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Form 8-K Jazz Pharmaceuticals For: Nov 08

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November 8, 2016 4:11 PM EST



 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM 8-K
 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
November 8, 2016
Date of Report (Date of earliest event reported)
 
 
JAZZ PHARMACEUTICALS PUBLIC LIMITED COMPANY
(Exact name of registrant as specified in its charter)
 
 
 
 
 
 
 
 
Ireland
 
001-33500
 
98-1032470
(State or Other Jurisdiction
of Incorporation)
 
(Commission
File No.)
 
(IRS Employer
Identification No.)
Fourth Floor, Connaught House, One Burlington Road, Dublin 4, Ireland
(Address of principal executive offices, including zip code)
011-353-1-634-7800
(Registrant's telephone number, including area code)
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





Item 2.02. Results of Operations and Financial Condition.
On November 8, 2016, Jazz Pharmaceuticals plc (the “Company”) issued a press release (the “Press Release”) announcing financial results for the Company for the quarter ended September 30, 2016. A copy of the Press Release is furnished as Exhibit 99.1 to this current report.
The information in this Item 2.02 and in the Press Release furnished as Exhibit 99.1 to this current report shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. The information contained in this Item 2.02 and in the Press Release furnished as Exhibit 99.1 to this current report shall not be incorporated by reference into any filing with the U.S. Securities and Exchange Commission made by the Company whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Item 9.01. Financial Statements and Exhibits.
(d)
Exhibits
Exhibit
Number
Description
 
 
99.1
Press Release dated November 8, 2016.






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
JAZZ PHARMACEUTICALS PUBLIC LIMITED COMPANY
 
 
 
 
By:
/s/ Matthew P. Young
 
Name:
Matthew P. Young
 
Title:
Executive Vice President and Chief Financial Officer
Date: November 8, 2016








EXHIBIT INDEX
 
Exhibit
Number
Description
 
 
99.1
Press Release dated November 8, 2016.



Exhibit 99.1
jazzlogo1a01a01a02a01a02.jpg

JAZZ PHARMACEUTICALS ANNOUNCES THIRD QUARTER 2016
FINANCIAL RESULTS
Total Revenues Increased 10% to $374 Million
Initiated Rolling NDA Submission for Vyxeos (CPX-351)


DUBLIN, November 8, 2016 -- Jazz Pharmaceuticals plc (Nasdaq: JAZZ) today announced financial results for the third quarter of 2016 and updated financial guidance for 2016.
“We have made substantial progress towards achieving our corporate objectives for 2016, delivering solid top-line growth in our commercial business, investing in broadening our hematology/oncology portfolio with the completion of the Celator acquisition and increasing our investments in R&D,” said Bruce Cozadd, chairman and chief executive officer of Jazz Pharmaceuticals. “In the third quarter, we began a rolling NDA submission for Vyxeos for the treatment of acute myeloid leukemia, and we are pleased with the achievement of important clinical milestones, advancement of key R&D programs and expansion of our clinical development portfolio, all of which support our goal of developing and commercializing meaningful therapies for patients while building shareholder value.”
GAAP net income attributable to Jazz Pharmaceuticals plc for the third quarter of 2016 was $87.1 million, or $1.41 per diluted share, compared to $88.0 million, or $1.39 per diluted share, for the third quarter of 2015.
Adjusted net income attributable to Jazz Pharmaceuticals plc for the third quarter of 2016 was $158.5 million, or $2.57 per diluted share, compared to $159.3 million, or $2.52 per diluted share, for the third quarter of 2015. Reconciliations of applicable GAAP reported to non-GAAP adjusted information are included in this press release.

Financial Highlights
 
Three Months Ended September 30,
 
 
 
