On February 28, 2024 Jazz Pharmaceuticals plc (Nasdaq: JAZZ) reported financial results for the full year and fourth quarter of 2023 and provided guidance for 2024 (Press release, Jazz Pharmaceuticals, FEB 28, 2024, View Source [SID1234640620]).

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"2023 was a year of continued strong execution that delivered top- and bottom-line growth and over $3.8 billion in total revenue. Sleep1 revenue exceeded $1.9 billion, Oncology revenue surpassed $1 billion and Epidiolex remains on track to deliver on its blockbuster potential, demonstrating our progress towards Vision 2025 targets. We also meaningfully advanced our late-stage pipeline and are pleased to note enrollment of the Phase 3 Zepzelca trial in first-line small cell lung cancer has been completed," said Bruce Cozadd, chairman and chief executive officer of Jazz Pharmaceuticals. "Looking to 2024, we expect double-digit percentage revenue growth across combined key growth drivers: Xywav, Epidiolex and Rylaze. We look forward to multiple near-term, late-stage pipeline catalysts and anticipate completing the rolling BLA submission for zanidatamab in second-line biliary tract cancer in the first half of 2024. We expect our disciplined capital allocation to enable investment in our key commercial growth drivers for near-term growth, in our pipeline for long-term growth and to provide flexibility for corporate development."

Key Highlights

Achieved first $1 billion revenue quarter.
Key growth drivers:
Xywav net product sales grew 33% year-over-year; annualizing2 at $1.35 billion.
Epidiolex/Epidyolex net product sales grew 15% year-over-year; annualizing2 at over $900 million.
Rylaze net product sales grew 40% year-over-year; annualizing2 at over $400 million.
Initiated zanidatamab 1L BTC confirmatory trial in 1Q24.
Multiple near-term, late-stage pipeline catalysts anticipated:
Completion of rolling BLA submission for accelerated approval in 2L BTC in 1H24.
Top-line PFS data from zanidatamab in Phase 3 1L GEA targeted for late 2024.
Suvecaltamide top-line data from Phase 2b trial in ET in late 1H24.
Top-line data from Epidyolex Phase 3 trial in Japan in 2H24.
Top-line data from Zepzelca 1L SCLC Phase 3 trial at the end of 2024 or early 2025.
The Company will host a virtual zanidatamab R&D Day on Tuesday, March 19, 2024.
2024 total revenue guidance of $4.0 to $4.2 billion, 7% top-line growth at the mid-point.
Total revenue guidance is underpinned by expectations of continued growth in net sales of Xywav in IH, Epidiolex/Epidyolex, our Oncology therapeutic area, and royalties on net sales of authorized generics of Xyrem offset by a continued decline in net sales of Xyrem.
_______________________

1 Total Sleep revenue includes: Xywav, branded Xyrem and high-sodium authorized generic royalty revenues.

2 Based on 4Q23 net product sales.

Business Updates

Key Commercial Products

Xywav (calcium, magnesium, potassium, and sodium oxybates) oral solution:

Xywav net product sales increased 33% to $1,273.0 million in 2023 and increased 20% to $337.0 million in 4Q23 compared to the same periods in 2022.
As the only low-sodium oxybate and the only therapy approved to treat IH, expect Xywav to remain the oxybate of choice.
There were approximately 12,300 active Xywav patients exiting 4Q23.
Results from the real-world TENOR study were published in Sleep Medicine. The most common reason cited for switching to Xywav was long-term health benefits due to lower sodium content of Xywav.
A review of scientific evidence was published in Neurology and Therapy showing oxybate regimens impart substantial and highly similar medical benefit on subjective and objective measures of sleep and daytime function regardless of dosing.
Xywav for Narcolepsy:

There were approximately 9,525 narcolepsy patients taking Xywav exiting 4Q23.
Xywav for Idiopathic Hypersomnia (IH):

There were approximately 2,775 IH patients taking Xywav exiting 4Q23.
Xyrem (sodium oxybate) oral solution:

Xyrem net product sales decreased 44% to $569.7 million in 2023 and decreased 57% to $106.7 million in 4Q23 compared to the same periods in 2022.
High-Sodium Oxybate Authorized Generic (AG) Royalties:

Royalties from high-sodium oxybate AGs were $75.9 million in 2023 and $39.4 million in 4Q23.
The Company expects high-sodium oxybate AG royalty revenue to exceed $200 million in 2024, which reflects an increase in the fixed-rate royalty structures of the AG agreements in 2024.
Epidiolex/Epidyolex (cannabidiol):

