Jazz Pharmaceuticals Announces Third Quarter 2018 Financial Results

Jazz Pharmaceuticals Announces Third Quarter 2018 Financial Results

PR Newswire

DUBLIN, Nov. 6, 2018

GAAP Diluted EPS of $2.41; Adjusted Diluted EPS of $3.58 Reflects Growth of 11%

Total Revenues Increased 14% to $469 Million

Xyrem Product Sales Increased 18% to $357 Million

Received EU Marketing Authorization for Vyxeos and Initiated Rolling Launch

ANDA Filer Settlement Reached, Resolving Outstanding Xyrem Patent Litigation

Received FDA Approval of Xyrem for Pediatric Narcolepsy Patients

DUBLIN, Nov. 6, 2018 /PRNewswire/ -- Jazz Pharmaceuticals plc (Nasdaq: JAZZ) today announced financial results for the third quarter of 2018 and updated financial guidance for 2018.

"We delivered strong top-line and bottom-line growth in the third quarter and recently achieved two significant regulatory milestones, with the receipt of marketing authorization for Vyxeos in the EU and FDA approval of Xyrem for pediatric narcolepsy patients," said Bruce Cozadd, chairman and chief executive officer of Jazz Pharmaceuticals. "In the U.S., we are reinforcing Vyxeos as essential therapy for secondary AML with increased education and outreach programs to address the complex and evolving marketplace for AML. As we approach year end, we are also focused on our remaining 2018 corporate goals, including our planned solriamfetol EU regulatory submission and expected FDA approval of solriamfetol."

GAAP net income for the third quarter of 2018 was $149.3 million, or $2.41 per diluted share, compared to $63.5 million, or $1.03 per diluted share, for the third quarter of 2017.

Adjusted net income for the third quarter of 2018 was $221.7 million, or $3.58 per diluted share, compared to $197.6 million, or $3.22 per diluted share, for the third quarter of 2017. Reconciliations of applicable GAAP reported to non-GAAP adjusted information are included at the end of this press release.

Financial Highlights
























Three Months Ended

September 30,




Nine Months Ended
September 30,



(In thousands, except per share amounts
and percentages)

2018


2017


Change


2018


2017


Change

Total revenues

$

469,373



$

411,855



14

%


$

1,414,465



$

1,182,294



20

%

GAAP net income

$

149,316



$

63,526



135

%


$

287,628



$

255,641



13

%

Adjusted net income

$

221,655



$

197,649



12

%


$

618,662



$

496,225



25

%

GAAP EPS

$

2.41



$

1.03



134

%


$

4.68



$

4.17



12

%

Adjusted EPS

$

3.58



$

3.22



11

%


$

10.06



$

8.09



24

%

 

Total Revenues


















Three Months Ended

September 30,


Nine Months Ended

September 30,

(In thousands)

2018


2017


2018


2017

Xyrem® (sodium oxybate) oral solution

$

357,251



$

303,870



$

1,030,036



$

874,222


Erwinaze® / Erwinase® (asparaginase Erwinia chrysanthemi)

41,134



49,173



150,474



149,585


Defitelio® (defibrotide sodium) / defibrotide

36,177



31,213



111,736



97,351


Vyxeos® (daunorubicin and cytarabine) liposome for injection

21,038



9,719



75,217



9,719


Prialt® (ziconotide) intrathecal infusion

5,792



7,930



20,839



21,303


Other

3,805



6,066



13,837



19,124


Product sales, net

465,197



407,971



1,402,139



1,171,304


Royalties and contract revenues

4,176



3,884



12,326



10,990


Total revenues

$

469,373



$

411,855



$

1,414,465



$

1,182,294


Total revenues increased 14% in the third quarter of 2018 compared to the same period in 2017 due to the contribution of strong sales from Xyrem and Defitelio and the inclusion of a full quarter of Vyxeos sales.

Xyrem net product sales increased 18% in the third quarter of 2018 compared to the same period in 2017.

