Jazz Pharmaceuticals Announces Second Quarter 2022 Financial Results and Affirms 2022 Financial Guidance

On August 3, 2022 Jazz Pharmaceuticals plc (Nasdaq: JAZZ) reported financial results for the second quarter of 2022, affirmed 2022 financial guidance1 and provided business updates (Press release, Jazz Pharmaceuticals, AUG 3, 2022, View Source [SID1234617443]).

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

                  Schedule Your 30 min Free Demo!

"We’ve had a highly productive second quarter across commercial, R&D and corporate development that has resulted in meaningful progress towards Vision 2025. We have also achieved an important milestone and for the first time there are now more patients taking Xywav than Xyrem," said Bruce Cozadd, chairman and CEO of Jazz Pharmaceuticals. "Execution remains our primary focus as we aim to maximize the value of Xywav in idiopathic hypersomnia (IH) and narcolepsy, grow Epidiolex in the U.S. and expand the launch of Epidyolex globally, build on the successful launch of Rylaze and progress the development program for Zepzelca. We are also advancing a number of mid- and late-stage programs in our pipeline with multiple Investigational New Drug (IND) applications expected through 2023, and are pleased our pan-RAF inhibitor, JZP815, was cleared by the FDA to enter clinical development."

"We have achieved our net leverage2 ratio target ahead of our stated timeline and therefore our focus will be to continue to manage the balance sheet through disciplined capital allocation, providing us with further flexibility to pursue corporate development opportunities," said Renée Galá, executive vice president and chief financial officer of Jazz Pharmaceuticals. "Our strong second quarter financial results and top- and bottom-line growth put us well on track to achieve our 2022 financial guidance. Operational excellence will also remain a key area of focus for us as we build the foundation for future growth and progress toward achieving Vision 2025."

Key Highlights

Business and Execution

Continued robust launch momentum of Xywav for IH.
Achieved a significant milestone in 2Q22, with more active oxybate patients taking Xywav than Xyrem.
Completed Marketing Authorization Application (MAA) submission for JZP458 (approved as Rylaze in the U.S.) to European Medicines Agency (EMA) in May 2022, with potential for approval in 2023.
Announced the U.S. Food and Drug Administration (FDA) cleared the IND application that will allow JZP815 to enter clinical development.
Strengthened leadership in sleep medicine with addition of a potent, highly selective oral orexin-2 receptor agonist, JZP441 (DSP-0187).
Expanded oncology pipeline with JZP898 (WTX-613), a differentiated, conditionally activated IFNα INDUKINE molecule.
Strategically divested Sunosi, allowing for increased investment and sharpened focus on highest strategic priorities.
Financial

Growing and durable commercial franchises drove 2Q22 total revenues of $932.9 million; 24% increase compared to the same period in 2021.
2022 total revenue guidance affirmed at $3.5 to $3.7 billion.
Achieved net leverage ratio target six months ahead of our stated timeline. Net leverage ratio of 3.2×2 as of June 30, 2022, demonstrates rapid deleveraging following the close of the GW Pharmaceuticals (GW) acquisition.
_______________________

1. The Company has updated its GAAP guidance primarily to reflect the impact of foreign currency exchange movements on non-USD denominated amortization and inventory step up expense. The Company is affirming its non-GAAP adjusted guidance.

2. On a pro forma non-GAAP adjusted basis. Non-GAAP net leverage ratio is a non-GAAP financial measure. For further information, see "Non-GAAP Financial Measures."

Business Updates

Key Commercial Products

Oxybate (Xywav and Xyrem):

Net product sales for the combined oxybate business increased 10% to $504.4 million in 2Q22 compared to the same period in 2021.
Average active oxybate patients on therapy was approximately 17,100 in 2Q22, an increase of approximately 8% compared to the same period in 2021.
The Company achieved a significant milestone in 2Q22, with more active oxybate patients taking Xywav than Xyrem.
Xywav (calcium, magnesium, potassium, and sodium oxybates) oral solution:

Xywav net product sales increased 89% to $235.0 million in 2Q22 compared to the same period in 2021.
There were approximately 8,700 active Xywav patients exiting 2Q22.
Xywav has broad patent protection to 2033.
Xywav for Narcolepsy:

There were approximately 7,550 narcolepsy patients taking Xywav exiting 2Q22.
The benefits of lowering sodium intake continue to resonate with patients and prescribers. In June 2021, FDA recognized seven years of Orphan Drug Exclusivity (ODE), through July 2027, for Xywav and published its summary of clinical superiority findings stating that "Xywav is clinically superior to Xyrem by means of greater safety because Xywav provides a greatly reduced chronic sodium burden compared to Xyrem." Further, FDA stated that "the differences in the sodium content of the two products at the recommended doses will be clinically meaningful in reducing cardiovascular morbidity in a substantial proportion of patients for whom the drug is indicated."
Xywav for Idiopathic Hypersomnia (IH):

Continued robust launch momentum with approximately 1,150 IH patients taking Xywav exiting 2Q22.
The Company has achieved its goal of obtaining similar payer coverage to narcolepsy with coverage now at approximately 90% of commercial lives for IH.
The Company launched Xywav for IH in November 2021, with initial launch efforts focused on the approximately 37,000 currently diagnosed patients in the U.S. who are actively seeking healthcare. Healthcare providers are excited to have a treatment option with positive and compelling clinical trial results that addresses IH and not just its symptoms.
FDA recognized ODE for IH in January 2022, extending regulatory exclusivity to August 2028.
Xyrem (sodium oxybate) oral solution:

Xyrem net product sales decreased 19% to $269.4 million in 2Q22 compared to the same period in 2021, reflecting the continued adoption of Xywav by patients with narcolepsy.
Epidiolex/Epidyolex (cannabidiol):

Epidiolex/Epidyolex net product sales increased 12% to $175.3 million in 2Q22 compared to the same period in 2021, on a proforma basis.
Epidyolex is now commercially available and fully reimbursed in four of the five key European markets: United Kingdom, Germany, Italy and Spain, with an anticipated launch in France this year. The Company anticipates a total of 10 new market and indication launches across 2022, continuing to drive growth of Epidyolex ex-U.S.
The Company expects to initiate a Phase 3 pivotal trial of Epidiolex for Epilepsy with Myoclonic-Atonic Seizures (EMAS), the fourth target indication for Epidiolex, shortly.
The Company expects to initiate a pivotal Phase 3 trial for Epidiolex in Japan for Lennox-Gastaut Syndrome (LGS), Tuberous Sclerosis Complex (TSC) and Dravet Syndrome (DS) this year.
Zepzelca (lurbinectedin):

Zepzelca net product sales increased 22% to $68.3 million in 2Q22 compared to the same period in 2021.
The Company is pleased to have established Zepzelca as the treatment of choice in the second-line small cell lung cancer (SCLC) setting after only eighteen months on the market.
Zepzelca development program highlights:
In March 2022, the first patient was enrolled in the EMERGE-201 Phase 2 basket trial evaluating Zepzelca as monotherapy in select relapsed/refractory solid tumors.
In November 2021, Jazz and collaborator F. Hoffmann-La Roche Ltd (Roche) initiated a Phase 3 trial to evaluate first-line use of Zepzelca in combination with Tecentriq (atezolizumab), compared to Tecentriq alone, as maintenance therapy in patients with extensive-stage SCLC after induction chemotherapy.
The Company’s partner, PharmaMar, initiated a confirmatory trial, LAGOON, in second-line SCLC in December 2021. If positive, this trial could confirm the benefit of Zepzelca in the treatment of SCLC when patients progress following first-line treatment with a platinum-based regimen.
Rylaze (asparaginase erwinia chrysanthemi (recombinant)-rywn):

Rylaze net product sales were $73.0 million in 2Q22.
The continued strong launch of Rylaze reflects the significant unmet patient need for a high-quality, reliable supply of Erwinia asparaginase for patients with acute lymphoblastic leukemia.
In May 2022, the Company completed the MAA submission to EMA for a M/W/F dosing schedule and IM and IV administration for JZP458 (approved as Rylaze in the U.S.) with potential for approval in 2023. The Company is also advancing the program for potential submission, approval and launch in Japan.
In January 2022, the Company completed the submission of a supplemental Biologics Licensing Application (sBLA) to FDA seeking approval for a M/W/F IM dosing schedule for Rylaze. In April 2022, the Company completed the submission of an sBLA to FDA seeking approval for IV administration of Rylaze. Both submissions are being reviewed under the Real-time Oncology Review Program (RTOR).
Corporate Development