Epidiolex/Epidyolex net product sales increased 15% to $845.5 million in 2023 and increased 16% to $240.6 million in 4Q23 compared to the same periods in 2022.
Outside of the U.S., Epidyolex is approved in more than 35 countries with additional launches and reimbursement anticipated through the end of 2024.
Long-term and real-world data of treatment-resistant epilepsy were presented at AES 2023:
Data from long-term Expanded Access Program study demonstrated Epidiolex was associated with a sustained reduction in treatment-resistant, focal-onset seizures through 144 weeks.
Interim results from the BECOME-TSC survey of caregivers of patients with tuberous sclerosis complex (TSC) demonstrated improved day-to-day function, cognition, language and communication and emotional and social function in patients.
Rylaze/Enrylaze (asparaginase erwinia chrysanthemi (recombinant)-rywn):

Rylaze net product sales increased 40% to $394.2 million in 2023 and increased 26% to $101.7 million in 4Q23 compared to the same periods in 2022.
Initiated European rolling launch of Enrylaze (JZP458; a recombinant Erwinia asparaginase or crisantaspase), marketed as Rylaze in the U.S. and Canada, in 4Q23.
Zepzelca (lurbinectedin):

Zepzelca net product sales increased 7% to $289.5 million in 2023 and increased 3% to $74.0 million in 4Q23 compared to the same periods in 2022.
Enrollment in the Phase 3 trial evaluating first-line (1L) use of Zepzelca in combination with Tecentriq (atezolizumab) in small cell lung cancer, in partnership with Roche, is complete; expect top-line progression-free survival (PFS) data readout at the end of 2024 or early 2025.
Key Pipeline Highlights

Zanidatamab:

Initiated the zanidatamab rolling biologics license application (BLA) submission in 4Q23 for accelerated approval in second-line (2L) biliary tract cancer (BTC) and expect to complete the rolling submission 1H24.
Initiated confirmatory trial in 1L metastatic BTC, where there remains unmet patient need, in 1Q24.
The pivotal HERIZON-GEA-01 trial, evaluating zanidatamab in 1L gastroesophageal adenocarcinoma (GEA), is ongoing and the Company is targeting top-line PFS data in late 2024. The Company increased enrollment in the trial from 714 to 918 to improve statistical power for overall survival analysis, while maintaining PFS top-line readout.
Data presented at SABCS in heavily pretreated patients with HER2+/HR+ metastatic breast cancer demonstrated 67% PFS at six months with a median PFS of 12 months.
In addition to achieving clinically meaningful improvements, data presented at the ASCO (Free ASCO Whitepaper) Gastrointestinal Cancers Symposium in January 2024 demonstrated that patients who responded to zanidatamab also reported improved quality of life with less pain interference in the Phase 2b HERIZON-BTC-01 trial.
Suvecaltamide (JZP385):

Patient enrollment is ongoing in the Phase 2b essential tremor (ET) trial; top-line data readout is anticipated late 1H24.
A Phase 2 trial in patients with Parkinson’s disease tremor is ongoing.
JZP898:

Initiated a Phase 1 first-in-human clinical trial in solid tumors in 4Q23.
Corporate Development

KRAS Inhibitor Program Agreement:

In February 2024, the Company acquired Redx Pharma’s KRAS inhibitor program, which includes G12D selective and pan-KRAS molecules, further expanding Jazz’s early-stage oncology pipeline.
Ion Channel Targets Agreement:

In November 2023, the Company and Autifony announced an exclusive global license and collaboration agreement to discover and develop drug candidates for two different ion channel targets associated with neurological disorders.
Continued Repurchases under Previously Announced $1.5 Billion Share Repurchase Program

The Company continued repurchases of its ordinary shares on the open market in the fourth quarter of 2023 as part of its previously authorized and announced share repurchase program. As of December 31, 2023, approximately $161 million remained available and authorized for share repurchases, after the purchase of approximately $100 million of shares during the fourth quarter of 2023. The timing and amount of repurchases under the program 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 regulatory requirements and market conditions.