Erwinaze/Erwinase net product sales decreased 16% in the third quarter of 2018 compared to the same period in 2017. Ongoing supply challenges at the manufacturer, Porton Biopharma Limited, continue to negatively impact the company's ability to provide patients with this important component of the treatment regimen for acute lymphoblastic leukemia. There is currently a global supply outage of Erwinaze, and the company expects further supply disruptions during the fourth quarter and into 2019.

Defitelio/defibrotide net product sales increased 16% in the third quarter of 2018 compared to the same period in 2017. The company continues to expect inter-quarter variability in Defitelio net sales given that hepatic veno-occlusive disease (VOD) is an ultra-rare disease.

Vyxeos net product sales were $21.0 million in the third quarter of 2018 compared to $9.7 million in the third quarter of 2017, which reflected the first six weeks of sales post-launch in August 2017. The company is implementing initiatives focused on establishing Vyxeos as essential therapy for patients with secondary acute myeloid leukemia (AML), as the company addresses challenges to wider adoption in a complex and evolving AML market.

Operating Expenses


















Three Months Ended

September 30,


Nine Months Ended

September 30,

(In thousands, except percentages)

2018


2017


2018


2017

GAAP:








Cost of product sales

$

26,574



$

31,203



$

95,207



$

84,940


Gross margin

94.3

%


92.4

%


93.2

%


92.7

%

Selling, general and administrative

$

155,873



$

124,523



$

521,665



$

401,106


% of total revenues

33.2

%


30.2

%


36.9

%


33.9

%

Research and development

$

51,160



$

47,362



$

169,959



$

132,447


% of total revenues

10.9

%


11.5

%


12.0

%


11.2

%

Acquired in-process research and development

$



$

75,000



$



$

77,000


Impairment charges

$



$



$

42,896



$


Income tax provision

$

19,348



$

1,239



$

75,018



$

65,914


Effective tax rate

11.4

%


1.9

%


20.6

%


20.5

%



















Three Months Ended

September 30,


Nine Months Ended

September 30,

(In thousands, except percentages)

2018


2017


2018


2017

Non-GAAP adjusted:








Cost of product sales

$

25,049



$

29,630



$

90,185



$

80,594


Gross margin

94.6

%


92.7

%


93.6

%


93.1

%

Selling, general and administrative

$

136,895



$

103,620



$

406,580



$

333,524


% of total revenues

29.2

%


25.2

%


28.7

%


28.2

%

Research and development

$

46,560



$

42,712



$

145,275



$

118,796


% of total revenues

9.9

%


10.4

%


10.3

%


10.0

%

Income tax provision

$

30,266



$

24,410



$

119,295



$

104,307


Effective tax rate

12.0

%


11.0

%


16.1

%


17.4

%

Operating expenses changed over the prior year period primarily due to the following:

Cash Flow and Balance Sheet

As of September 30, 2018, cash, cash equivalents and investments were $1.1 billion and the outstanding principal balance of the company's long-term debt was $1.8 billion. During the nine months ended September 30, 2018, the company generated $574.6 million of cash from operations, received a $50.0 million upfront payment for the sale of its rights to Prialt, purchased a priority review voucher for $110.0 million and used $77.0 million to repurchase approximately 500,000 ordinary shares under the company's share repurchase program at an average cost of $154.03 per ordinary share. As of September 30, 2018, the remaining amount authorized under the share repurchase program was $106 million. In November 2018, the company's board of directors increased the share repurchase program by $320 million.

Recent Developments

In August 2018, the company initiated the EU rolling launch of Vyxeos® 44 mg/100 mg powder for concentrate for solution for infusion for the treatment of adults with newly diagnosed, therapy-related acute myeloid leukemia (t-AML) or AML with myelodysplasia-related changes (AML-MRC), following EU approval on August 23, 2018.

In September 2018, the company completed the sale of its rights to Prialt to TerSera Therapeutics LLC for a total purchase price of $80.0 million, of which the company received $50.0 million at closing and, subject to certain conditions, is scheduled to receive $15.0 million at the end of 2019 and $15.0 million at the end of 2020.