Nine Months Ended September 30,
 
 
(In thousands, except per share amounts and percentages)
2016
 
2015
 
Change
 
2016
 
2015
 
Change
Total revenues
$
374,181

 
$
340,872

 
9.8
 %
 
$
1,091,352

 
$
983,922

 
10.9
%
GAAP net income attributable to Jazz Pharmaceuticals plc
$
87,145

 
$
87,960

 
(0.9
)%
 
$
272,548

 
$
246,774

 
10.4
%
Adjusted net income attributable to Jazz Pharmaceuticals plc1
$
158,470

 
$
159,302

 
(0.5
)%
 
$
453,931

 
$
418,968

 
8.3
%
GAAP EPS attributable to Jazz Pharmaceuticals plc
$
1.41

 
$
1.39

 
1.4
 %
 
$
4.40

 
$
3.91

 
12.5
%
Adjusted EPS attributable to Jazz Pharmaceuticals plc1
$
2.57

 
$
2.52

 
2.0
 %
 
$
7.32

 
$
6.64

 
10.2
%
____________________________
1.
Commencing with the second quarter of 2016, the company modified the calculation of its non-GAAP income tax provision in connection with the Securities and Exchange Commission’s May 2016 guidance pertaining to non-GAAP financial measures. This modification is reflected in the company’s 2015 and 2016 non-GAAP interim period results and full-year 2016 financial guidance. See “Non-GAAP Financial Measures” below. The modification did not have a material effect on the adjusted net income attributable to Jazz Pharmaceuticals plc or adjusted EPS for the three months ended September 30, 2015. The modification

1

resulted in the reduction of adjusted net income attributable to Jazz Pharmaceuticals plc by $17.6 million, or $0.28 per diluted share, compared to the amount previously reported for the nine months ended September 30, 2015.

Total Revenues

Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(In thousands)
2016
 
2015
 
2016
 
2015
Xyrem® (sodium oxybate) oral solution
$
285,907

 
$
242,899

 
$
816,412

 
$
703,435

Erwinaze® / Erwinase® (asparaginase Erwinia chrysanthemi)
42,986

 
56,317

 
143,907

 
152,821

Defitelio® (defibrotide sodium) / defibrotide
28,137

 
19,639

 
79,280

 
52,259

Prialt® (ziconotide) intrathecal infusion
8,783

 
6,042

 
23,065

 
19,944

Psychiatry
3,875

 
9,910

 
14,744

 
28,375

Other
1,933

 
3,947

 
7,239

 
21,061

Product sales, net
371,621

 
338,754

 
1,084,647

 
977,895

Royalties and contract revenues
2,560

 
2,118

 
6,705

 
6,027

Total revenues
$
374,181

 
$
340,872

 
$
1,091,352

 
$
983,922

Net product sales increased 10% in the third quarter of 2016 compared to the same period in 2015 due to higher net product sales of Xyrem and Defitelio.
Xyrem net product sales increased 18% in the third quarter of 2016 compared to the same period in 2015.
Erwinaze/Erwinase net product sales decreased 24% in the third quarter of 2016 compared to the same period in 2015 due to an Erwinaze supply interruption in the U.S. late in the third quarter of 2016. The company expects that it will continue to experience Erwinaze inventory and supply challenges, which have resulted, and are expected to continue to result, in temporary disruptions in the company's ability to supply certain markets, including the U.S.
Defitelio/defibrotide net product sales increased $8.5 million in the third quarter of 2016 compared to the same period in 2015 primarily due to net sales of $7.1 million in the U.S.

Operating Expenses
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(In thousands, except percentages)
2016
 
2015
 
2016
 
2015
GAAP:
 
 
 
 
 
 
 
Cost of product sales
$
24,311

 
$
28,385

 
$
71,730

 
$
78,496

Gross margin
93.5
%
 
91.6
%
 
93.4
%
 
92.0
%
Selling, general and administrative
$
124,368

 
$
104,044

 
$
375,751

 
$
323,564

% of total revenues
33.2
%
 
30.5
%
 
34.4
%
 
32.9
%
Research and development
$
47,796

 
$
50,784

 
$
118,139

 
$
105,798

% of total revenues
12.8
%
 
14.9
%
 
10.8
%
 
10.8
%
Acquired in-process research and development
$
15,000

 
$
—

 
$
23,750

 
$
—


2


 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(In thousands, except percentages)
2016
 
2015
 
2016
 
2015
Non-GAAP adjusted:
 
 
 
 
 
 
 