Financial Highlights

Three Months Ended

December 31,

Year Ended

December 31,

(In thousands, except per share amounts)

2023

2022

2023

2022

Total revenues

$ 1,011,935

$ 972,123

$ 3,834,204

$ 3,659,374

GAAP net income (loss)

$ 94,154

$ (240,724)

$ 414,832

$ (224,060)

Non-GAAP adjusted net income (loss)

$ 345,286

$ (4,239)

$ 1,295,824

$ 933,598

GAAP earnings (loss) per share

$ 1.42

$ (3.82)

$ 6.10

$ (3.58)

Non-GAAP adjusted EPS

$ 5.02

$ (0.07)

$ 18.29

$ 13.20

GAAP net income for 2023 was $414.8 million, or $6.10 per diluted share, compared to a GAAP net loss of $(224.1) million, or $(3.58) per diluted share, for 2022. GAAP net income for 4Q23 was $94.2 million, or $1.42 per diluted share, compared to a GAAP net loss of $(240.7) million, or $(3.82) per diluted share, for 4Q22.

Non-GAAP adjusted net income for 2023 was $1,295.8 million, or $18.29 per diluted share, compared to $933.6 million, or $13.20 per diluted share, for 2022. Non-GAAP adjusted net income for 4Q23 was $345.3 million, or $5.02 per diluted share, compared to a Non-GAAP adjusted net loss of $(4.2) million, or $(0.07) per diluted share, for 4Q22.

Reconciliations of applicable GAAP reported to non-GAAP adjusted information are included at the end of this press release.

Total Revenues

Three Months Ended

December 31,

Year Ended

December 31,

(In thousands)

2023

2022

2023

2022

Xywav

$ 337,019

$ 281,384

$ 1,272,977

$ 958,425

Xyrem

106,721

247,496

569,730

1,020,453

Epidiolex/Epidyolex

240,622

206,998

845,468

736,398

Sativex

5,137

4,721

19,668

16,825

Sunosi1

—

—

—

28,844

Total Neuroscience

689,499

740,599

2,707,843

2,760,945

Rylaze

101,747

80,972

394,226

281,659

Zepzelca

74,010

71,969

289,533

269,912

Defitelio/defibrotide

51,083

40,653

184,000

194,290

Vyxeos

46,912

30,266

147,495

127,980

Total Oncology

273,752

223,860

1,015,254

873,841

Other

4,088

3,067

13,846

6,643

Product sales, net

967,339

967,526

3,736,943

3,641,429

High-sodium oxybate AG royalty revenue

39,387

—

75,918

—

Other royalty and contract revenues

5,209

4,597

21,343

17,945

Total revenues

$ 1,011,935

$ 972,123

$ 3,834,204

$ 3,659,374

___________________________

1. Divestiture of Sunosi U.S. was completed in May 2022.

Total revenues increased 5% in 2023 and 4% in 4Q23 compared to the same periods in 2022.

Total neuroscience revenue, including high-sodium oxybate AG royalty revenue, of $2,783.8 million in 2023 and $728.9 million in 4Q23, was broadly in line with the same periods in 2022 and included increased Xywav and Epidiolex/Epidyolex net product sales, offset by decreased Xyrem revenues, reflecting the strong adoption of Xywav by existing Xyrem patients and the impact of high-sodium oxybate competition. High-sodium oxybate AG royalty revenue relates primarily to royalty revenue received from Hikma Pharmaceuticals plc on net sales of a high-sodium oxybate AG product.
Oncology net product sales increased 16% in 2023 and 22% in 4Q23 compared to the same periods in 2022, primarily driven by the continued growth in Rylaze product sales, which increased 40% to $394.2 million in 2023 and increased 26% to $101.7 million in 4Q23 compared to the same periods in 2022.
Operating Expenses and Effective Tax Rate

Three Months Ended

December 31,

Year Ended

December 31,

(In thousands, except percentages)

2023

2022

2023

2022

GAAP:

Cost of product sales

$ 107,243

$ 167,364

$ 435,577

$ 540,517

Gross margin

88.9 %

82.7 %

88.3 %

85.2 %

Selling, general and administrative

$ 396,034

$ 383,203

$ 1,343,105

$ 1,416,967

% of total revenues

39.1 %

39.4 %

35.0 %

38.7 %

Research and development

$ 216,608

$ 172,555

$ 849,658

$ 590,453

% of total revenues

21.4 %

17.8 %

22.2 %

16.1 %

Acquired in-process research and development

$ 18,000

$ 375,000

$ 19,000

$ 444,148

Intangible asset impairment charge

$ —

$ —

$ —

$ 133,648

Income tax benefit

$ (33,089)

$ (100,042)

$ (119,912)

$ (158,645)

Effective tax rate 1

(53.8) %

29.4 %

(40.2) %

42.6 %

_________________________

1.

