an increase in intangible assets.
Financial Highlights
Three Months Ended | Six Months Ended | ||||||||||||||
(In thousands, except per share amounts) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Total revenues | $ | 562,436 | $ | 534,133 | $ | 1,097,162 | $ | 1,042,319 | |||||||
GAAP net income (loss) | $ | 114,801 | $ | 261,898 | $ | (43,032) | $ | 347,099 | |||||||
Adjusted net income1 | $ | 207,316 | $ | 232,537 | $ | 233,149 | $ | 396,710 | |||||||
GAAP EPS | $ | 2.06 | $ | 4.56 | $ | (0.77) | $ | 6.01 | |||||||
Adjusted EPS1 | $ | 3.71 | $ | 4.05 | $ | 4.14 | $ | 6.87 |
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1. | 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 six months ended June 30, 2019 have been updated to reflect this change. See "Non-GAAP Financial Measures" below. |
GAAP net income for the second quarter of 2020 was $114.8 million, or $2.06 per diluted share, compared to $261.9 million, or $4.56 per diluted share, for the second quarter of 2019. On a GAAP basis, in the second quarter of 2019, the company recorded a one-time tax benefit of $112.3 million, or $1.96 per diluted share, resulting from an intra-entity intellectual property asset transfer.
Non-GAAP adjusted net income for the second quarter of 2020 was $207.3 million, or $3.71 per diluted share, compared to $232.5 million, or $4.05 per diluted share, in the second quarter of 2019. Reconciliations of applicable GAAP reported to non-GAAP adjusted information are included at the end of this press release.
Total Revenues
Three Months Ended | Six Months Ended | ||||||||||||||
(In thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Xyrem® (sodium oxybate) oral solution | $ | 446,808 | $ | 413,212 | $ | 854,683 | $ | 781,529 | |||||||
Defitelio® (defibrotide sodium) / defibrotide | 42,714 | 46,055 | 90,146 | 87,555 | |||||||||||
Erwinaze® / Erwinase® (asparaginase Erwinia chrysanthemi) | 32,683 | 27,622 | 70,415 | 88,521 | |||||||||||
Vyxeos® (daunorubicin and cytarabine) liposome for injection | 26,568 | 31,362 | 59,288 | 60,305 | |||||||||||
Sunosi® (solriamfetol) | 8,578 | — | 10,502 | — | |||||||||||
Other | 852 | 5,172 | 3,374 | 8,844 | |||||||||||
Product sales, net | 558,203 | 523,423 | 1,088,408 | 1,026,754 | |||||||||||
Royalties and contract revenues | 4,233 | 10,710 | 8,754 | 15,565 | |||||||||||
Total revenues | $ | 562,436 | $ | 534,133 | $ | 1,097,162 | $ | 1,042,319 |
Total revenues increased 5% in the second quarter of 2020 compared to the same period in 2019. Total net product sales increased 7% in the second quarter of 2020 compared to the same period in 2019 primarily due to an increase in Xyrem, Sunosi and Erwinaze net product sales, partially offset by a decrease in Vyxeos and Defitelio net product sales.
Operating Expenses and Effective Tax Rate
Three Months Ended | Six Months Ended | ||||||||||||||
(In thousands, except percentages) | 2020 | 2019 | 2020 | 2019 | |||||||||||
GAAP: | |||||||||||||||
Cost of product sales | $ | 28,008 | $ | 27,676 | $ | 56,665 | $ | 61,182 | |||||||
Gross margin | 95.0 % | 94.7 % | 94.8 % | 94.0 % | |||||||||||
Selling, general and administrative | $ | 191,406 | $ | 176,014 | $ | 399,806 | $ | 343,961 | |||||||
% of total revenues | 34.0 % | 33.0 % | 36.4 % | 33.0 % | |||||||||||
Research and development | $ | 78,922 | $ | 62,384 | $ | 165,029 | $ | 122,489 | |||||||
% of total revenues | 14.0 % | 11.7 % | 15.0 % | 11.8 % | |||||||||||
Acquired in-process research and development | $ | 3,000 | $ | 2,200 | $ | 205,250 | $ | 58,200 | |||||||
Impairment charge | $ | — | $ | — | $ | 136,139 | $ | — | |||||||
Income tax provision (benefit) | $ | 54,754 | $ | (78,650) | $ | 3,467 | $ | (49,534) | |||||||
Effective tax rate | 31.9 % | (42.7) % | (9.2) % | (16.5) % | |||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
(In thousands, except percentages) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Non-GAAP adjusted: | |||||||||||||||
Cost of product sales | $ | 26,087 | $ | 25,968 | $ | 53,071 | $ | 57,815 | |||||||
Gross margin | 95.3 % | 95.0 % | 95.1 % | 94.4 % | |||||||||||
Selling, general and administrative | $ | 170,386 | $ | 155,329 | $ | 358,190 | $ | 302,906 | |||||||
% of total revenues | 30.3 % | 29.1 % | 32.6 % | 29.1 % | |||||||||||
Research and development | $ | 71,259 | $ | 56,488 | $ | 150,981 | $ | 111,070 | |||||||