Cost of product sales
$
22,963

 
$
27,599

 
$
68,620

 
$
76,243

Gross margin
93.8
%
 
91.9
%
 
93.7
%
 
92.2
%
Selling, general and administrative
$
94,534

 
$
84,502

 
$
296,633

 
$
268,013

% of total revenues
25.3
%
 
24.8
%
 
27.2
%
 
27.2
%
Research and development
$
43,323

 
$
22,998

 
$
106,847

 
$
70,661

% of total revenues
11.6
%
 
6.7
%
 
9.8
%
 
7.2
%
Operating expenses changed over the prior year period primarily due to the following:
•
Selling, general and administrative (SG&A) expenses increased in the third quarter of 2016 compared to the same period in 2015 on a GAAP and on a non-GAAP adjusted basis, primarily due to higher headcount and other expenses resulting from the expansion of the company’s business. The increase on a GAAP basis was also driven by transaction and integration costs related to the Celator acquisition.
•
Research and development (R&D) expenses on a GAAP basis decreased by $3.0 million in the third quarter of 2016 compared to the same period in 2015. R&D expenses on a non-GAAP adjusted basis increased by $20.3 million primarily due to increased expenses for the development of JZP-110; increasing investments in line extensions for the company's existing products, including oxybate-related R&D programs and the initiation of a clinical study of defibrotide for the prevention of veno-occlusive disease (VOD); and costs related to the rolling new drug application (NDA) submission for VyxeosTM(cytarabine and daunorubicin liposome injection). The decrease in R&D expenses on a GAAP basis was primarily due to a $25.0 million milestone expense in the third quarter of 2015 in connection with the acceptance for filing by the U.S. Food and Drug Administration (FDA) of the NDA for defibrotide, which was partially offset by the project related costs described above.
•
Acquired in-process research and development expense in the third quarter of 2016 related to upfront and option payments to Pfenex Inc. under an agreement in which the company was granted worldwide rights to develop and commercialize multiple early-stage hematology product candidates.

Cash Flow and Balance Sheet
As of September 30, 2016, cash, cash equivalents and investments were $426.0 million, and the outstanding principal balance of the company’s long-term debt was $2.3 billion. Cash, cash equivalents and investments decreased from December 31, 2015 primarily due to the acquisition of Celator for approximately $1.5 billion, repurchases under the company’s share repurchase program and a $150.0 million milestone payment triggered by FDA approval of Defitelio on March 30, 2016, partially offset by borrowings of $1.0 billion under the company's revolving credit facility and cash flows from operations of $409.8 million.
During the nine months ended September 30, 2016, the company repurchased 2.1 million ordinary shares for $259.8 million, at an average cost of $125.65 per ordinary share, under a share repurchase program approved in November 2015. This share repurchase program was completed in September 2016. The company's board of directors has authorized a new share repurchase program under which the company is authorized to repurchase a number of ordinary shares having an aggregate purchase price of up to $300 million. Under the new program, which has no expiration date, the company may repurchase ordinary shares from time to time on the open market. The timing and amount of repurchases will depend on a variety of factors, including the price of the company's ordinary shares, alternative investment opportunities, restrictions under the company's credit agreement, corporate and

3


regulatory requirements and market conditions. The new share repurchase program may be modified, suspended or discontinued at any time without prior notice.

Recent Developments
In September 2016, the company completed patient enrollment for its two Phase 3 studies evaluating JZP-110 in excessive sleepiness associated with obstructive sleep apnea.
In September 2016, the company initiated the rolling NDA submission to the FDA for Vyxeos for the treatment of acute myeloid leukemia. Vyxeos has received FDA orphan drug designation for the treatment of AML and was granted breakthrough therapy designation for treatment of adults with therapy-related AML or AML with myelodysplasia-related changes.
During the third quarter of 2016, the company activated clinical sites in the Phase 3 study of defibrotide for the prevention of VOD in high-risk patients following hematopoietic stem cell transplantation.
In November 2016, the company completed enrollment in the Phase 3 study of Xyrem in pediatric narcolepsy patients with cataplexy.

2016 Financial Guidance
Jazz Pharmaceuticals is updating its full year 2016 financial guidance as follows (in millions, except per share amounts and percentages):
Revenues
$1,485-$1,530
Total net product sales
$1,477-$1,522
-Xyrem net sales*
$1,100-$1,125
-Erwinaze/Erwinase net sales
$190-$215
-Defitelio/defibrotide net sales*
$105-$120
GAAP gross margin %
93%
Non-GAAP adjusted gross margin %1,4
93%
GAAP SG&A expenses*
$492-$517
Non-GAAP adjusted SG&A expenses*,2,4
$395-$405
GAAP R&D expenses*
$159-$171
Non-GAAP adjusted R&D expenses*,3,4
$145-$155
GAAP net income per diluted share
$5.66-$6.56
Non-GAAP adjusted net income per diluted share4
$9.90-$10.30
____________________________
* Updated November 8, 2016.