In September 2018, Nippon Shinyaku Co., Ltd. announced that Japan's Ministry of Health, Labour and Welfare granted orphan drug designation to defibrotide sodium for the treatment of hepatic VOD following hematopoietic stem-cell transplantation, and, in October 2018, Nippon Shinyaku Co., Ltd. submitted a new drug application (NDA) in Japan.

In October 2018, the company announced the settlement of patent litigation against Amneal Pharmaceuticals LLC related to its abbreviated new drug application (ANDA) to market a generic version of Xyrem. This represents settlement of all outstanding patent litigation related to Xyrem.

In October 2018, the company received FDA approval of its supplemental NDA for Xyrem to treat cataplexy and excessive daytime sleepiness in pediatric narcolepsy patients and plans to launch in the first half of 2019.

2018 Financial Guidance


Jazz Pharmaceuticals is updating its full year 2018 financial guidance as follows (in millions, except per share amounts and percentages):



Revenues

$1,860 - $1,900

Total net product sales

$1,845 - $1,880

-Xyrem net sales

$1,385 - $1,400

-Erwinaze/Erwinase net sales

$165 - $175

-Defitelio/defibrotide net sales

$145 - $165

-Vyxeos net sales

$95 - $110

GAAP gross margin %

93%

Non-GAAP adjusted gross margin %1,5

93%

GAAP SG&A expenses

$671 - $694

Non-GAAP adjusted SG&A expenses2,5

$540 - $555

GAAP R&D expenses

$223 - $241

Non-GAAP adjusted R&D expenses3,5

$195 - $210

GAAP effective tax rate

19% - 22%

Non-GAAP adjusted effective tax rate4,5

16% - 18%

GAAP net income per diluted share

$5.70 - $6.90

Non-GAAP adjusted net income per diluted share5

$12.75 - $13.25












1.

Excludes $4-$8 million of share-based compensation expense from estimated GAAP gross margin.

2.

Excludes $74-$82 million of share-based compensation expense and $57 million of estimated loss contingency from estimated GAAP SG&A expenses.

3.

Excludes $17-$20 million of share-based compensation expense and $11 million of milestone payments from estimated GAAP R&D expenses.

4.

Excludes the income tax effect of adjustments between GAAP reported and non-GAAP adjusted net income.

5.

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 2018 Net Income Guidance" at the end of this press release.

Conference Call Details

Jazz Pharmaceuticals will host an investor conference call and live audio webcast today at 4:30 p.m. EST (9:30 p.m. GMT) to provide a business and financial update and discuss its 2018 third quarter results. The live webcast may be accessed from the Investors section of the company's website at www.jazzpharmaceuticals.com. Please connect to the website prior to the start of the conference call to ensure adequate time for any software downloads that may be necessary. Investors may participate in the conference call by dialing +1 855 353 7924 in the U.S., or +1 503 343 6056 outside the U.S., and entering passcode 8048589.

A replay of the conference call will be available through November 13, 2018 by dialing +1 855 859 2056 in the U.S., or +1 404 537 3406 outside the U.S., and entering passcode 8048589. 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.

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), Defitelio® (defibrotide sodium) and Vyxeos® (daunorubicin and cytarabine) liposome for injection in the U.S. and markets Erwinase®, Defitelio® (defibrotide) and Vyxeos® 44 mg/100 mg powder for concentrate for solution for infusion in countries outside the U.S. For country-specific product information, please visit www.jazzpharmaceuticals.com/products.  For more information, please visit www.jazzpharmaceuticals.com and follow us on Twitter at @JazzPharma.

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 (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 income tax effect of non-GAAP adjustments. In this regard, the components of non-GAAP adjusted net income, including non-GAAP cost of product sales, non-GAAP SG&A expenses and non-GAAP R&D 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.