JZP441 (DSP-0187) Agreement:

On May 4, 2022, the Company and Sumitomo Pharma Co., Ltd. (Sumitomo) announced an exclusive license agreement for JZP441, a potent, highly selective oral orexin-2 receptor agonist designed to activate orexin signaling.
JZP898 (WTX-613) Agreement:

On April 7, 2022, the Company and Werewolf Therapeutics (Werewolf) announced a licensing agreement under which the Company acquired exclusive global development and commercialization rights to Werewolf’s investigational molecule, WTX-613, now called JZP898, a differentiated, conditionally activated IFNα INDUKINE molecule.
Sunosi (solriamfetol) Strategic Divestiture:

On May 9, 2022, the Company completed the U.S. divestiture of Sunosi to Axsome Therapeutics (Axsome).
The Company and Axsome are committed to ensuring that patients receive uninterrupted access to Sunosi throughout the transition.
Key Pipeline Highlights

Nabiximols:

On June 28, 2022, the Company announced the Phase 3 RELEASE MSS1 trial (NCT04657666) did not meet the primary endpoint of change in Lower Limb Muscle Tone-6 (LLMT-6) between baseline and Day 21, as measured by the Modified Ashworth Scale (MAS).
The Company continues to assess the RELEASE MSS1 trial results, which will be presented at a future medical meeting.
Suvecaltamide (JZP385):

Suvecaltamide, a highly selective modulator of T-type calcium channels, is in clinical development for the treatment of essential tremor.
Patient enrollment is ongoing and top-line data read-out is anticipated in 1H24.
JZP150:

JZP150, a selective fatty acid amide hydrolase, or FAAH, inhibitor, is in clinical development for the potential treatment of post-traumatic stress disorder (PTSD).
Patient enrollment is ongoing and top-line data read-out is anticipated in late 2023.
The Company received Fast Track Designation for JZP150 development in PTSD from FDA in 4Q21, underscoring the significant unmet medical needs of patients.
JZP815:

In 2Q22, the Company announced that FDA cleared the IND application, which will allow JZP815 to enter clinical development.
The pan-RAF inhibitor program is part of a novel class of next-generation precision oncology therapies that has the potential to benefit cancer patients with high unmet needs in multiple different solid tumors.
The Company, together with its preclinical collaboration partner, Redx Pharma, presented its first preclinical data in a poster at the American Association for Cancer Research (AACR) (Free AACR Whitepaper) Annual Meeting in April 2022.
JZP815 inhibited tumor growth in several RAS- and BRAF-mutated solid tumor models, and demonstrated enhanced activity when combined with other MAPK pathway inhibitors.
Financial Highlights

1. Adjusted EPS for the three and six months ended June 30, 2022 was impacted by $0.51 per share and $0.95 per share, respectively, following the adoption of ASU 2020-06.

2. The Company adopted ASU No. 2020-06, "Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity", (ASU 2020-06) on January 1, 2022. Following adoption, diluted EPS must be calculated using the if-converted method which assumes full conversion of our Exchangeable Senior Notes.

GAAP net income (loss) in 2Q22 was $34.7 million, or $0.55 per diluted share, compared to $(363.3) million, or $(6.11) per diluted share, for 2Q21. Non-GAAP adjusted net income in 2Q22 was $305.5 million, or $4.30 per diluted share, compared to $240.6 million, or $3.90 per diluted share, for 2Q21. Reconciliations of applicable GAAP reported to non-GAAP adjusted information are included at the end of this press release.

1. Net product sales for Epidiolex/Epidyolex and Sativex are included from the acquisition of GW on May 5, 2021.

2. Net product sales for Sunosi U.S. are included until the date of divestment to Axsome of May 9, 2022.

Total revenues increased 24% in 2Q22 compared to the same period in 2021.