1.
Excludes $5 million of share-based compensation expense from estimated GAAP gross margin.
2.
Excludes $78-$86 million of share-based compensation expense, $13-$20 million of transaction and integration related costs and $6 million of expenses related to certain legal proceedings and restructuring from estimated GAAP SG&A expenses.
3.
Excludes $14-$16 million of share-based compensation expense from estimated GAAP R&D expenses.
4.
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 2016 Net Income Guidance" provided on the last page of this press release.

Conference Call Details
Jazz Pharmaceuticals will host an investor conference call and live audio webcast today at 4:30 p.m. EST (9:30 p.m. GMT) to provide a business and financial update and discuss its 2016 third quarter results. The live webcast may be accessed from the Investors & Media section of the company’s website

4


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 95431988.
A replay of the conference call will be available through November 15, 2016 by dialing +1 855 859 2056 in the U.S., or +1 404 537 3406 outside the U.S., and entering passcode 95431988. An archived version of the webcast will be available for at least one week in the Investors & Media section of the company's website at www.jazzpharmaceuticals.com.

About Jazz Pharmaceuticals plc
Jazz Pharmaceuticals plc (Nasdaq: JAZZ) is an international biopharmaceutical company focused on improving patients’ lives by identifying, developing and commercializing meaningful products that address unmet medical needs. The company has a diverse portfolio of products and product candidates with a focus in the areas of sleep and hematology/oncology. In these areas, Jazz Pharmaceuticals markets Xyrem® (sodium oxybate) oral solution, Erwinaze® (asparaginase Erwinia chrysanthemi) and Defitelio® (defibrotide sodium) in the U.S. and markets Erwinase® and Defitelio® (defibrotide) in countries outside the U.S. For more information, please visit www.jazzpharmaceuticals.com.

Non-GAAP Financial Measures
To supplement Jazz Pharmaceuticals’ financial results and guidance presented in accordance with U.S. generally accepted accounting principles (GAAP), the company uses certain non-GAAP (also referred to as adjusted or non-GAAP adjusted) financial measures in this press release and the accompanying tables. In particular, the company presents non-GAAP adjusted net income attributable to Jazz Pharmaceuticals plc (and the related per share measure) and its line item components, as well as certain non-GAAP adjusted financial measures derived therefrom, including non-GAAP adjusted gross margin percentage and non-GAAP adjusted effective tax rate. Non-GAAP adjusted net income (and the related per share measure) and its line item components exclude from reported GAAP net income (and the related per share measure) and its line item components certain items, as detailed in the reconciliation tables that follow, and in the case of non-GAAP adjusted net income (and the related per share measure), adjust for the tax effect of non-GAAP adjustments and, for the comparable 2015 periods, adjust for the amount attributable to noncontrolling interests. In this regard, the components of non-GAAP adjusted net income attributable to Jazz Pharmaceuticals plc, including non-GAAP cost of product sales, non-GAAP selling, general and administrative expenses and non-GAAP research and development expenses, are income statement line items prepared on the same basis as, and therefore components of, the overall non-GAAP adjusted net income measure.
The company believes that each of these non-GAAP financial measures provides useful supplementary information to, and facilitates additional analysis by, investors and analysts. In particular, the company believes that each of these non-GAAP financial measures, when considered together with the company’s financial information prepared in accordance with GAAP, can enhance investors’ and analysts' ability to meaningfully compare the company’s results from period to period and to its forward-looking guidance, and to identify operating trends in the company’s business. In addition, these non-GAAP financial measures are regularly used by investors and analysts to model and track the company’s financial performance. Jazz Pharmaceuticals’ management also regularly uses these non-GAAP financial measures internally to understand, manage and evaluate the company’s business and to make operating decisions, and compensation of executives is based in part on certain of these non-GAAP financial measures. Because these non-GAAP financial measures are important internal measurements for Jazz Pharmaceuticals’ management, the company also believes that these non-GAAP financial measures are useful to investors and analysts since these measures allow for greater transparency with respect to key financial metrics the company uses in assessing its own operating performance and making operating decisions.