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. 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 its 2018 financial guidance, the company's 2018 corporate goals, including the planned EU regulatory submission for and expected FDA approval of solriamfetol, increasing educational and outreach initiatives to reinforce Vyxeos as essential therapy in secondary AML, the company's plans to launch Xyrem for the treatment of cataplexy and excessive daytime sleepiness in pediatric narcolepsy patients and the timing thereof, the company's expectations for future Erwinaze supply disruptions and inter-quarter variability in Defitelio net sales, 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; effectively commercializing the company's other products and product candidates; the time-consuming and uncertain regulatory approval process, including the risk that the company's regulatory submissions, including the solriamfetol NDA, may not be approved by applicable regulatory authorities in a timely manner or at all; protecting and enhancing the company's intellectual property rights, including potential future challenges to the company's intellectual property around Xyrem; 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; government investigations and other actions, including the risk that the company may not ultimately reach a final settlement with the U.S. Department of Justice to resolve an investigation relating to the company's support of 501(c)(3) organizations that provide financial assistance to Medicare patients; obtaining and maintaining appropriate pricing and reimbursement for the company's products; pharmaceutical product development and the uncertainty of clinical success, including risks related to failure or delays in initiating or completing clinical trials; identifying and acquiring, in-licensing or developing additional products or product candidates, financing these transactions and successfully integrating acquired businesses; the ability to achieve expected future financial performance and results and the uncertainty of future tax and other provisions and estimates; 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, 2018 and future filings and reports by the company, including the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2018.  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 the 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 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.

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,


2018


2017


2018


2017

Revenues:








Product sales, net

$

465,197



$

407,971



$

1,402,139



$

1,171,304


Royalties and contract revenues

4,176



3,884



12,326



10,990


Total revenues

469,373



411,855



1,414,465



1,182,294


Operating expenses:








Cost of product sales (excluding amortization of intangible
assets)

26,574



31,203



95,207



84,940


Selling, general and administrative

155,873



124,523



521,665



401,106


Research and development

51,160



47,362



169,959



132,447


Intangible asset amortization

46,989



47,313



154,955



99,164


Impairment charges





42,896




Acquired in-process research and development



75,000





77,000


Total operating expenses

280,596



325,401



984,682



794,657


Income from operations

188,777



86,454



429,783



387,637


Interest expense, net

(18,920)



(19,192)



(59,171)



(56,330)


Foreign exchange loss

(756)



(2,224)



(5,181)



(9,115)


Loss on extinguishment and modification of debt





(1,425)




Income before income tax provision and equity in loss of
investees

169,101



65,038



364,006



322,192


Income tax provision

19,348



1,239



75,018



65,914


Equity in loss of investees

437



273



1,360



637


Net income

$

149,316



$

63,526



$

287,628



$

255,641










Net income per ordinary share:








Basic

$

2.47



$

1.06



$

4.78



$

4.26


Diluted

$

2.41



$

1.03



$

4.68



$

4.17


Weighted-average ordinary shares used in per share calculations
- basic

60,476



60,108



60,196



60,030


Weighted-average ordinary shares used in per share calculations
- diluted

61,857



61,436



61,493



61,360


 

JAZZ PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)










September 30,

2018


December 31,

2017

ASSETS




Current assets:




Cash and cash equivalents

$

499,018



$

386,035


Investments

565,000



215,000


Accounts receivable, net of allowances

279,437



224,129


Inventories

43,435



43,245


Prepaid expenses

23,189



23,182


Other current assets

54,310



76,686


Total current assets

1,464,389



968,277


Property, plant and equipment, net

198,053



170,080


Intangible assets, net

2,787,281



2,979,127


Goodwill

932,422



947,537


Deferred tax assets, net

37,582



34,559


Deferred financing costs

10,058



7,673


Other non-current assets

56,003



16,419


Total assets

$

5,485,788



$

5,123,672


LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

37,373



$

24,368


Accrued liabilities

257,453



198,779


Current portion of long-term debt

33,387



40,605


Income taxes payable

7,139



21,577


Deferred revenue

5,935



8,618


Total current liabilities

341,287



293,947


Deferred revenue, non-current

10,934



16,115


Long-term debt, less current portion

1,560,582



1,540,433


Deferred tax liabilities, net

337,021



383,472


Other non-current liabilities

208,647



176,608


Total shareholders' equity

3,027,317



2,713,097


Total liabilities and shareholders' equity

$

5,485,788



$

5,123,672


 