% of total revenues | 12.7 % | 10.6 % | 13.8 % | 10.7 % | |||||||||||
Acquired in-process research and development | $ | 3,000 | $ | 2,200 | $ | 205,250 | $ | 58,200 | |||||||
Income tax provision | $ | 73,085 | $ | 52,027 | $ | 77,772 | $ | 97,741 | |||||||
Effective tax rate | 25.9 % | 18.2 % | 24.9 % | 19.7 % |
Operating expenses increased over the prior year period primarily due to the following:
- Selling, general and administrative (SG&A) expenses increased in the second quarter of 2020 compared to the same period in 2019 on a GAAP and on a non-GAAP adjusted basis due to increased investment in sales, marketing and launch activities related to the company's priority products and product candidates, 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 the second quarter of 2020 compared to the same period in 2019 on a GAAP and on a non-GAAP adjusted basis primarily due to the pivotal JZP-458 study, as well as expenses related to progress made on the company's other clinical and pre-clinical development programs.
The effective tax rate increased over the prior year period primarily due to the following:
- On a GAAP basis, in the second quarter of 2019, the company recorded a one-time tax benefit of $112.3 million, or $1.96 per diluted share, resulting from an intra-entity intellectual property asset transfer. The increase in the effective tax rate in the second quarter of 2020 compared to the same period in 2019 was primarily due to the impact of the intra-entity intellectual property asset transfer. Excluding this effect, the increase in the effective tax rate for the second quarter of 2020 compared to the same period in 2019 was primarily due to the impact of the disallowance of certain interest deductions, and provision for a proposed settlement reached with the French tax authorities in respect of an ongoing tax audit.
- On a non-GAAP basis, the increase in the effective tax rate in the second quarter of 2020 compared to the same period in 2019 was primarily due to the impact of the disallowance of certain interest deductions, and provision for a proposed settlement reached with the French tax authorities in respect of an ongoing tax audit.
Cash Flow and Balance Sheet
As of June 30, 2020, cash, cash equivalents and investments were $1.7 billion, and the outstanding principal balance of the company's long-term debt was $2.4 billion. In the second quarter of 2020, the company issued $1.0 billion aggregate principal amount of 2.00% exchangeable senior notes due 2026 (2026 Notes) and used $332.9 million of the $981.4 million in net proceeds from the offering to repurchase $332.9 million aggregate principal amount of the company's 1.875% exchangeable senior notes due 2021 (2021 Notes). The remaining principal balance of the 2021 Notes was $242.1 million as of June 30, 2020. The remaining net proceeds from the issuance of the 2026 Notes will be used for general corporate purposes, including additional repurchases of the 2021 Notes. In June 2020, the company repaid a total of $500.0 million of borrowings under the company's revolving credit facility, which the company had drawn down in April 2020.
During the six months ended June 30, 2020, the company generated $455.5 million of cash from operations, made upfront and milestone payments totaling $300.0 million to PharmaMar under a license agreement and used $146.5 million to repurchase shares under the company's share repurchase program.
In the six months ended June 30, 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 June 30, 2020, the remaining amount authorized for share repurchases under the company's share repurchase program was $431.2 million.
2020 Financial Guidance
As noted above, Jazz Pharmaceuticals is updating its full year 2020 financial guidance. This guidance reflects the company's current and future expected operational performance, including the impact of COVID-19, and reflects the durability of its products, the strength of its underlying operations and the prioritization of new and ongoing value creating development projects.
(in millions) | Guidance provided as of | ||
May 5, 2020 | August 4, 2020 | ||
Revenues | $2,120 - $2,260 | $2,225 - $2,325 | |
Total net product sales | $2,105 - $2,240 | $2,210 - $2,310 | |
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