5


These non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures; should be read in conjunction with the company’s condensed consolidated financial statements prepared in accordance with GAAP; have no standardized meaning prescribed by GAAP; and are not prepared under any comprehensive set of accounting rules or principles. In addition, from time to time in the future there may be other items that the company may exclude for purposes of its non-GAAP financial measures; and the company has ceased, and may in the future cease, to exclude items that it has historically excluded for purposes of its non-GAAP financial measures. Likewise, the company may determine to modify the nature of its adjustments to arrive at its non-GAAP financial measures. In this regard, the company modified the calculation of its non-GAAP income tax provision commencing in the second quarter of 2016 and accordingly, the income tax effect of the adjustments between GAAP reported and non-GAAP adjusted results takes into account the tax treatment and related tax rate(s) that apply to each adjustment in the applicable tax jurisdiction(s). For purposes of comparability, the non-GAAP income tax provision and the corresponding income tax adjustment to arrive at non-GAAP adjusted net income attributable to Jazz Pharmaceuticals plc (and the related per share measures) for the comparable 2015 periods are presented on the same basis. Because of the non-standardized definitions of non-GAAP financial measures, the non-GAAP financial measures as used by Jazz Pharmaceuticals in this press release and the accompanying tables have limits in their usefulness to investors and may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995
This press release contains forward-looking statements, including, but not limited to, statements related to Jazz Pharmaceuticals’ future financial and operating results, including 2016 financial guidance, the company’s goal of developing and commercializing new therapies for patients and building shareholder value, the company’s expectation for continuing Erwinaze manufacturing, inventory and supply challenges, potential share repurchases and other statements that are not historical facts. These forward-looking statements are based on the company’s current plans, objectives, estimates, expectations and intentions, and inherently involve significant risks and uncertainties.  Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks and uncertainties associated with maintaining or increasing sales of and revenue from Xyrem, such as the potential introduction of generic competition or other competitive products; regulatory restrictions and requirements applicable to Xyrem and ongoing patent litigation and related proceedings; effectively commercializing the company’s other products and product candidates; protecting and enhancing the company’s intellectual property rights; delays or problems in the supply or manufacture of the company’s products and product candidates; complying with applicable U.S. and non-U.S. regulatory requirements; the difficulty and uncertainty of pharmaceutical product development and the uncertainty of clinical success; identifying and acquiring, in-licensing or developing additional products or product candidates, financing these transactions and successfully integrating acquired businesses such as Celator Pharmaceuticals, Inc.; potential restrictions on the company’s ability and flexibility to pursue share repurchases and future strategic opportunities as a result of its substantial outstanding debt obligations; the ability to achieve expected future financial performance and results; and other risks and uncertainties affecting the company, including those described from time to time under the caption “Risk Factors” and elsewhere in Jazz Pharmaceuticals plc’s Securities and Exchange Commission filings and reports (Commission File No. 001-33500), including the company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 and future filings and reports by the company, including the company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016.  Other risks and uncertainties of which the company is not currently aware may also affect the company’s forward-looking statements and may cause actual results and timing of events to differ materially from those anticipated.  The forward-looking statements herein are made only as of the date hereof or as of the dates indicated in the forward-looking statements, even if they are subsequently made available by the company on its website or otherwise.  The company undertakes no obligation to update or supplement any forward-looking

6


statements to reflect actual results, new information, future events, changes in its expectations or other circumstances that exist after the date as of which the forward-looking statements were made.


7


JAZZ PHARMACEUTICALS PLC
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Revenues:
 
 
 
 
 
 
 
Product sales, net
$
371,621

 
$
338,754

 
$
1,084,647

 
$
977,895

Royalties and contract revenues
2,560

 
2,118

 
6,705

 
6,027

Total revenues
374,181

 
340,872

 
1,091,352

 
983,922

Operating expenses:
 
 
 
 
 
 
 
Cost of product sales (excluding amortization of intangible assets)
24,311

 
28,385

 
71,730

 
78,496

Selling, general and administrative
124,368

 
104,044

 
375,751

 
323,564

Research and development
47,796

 
50,784

 
118,139

 
105,798

Acquired in-process research and development
15,000

 
—

 
23,750

 
—

Intangible asset amortization
26,453

 
26,127

 
75,832

 
74,472

Total operating expenses
237,928

 
209,340

 
665,202

 
582,330

Income from operations
136,253

 
131,532

 
426,150

 
401,592

Interest expense, net
(18,498
)
 
(12,650
)
 
(42,811
)
 
(44,707
)
Foreign currency loss
(749
)
 
(977
)
 
(1,568
)
 
(646
)
Loss on extinguishment and modification of debt
(638
)
 
—

 
(638
)
 
(16,815
)
Income before income tax provision and equity in loss of investee, net of tax
116,368

 
117,905

 
381,133

 
339,424

Income tax provision
29,120

 
29,945

 
108,482

 
92,651

Equity in loss of investee, net of tax
103

 
—

 
103

 
—

Net income
87,145

 
87,960

 
272,548

 
246,773

Net loss attributable to noncontrolling interests, net of tax
—

 
—

 
—

 
(1
)
Net income attributable to Jazz Pharmaceuticals plc
$
87,145

 
$
87,960

 
$
272,548

 
$
246,774

 
 