Neuroscience net product sales in 2Q22 increased 20% to $696.8 million compared to the same period in 2021 primarily driven by Epidiolex/Epidyolex net product sales of $175.3 million, following the acquisition of GW. In 2Q22, oxybate net product sales increased 10% to $504.4 million.
Oncology net product sales in 2Q22 increased 40% to $229.8 million compared to the same period in 2021 primarily driven by Rylaze net product sales in 2Q22 of $73.0 million following product launch in July 2021, partially offset by Erwinaze/Erwinase net product sales in 2Q21 of $28.3 million.
Operating Expenses and Effective Tax Rate

1. The fluctuations in the GAAP effective tax rates for the three and six months ended June 30, 2022 and 2021 are as a result of changes in the mix of pre-tax income and losses across our jurisdictions and the impact of the change in the statutory tax rate in the U.K. on the 2021 periods.

Operating expenses increased in 2Q22 over the prior year period primarily due to the following:

Cost of product sales increased in 2Q22 compared to the same period in 2021, on a GAAP and on a non-GAAP adjusted basis, due to increased net product sales. In addition, GAAP cost of product sales was impacted by a higher acquisition accounting inventory fair value step-up expense in 2Q22.
Selling, general and administrative (SG&A) expenses decreased in 2Q22 compared to the same period in 2021, on a GAAP basis, primarily due to lower GW acquisition related transaction and integration expenses, offset by the loss on disposal of Sunosi. SG&A expenses, on a GAAP and non-GAAP adjusted basis, included increased compensation-related expenses driven by the inclusion of GW related headcount costs for the full quarter offset by lower Sunosi U.S. marketing costs in 2Q22.
Research and development (R&D) expenses increased in 2Q22 compared to the same period in 2021, on a GAAP and on a non-GAAP adjusted basis, primarily due to the inclusion of a full quarter of GW employee costs and clinical program spend for Epidiolex and nabiximols in 2Q22, offset by a reduction in costs related to JZP458 (Rylaze) and JZP385.
Acquired in-process research and development (IPR&D) expense in 2Q22 on a GAAP and on a non-GAAP adjusted basis primarily related to upfront payments of $50.0 million and $15.0 million to Sumitomo and Werewolf, respectively, in connection with our licensing agreements.
Cash Flow and Balance Sheet

As of June 30, 2022, cash, cash equivalents and investments were $771.3 million, and the outstanding principal balance of the Company’s long-term debt was $6.1 billion compared to $6.4 billion as of December 31, 2021. In addition, the Company had undrawn borrowing capacity under a revolving credit facility of $500.0 million. For the six months ended June 30, 2022, the Company generated $512.0 million of cash from operations. In 1Q22 the Company repaid in full the $251.0 million remaining aggregate principal amount of the Euro Term Loan B.

2022 Financial Guidance

The Company has updated its GAAP guidance primarily to reflect the impact of foreign currency exchange movements on non-USD denominated amortization and inventory step up expense. The Company is affirming its non-GAAP adjusted guidance.

1. Excludes $270-$300 million of amortization of acquisition-related inventory fair value step-up, $13-$15 million of share-based compensation expense and $2 million of transaction and integration related expenses relating to the acquisition of GW from estimated GAAP gross margin.

2. Excludes $148-$168 million of share-based compensation expense, $31-$41 million of transaction and integration related expenses relating to the acquisition of GW and $40-$50 million of costs related to the disposal of Sunosi from estimated GAAP SG&A expenses.

3. Excludes $59-$67 million of share-based compensation expense and $2 million of transaction and integration related expenses relating to the acquisition of GW from estimated GAAP R&D expenses.

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

5. Non-GAAP adjusted EPS guidance for 2022 reflects dilution of $2.05, at the midpoint, post adoption of ASU 2020-06. Diluted EPS calculations for 2022 include 9 million shares related to the assumed conversion of the Exchangeable Senior Notes and the associated interest expense add-back to net income of $29 million on a GAAP basis, when dilutive, and $25 million on a non-GAAP basis, under the "if converted" method.

6. 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 2022 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. ET (9:30 p.m. IST) to provide a business and financial update and discuss its 2022 second quarter results.

Interested parties may register for the call in advance here or via the Investors section of the Jazz Pharmaceuticals website at www.jazzpharmaceuticals.com. Please connect to the website prior to the start of the call to ensure adequate time for any software downloads that may be necessary.

A replay of the webcast will be available via the Investors section of the Jazz Pharmaceuticals website at www.jazzpharmaceuticals.com.