JAZZ PHARMACEUTICALS PLC

SUMMARY OF CASH FLOWS

(In thousands)

(Unaudited)










Nine Months Ended

September 30,


2018


2017

Net cash provided by operating activities

$

574,558



$

488,528


Net cash used in investing activities

(428,229)



(237,072)


Net cash used in financing activities

(32,674)



(369,127)


Effect of exchange rates on cash and cash equivalents

(672)



4,323


Net increase (decrease) in cash and cash equivalents

$

112,983



$

(113,348)


 

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,


2018


2017


2018


2017

GAAP reported net income

$

149,316



$

63,526



$

287,628



$

255,641


Intangible asset amortization

46,989



47,313



154,955



99,164


Share-based compensation expense

25,103



27,126



75,718



79,579


Estimated loss contingency





57,000




Impairment charges and disposal costs





43,969




Upfront and milestone payments



75,000



11,000



75,000


Expenses related to certain legal proceedings







6,000


Non-cash interest expense

11,165



7,855



32,669



19,234


Income tax effect of above adjustments

(13,786)



(23,171)



(47,145)



(38,393)


U.S. Tax Cuts and Jobs Act impact

2,868





2,868




Non-GAAP adjusted net income

$

221,655



$

197,649



$

618,662



$

496,225










GAAP reported net income per diluted share

$

2.41



$

1.03



$

4.68



$

4.17


Non-GAAP adjusted net income per diluted share

$

3.58



$

3.22



$

10.06



$

8.09


Weighted-average ordinary shares used in diluted per share calculations

61,857



61,436



61,493



61,360


 

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, 2018


September 30, 2017


GAAP
Reported


Adjustments


Non-GAAP
Adjusted


GAAP
Reported


Adjustments


Non-GAAP
Adjusted

Total revenues

$

469,373



$



$

469,373



$

411,855



$



$

411,855


Cost of product sales (excluding amortization of intangible assets)

26,574



(1,525)


(a) 

25,049



31,203



(1,573)


(a) 

29,630


Selling, general and administrative

155,873



(18,978)


(b) 

136,895



124,523



(20,903)


(b) 

103,620


Research and development

51,160



(4,600)


(c) 

46,560



47,362



(4,650)


(c) 

42,712


Intangible asset amortization

46,989



(46,989)





47,313



(47,313)




Acquired in-process research and development







75,000



(75,000)




Interest expense, net

18,920



(11,165)


(d) 

7,755



19,192



(7,855)


(d) 

11,337


Foreign exchange loss

756





756



2,224





2,224


Income before income tax provision and equity in loss of investees

169,101



83,257


(e) 

252,358



65,038



157,294


(e) 

222,332


Income tax provision

19,348



10,918


(f) 

30,266



1,239



23,171


(f) 

24,410


Effective tax rate (g)

11.4

%




12.0

%


1.9

%




11.0

%

Equity in loss of investees

437





437



273





273


Net income

$

149,316



$

72,339


(h) 

$

221,655



$

63,526



$

134,123


(h) 

$

197,649


Net income per diluted share

$

2.41





$

3.58



$

1.03





$

3.22


 

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, 2018


September 30, 2017


GAAP
Reported


Adjustments


Non-GAAP
Adjusted


GAAP
Reported


Adjustments


Non-GAAP
Adjusted

Total revenues

$

1,414,465



$



$

1,414,465



$

1,182,294



$



$

1,182,294


Cost of product sales (excluding amortization of intangible assets)

95,207



(5,022)


(i) 

90,185



84,940



(4,346)


(i) 

80,594


Selling, general and administrative

521,665



(115,085)


(j) 

406,580



401,106



(67,582)


(j) 

333,524


Research and development

169,959



(24,684)


(k) 

145,275



132,447



(13,651)