 
 
 
 
 
 
Net income attributable to Jazz Pharmaceuticals plc per ordinary share:
 
 
 
 
 
 
 
Basic
$
1.44

 
$
1.43

 
$
4.49

 
$
4.04

Diluted
$
1.41

 
$
1.39

 
$
4.40

 
$
3.91

Weighted-average ordinary shares used in per share calculations - basic
60,437

 
61,435

 
60,692

 
61,145

Weighted-average ordinary shares used in per share calculations - diluted
61,644

 
63,154

 
61,983

 
63,072







8


JAZZ PHARMACEUTICALS PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

 
September 30,
2016
 
December 31,
2015
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
366,567

 
$
988,785

Investments
59,418

 
—

Accounts receivable, net of allowances
238,072

 
209,685

Inventories
32,351

 
19,451

Prepaid expenses
23,304

 
20,699

Other current assets
24,517

 
19,047

Total current assets
744,229

 
1,257,667

Property and equipment, net
99,898

 
85,572

Intangible assets, net
3,110,439

 
1,185,606

Goodwill
927,993

 
657,139

Deferred tax assets, net, non-current
—

 
122,863

Deferred financing costs
10,258

 
7,209

Other non-current assets
37,764

 
27,548

Total assets
$
4,930,581

 
$
3,343,604

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
17,626

 
$
21,807

Accrued liabilities
172,418

 
164,070

Current portion of long-term debt
36,094

 
37,587

Income taxes payable
5,222

 
1,808

Deferred revenue
1,499

 
1,370

Total current liabilities
232,859

 
226,642

Deferred revenue, non-current
2,881

 
3,721

Long-term debt, less current portion
2,147,379

 
1,150,857

Deferred tax liability, net, non-current
725,358

 
294,485

Other non-current liabilities
106,101

 
69,253

Total shareholders’ equity
1,716,003

 
1,598,646

Total liabilities and shareholders’ equity
$
4,930,581

 
$
3,343,604


9


JAZZ PHARMACEUTICALS PLC
RECONCILIATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
(In thousands, except per share amounts)
(Unaudited)

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
GAAP reported net income attributable to Jazz Pharmaceuticals plc
$
87,145

 
$
87,960

 
$
272,548

 
$
246,774

Intangible asset amortization
26,453

 
26,127

 
75,832

 
74,472

Share-based compensation expense
24,874

 
23,114

 
74,490

 
67,233

Upfront and milestone payments
15,000

 
25,000

 
23,750

 
25,000

Transaction and integration related costs
10,781

 
—

 
12,970

 
155

Expenses related to certain legal proceedings and restructuring
—

 
—

 
6,060

 
553

Non-cash interest expense
5,642

 
5,300

 
16,418

 
17,348

Loss on extinguishment and modification of debt
638

 
—

 
638

 
16,815

Income tax effect of adjustments (1)
(12,063
)
 
(8,199
)
 
(28,775
)
 
(29,380
)
Adjustments for amount attributable to noncontrolling interests (2)
—

 
—

 
—

 
(2
)
Non-GAAP adjusted net income attributable to Jazz Pharmaceuticals plc
$
158,470

 
$
159,302

 
$
453,931

 
$
418,968

 
 
 
 
 
 
 
 
GAAP reported net income attributable to Jazz Pharmaceuticals plc per diluted share
$
1.41

 
$
1.39

 
$
4.40

 
$
3.91

Non-GAAP adjusted net income attributable to Jazz Pharmaceuticals plc per diluted share (3)
$
2.57

 
$
2.52

 
$
7.32

 
$
6.64

Weighted-average ordinary shares used in diluted per share calculations
61,644

 
63,154

 
61,983

 
63,072

_____________________________
(1)
The income tax effect of the adjustments between GAAP reported and non-GAAP adjusted net income takes into account the tax treatment and related tax rate(s) that apply to each adjustment in the applicable tax jurisdiction(s).
(2)
The noncontrolling interests’ share of the above adjustments as applicable.
(3)
Commencing with the company's earnings release for the second quarter of 2016, the company modified the calculation of its non-GAAP income tax provision. The modification did not have a material effect on non-GAAP adjusted EPS for the three months ended September 30, 2015. The modification resulted in the reduction of non-GAAP adjusted net income attributable to Jazz Pharmaceuticals plc per diluted share of $0.28 compared to the amount previously reported for the nine months ended September 30, 2015. See “Non-GAAP Financial Measures”.


 
 
 
 
 
 
 
 


10


JAZZ PHARMACEUTICALS PLC
RECONCILIATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS AND OTHER INFORMATION
(In thousands, except per share amounts and percentages)
(Unaudited)

 
Three Months Ended
 
September 30, 2016
 
September 30, 2015
 
GAAP Reported
 
Adjustments
 
Non-GAAP Adjusted
 
GAAP Reported
 
Adjustments
 
Non-GAAP Adjusted
Total revenues
$
374,181

 
$
—

 
$
374,181

 
$
340,872

 
$
—

 
$
340,872

Cost of product sales (excluding amortization of intangible assets)
24,311

 
(1,348
)
(a) 
22,963

 
28,385

 
(786
)
(a) 
27,599

Selling, general and administrative
124,368

 
(29,834
)
(b) 
94,534

 
104,044

 
(19,542
)
(b) 
84,502

Research and development
47,796

 
(4,473
)
(c) 
43,323

 
50,784

 
(27,786
)
(c) 
22,998

Acquired in-process research and development
15,000

 
(15,000
)
 
—

 
—

 
—

 
—

Intangible asset amortization
26,453

 
(26,453
)
 
—

 
26,127

 
(26,127
)
 
—

Interest expense, net
18,498

 
(5,642
)
(d) 
12,856

 
12,650

 
(5,300
)
(d) 
7,350

Foreign currency loss
749

 
—

 
749

 
977

 
—

 
977

Loss on extinguishment and modification of debt
638

 
(638
)
 
—

 
—

 
—

 
—

Income before income tax provision and equity in loss of investee, net of tax
116,368

 
83,388

(e) 
199,756

 
117,905

 
79,541

(e) 
197,446

Income tax provision
29,120

 
12,063

(f) 
41,183

 
29,945

 
8,199

(f) 
38,144

Effective tax rate (g)
25.0
%
 
 
 
20.6
%
 
25.4
%
 
 
 
19.3
%
Equity in loss of investee, net of tax
103

 
—

 
103

 
—

 
—

 
—

Net income
$
87,145

 
$
71,325

(h) 
$
158,470

 
$
87,960

 
$
71,342

(h) 
$
159,302

Net income per diluted share
$
1.41

 
 
 
$
2.57

 
$
1.39

 
 
 
$
2.52


11


JAZZ PHARMACEUTICALS PLC
RECONCILIATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
CERTAIN LINE ITEMS AND OTHER INFORMATION
(In thousands, except per share amounts and percentages)
(Unaudited)

 
Nine Months Ended
 
September 30, 2016
 
September 30, 2015
 
GAAP Reported
 
Adjustments
 
Non-GAAP Adjusted
 
GAAP Reported
 
Adjustments
 
Non-GAAP Adjusted
Total revenues
$
1,091,352

 
$
—

 
$
1,091,352

 
$
983,922

 
$
—

 
$
983,922

Cost of product sales (excluding amortization of intangible assets)
71,730

 
(3,110
)
(i) 
68,620

 
78,496

 
(2,253
)
(i) 
76,243

Selling, general and administrative
375,751

 
(79,118
)
(j) 
296,633

 
323,564

 
(55,551
)
(j) 
268,013

Research and development
118,139

 
(11,292
)
(k) 
106,847

 
105,798

 
(35,137
)
(k) 
70,661

Acquired in-process research and development
23,750

 
(23,750
)
 
—

 
—

 
—

 
—

Intangible asset amortization
75,832

 
(75,832
)
 
—

 
74,472

 
(74,472
)
 
—

Interest expense, net
42,811

 
(16,418
)
(d) 
26,393

 
44,707

 
(17,348
)
(d) 
27,359

Foreign currency loss
1,568

 
—

 
1,568

 
646

 
—

 
646

Loss on extinguishment and modification of debt
638

 
(638
)
 
—

 
16,815

 
(16,815
)
 
—

Income before income tax provision and equity in loss of investee, net of tax
381,133

 
210,158

(l) 
591,291

 
339,424

 
201,576

(l) 
541,000

Income tax provision
108,482

 
28,775

(f) 
137,257

 
92,651

 
29,380

(f) 
122,031

Effective tax rate (g)
28.5
%
 
 
 
23.2
%
 
27.3
%
 
 
 