(k) 

118,796


Intangible asset amortization

154,955



(154,955)





99,164



(99,164)




Impairment charges

42,896



(42,896)










Acquired in-process research and development







77,000



(75,000)



2,000


Interest expense, net

59,171



(32,669)


(d) 

26,502



56,330



(19,234)


(d) 

37,096


Foreign exchange loss

5,181





5,181



9,115





9,115


Loss on extinguishment and modification of debt

1,425





1,425








Income before income tax provision and equity in loss of investees

364,006



375,311


(l) 

739,317



322,192



278,977


(l) 

601,169


Income tax provision

75,018



44,277


(m) 

119,295



65,914



38,393


(m) 

104,307


Effective tax rate (g)

20.6

%




16.1

%


20.5

%




17.4

%

Equity in loss of investees

1,360





1,360



637





637


Net income

$

287,628



$

331,034


(n) 

$

618,662



$

255,641



$

240,584


(n) 

$

496,225


Net income per diluted share

$

4.68





$

10.06



$

4.17





$

8.09






















Explanation of Adjustments and Certain Line Items (in thousands):


(a)

Share-based compensation expense of $1,525 and $1,573 for the three months ended September 30, 2018 and 2017, respectively.

(b)

Share-based compensation expense of $18,978 and $20,903 for the three months ended September 30, 2018 and 2017, respectively.

(c)

Share-based compensation expense of $4,600 and $4,650 for the three months ended September 30, 2018 and 2017, respectively.

(d)

Non-cash interest expense associated with debt discount and debt issuance costs for the respective three-month period.

(e)

Sum of adjustments (a) through (d) plus the adjustments for intangible asset amortization and acquired in-process research and development, as applicable, for the respective three-month period.

(f)

Income tax adjustments related to the income tax effect of adjustments between GAAP reported and non-GAAP adjusted net income of $13,786 and $23,171 offset by the impact of the U.S. Tax Cuts and Jobs Act of $2,868 and $0 for the three months ended September 30, 2018 and 2017, respectively.

(g)

Income tax provision divided by income before income tax provision and equity in loss of investees 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 $5,022 and $4,346 for the nine months ended September 30, 2018 and 2017, respectively.

(j)

Share-based compensation expense of $57,012 and $61,582, estimated loss contingency of $57,000 and $0, disposal costs of $1,073 and $0 and expenses related to certain legal proceedings of $0 and $6,000 for the nine months ended September 30, 2018 and 2017, respectively.

(k)

Share-based compensation expense of $13,684 and $13,651 and upfront and milestone payments of $11,000 and $0 for the nine months ended September 30, 2018 and 2017, respectively.

(l)

Sum of adjustments (i), (j), (k) and (d) plus the adjustments for intangible asset amortization, impairment charges and acquired in-process research and development, as applicable, for the respective nine-month period.

(m)

Income tax adjustments related to the income tax effect of adjustments between GAAP reported and non-GAAP adjusted net income of $47,145 and $38,393 offset by the impact of the U.S. Tax Cuts and Jobs Act of $2,868 and $0 for the nine months ended September 30, 2018 and 2017, respectively.

(n)

Net of adjustments (l) and (m) for the respective nine-month period.

 

JAZZ PHARMACEUTICALS PLC

RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED 2018 NET INCOME GUIDANCE

(In millions, except per share amounts)

(Unaudited)



GAAP net income*

$350 - $420

Intangible asset amortization

200 - 220

Share-based compensation expense

95 - 110

Estimated loss contingency

57

Impairment charges and disposal costs

44

Milestone payments

11

Non-cash interest expense

40 - 50

Income tax effect of above adjustments*

(55) - (65)

U.S. Tax Cuts and Jobs Act impact*

3

Non-GAAP adjusted net income

$780 - $815



GAAP net income per diluted share

$5.70 - $6.90

Non-GAAP adjusted net income per diluted share 

$12.75 - $13.25



Weighted-average ordinary shares used in per share calculations

62










* Updated November 6, 2018.


 

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