22.6
%
Equity in loss of investee, net of tax
103

 
—

 
103

 
—

 
—

 
—

Net income
272,548

 
181,383

(m) 
453,931

 
246,773

 
172,196

(m) 
418,969

Net income (loss) attributable to noncontrolling interests, net of tax
—

 
—

(n) 
—

 
(1
)
 
2

(n) 
1

Net income attributable to Jazz Pharmaceuticals plc
$
272,548

 
$
181,383

(o) 
$
453,931

 
$
246,774

 
$
172,194

(o) 
$
418,968

Net income attributable to Jazz Pharmaceuticals plc per diluted share
$
4.40

 
 
 
$
7.32

 
$
3.91

 
 
 
$
6.64

_____________________________
Explanation of Adjustments and Certain Line Items (in thousands):
(a)
Share-based compensation expense of $1,307 and $786 and transaction and integration related costs of $41 and $0 for the three months ended September 30, 2016 and 2015, respectively.
(b)
Share-based compensation expense of $19,511 and $19,542 and transaction and integration related costs of $10,323 and $0 for the three months ended September 30, 2016 and 2015, respectively.
(c)
Share-based compensation expense of $4,056 and $2,786, transaction and integration related costs of $417 and $0 and milestone of $0 and $25,000 for the three months ended September 30, 2016 and 2015, respectively.
(d)
Non-cash interest expense associated with debt discount and debt issuance costs for the respective three- and nine-month periods.
(e)
Sum of adjustments (a) through (d) plus the adjustments for acquired in-process research and development, intangible asset amortization and loss on extinguishment and modification of debt, as applicable, for the respective three-month period.
(f)
Income tax effect of the adjustments between GAAP reported and non-GAAP adjusted net income takes into account the tax treatment and related tax rate(s) that apply to each adjustment in the applicable tax jurisdiction(s) in the respective three-and nine-month periods.
(g)
Income tax provision divided by income before income tax provision and equity in loss of investee, net of tax, for the respective three- and nine-month periods.
(h)
Net of adjustments (e) and (f) for the respective three-month period.
(i)
Share-based compensation expense of $2,959 and $2,253, expenses related to certain legal proceedings and restructuring of $110 and $0 and transaction and integration related costs of $41 and $0 for the nine months ended September 30, 2016 and 2015, respectively.
(j)
Share-based compensation expense of $60,664 and $54,843, expenses related to certain legal proceedings and restructuring of $5,950 and $553 and transaction and integration related costs of $12,504 and $155 for the nine months ended September 30, 2016 and 2015, respectively.

12


(k)
Share-based compensation expense of $10,867 and $10,137, transaction and integration related costs of $425 and $0 and milestone of $0 and $25,000 for the nine months ended September 30, 2016 and 2015, respectively.
(l)
Sum of adjustments (i), (j), (k) and (d) plus the adjustments for acquired in-process research and development expenses, intangible asset amortization and loss on extinguishment and modification of debt, as applicable, for the respective nine-month period.
(m)
Net of adjustments (l) and (f) for the respective nine-month period.
(n)
Adjustments for amount attributable to noncontrolling interests for the respective nine-month period.
(o)
Net of adjustments (m) and (n) for the respective nine-month period.

13


JAZZ PHARMACEUTICALS PLC
RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED 2016 NET INCOME GUIDANCE
(In millions, except per share amounts)
(Unaudited)
GAAP net income
$351 - $407
Intangible asset amortization
100 - 110
Share-based compensation expense
97 - 107
Upfront and milestone payments
24
Transaction and integration related costs*
13 - 20
Expenses related to certain legal proceedings and restructuring
6
Non-cash interest expense
20 - 24
Loss on extinguishment and modification of debt*
1
Income tax effect of adjustments
(37) - (27)
Non-GAAP adjusted net income
$615 - $640
 
 
GAAP net income per diluted share
$5.66-$6.56
Non-GAAP adjusted net income per diluted share 
$9.90-$10.30
 
 
Weighted-average ordinary shares used in per share calculations
62
_____________________________
* Updated November 8, 2016.





Contacts:
Investors
Kathee Littrell
Vice President, Investor Relations
Jazz Pharmaceuticals plc
Ireland, + 353 1 634 7887
U.S., + 1 650 496 2717

Media
Laurie Hurley
Vice President, Corporate Affairs
Jazz Pharmaceuticals plc
Ireland, + 353 1 634 7894
U.S., + 1 650 496 2796


14

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