The GAAP effective tax rate decreased for the three months and the year ended December 31, 2023 compared to the same periods in 2022, primarily due to the impact of payments made for acquired in-process research and development (IPR&D) in 2022. The year ended December 31, 2022 was also impacted by the recognition of the nabiximols impairment charge, partially offset by the change in income mix across jurisdictions.

Three Months Ended

December 31,

Year Ended

December 31,

(In thousands, except percentages)

2023

2022

2023

2022

Non-GAAP adjusted:

Cost of product sales

$ 71,238

$ 93,386

$ 269,079

$ 251,941

Gross margin

92.6 %

90.3 %

92.8 %

93.1 %

Selling, general and administrative

$ 300,520

$ 319,763

$ 1,110,948

$ 1,134,703

% of total revenues

29.7 %

32.9 %

29.0 %

31.0 %

Research and development

$ 201,107

$ 160,105

$ 784,811

$ 521,085

% of total revenues

19.9 %

16.5 %

20.5 %

14.2 %

Acquired in-process research and development

$ 18,000

$ 375,000

$ 19,000

$ 444,148

Income tax expense (benefit)

$ 20,475

$ (43,301)

$ 93,260

$ 94,695

Effective tax rate1

5.6 %

92.6 %

6.7 %

9.1 %

The non-GAAP effective tax rate decreased for the three months ended December 31, 2023 compared to the same period in 2022, primarily due to the impact of payments made for acquired IPR&D in 2022.

Changes in operating expenses in 2023 and 4Q23 over the prior year periods are primarily due to the following:

Cost of product sales decreased in 2023 and 4Q23 compared to the same periods in 2022, on a GAAP basis, primarily due to lower acquisition accounting inventory fair value step-up expense and the impact of an expense in 2022 for past royalties payable under a settlement agreement with Otsuka Pharmaceutical Co., Ltd, or the Otsuka past royalty expense, partially offset by changes in product mix. Cost of product sales, on a non-GAAP adjusted basis, increased in 2023 compared to the same period in 2022 primarily due to changes in product mix, partially offset by the Otsuka past royalty expense and decreased in 4Q23 compared to the same period in 2022 primarily due to the Otsuka past royalty expense, partially offset by changes in product mix.
Selling, general and administrative (SG&A) expenses, on a GAAP basis, decreased in 2023 compared to the same period in 2022, primarily due to the loss on disposal of Sunosi, restructuring costs and GW related integration costs incurred in 2022, together with a reduction in costs related to program terminations, partially offset by an impairment of facility assets in 2023. SG&A expenses, on a GAAP and on a non-GAAP adjusted basis, in 2023 included lower compensation-related expenses compared to 2022. SG&A expenses, on a GAAP basis, increased in 4Q23 compared to the same period in 2022, primarily due to an impairment of facility assets in 4Q23, offset by costs related to program terminations incurred in 2022. SG&A expenses, on a GAAP and on a non-GAAP adjusted basis, in 4Q23 included lower compensation-related and litigation expenses compared to 4Q22.
Research and development (R&D) expenses increased in 2023 and 4Q23 compared to the same periods in 2022, on a GAAP and on a non-GAAP adjusted basis, primarily due to the inclusion of costs related to zanidatamab, as well as our other key pipeline programs.
Acquired IPR&D expense in 4Q23 and 2023, on a GAAP and on a non-GAAP adjusted basis, primarily related to an upfront payment made in connection with our licensing and collaboration agreement with Autifony Therapeutics Limited. Acquired IPR&D expense in 4Q22, on a GAAP and on a non-GAAP adjusted basis, related to payments of $375.0 million to Zymeworks Inc., in connection with our licensing and collaboration agreement. Acquired IPR&D expense in 2022, on a GAAP and on a non-GAAP adjusted basis, also included upfront payments of $50.0 million to Sumitomo Pharma Co., Ltd in relation to our licensing agreement and $15.0 million to Werewolf Therapeutics, Inc., in connection with our licensing and collaboration agreement.
The intangible asset impairment charge in 2022, on a GAAP basis, related to the discontinuation of our nabiximols program.
Cash Flow and Balance Sheet

As of December 31, 2023, cash, cash equivalents and investments were $1.6 billion, and the outstanding principal balance of the Company’s long-term debt was $5.8 billion. In addition, the Company had undrawn borrowing capacity under a revolving credit facility of $500.0 million. For the year ended December 31, 2023, the Company generated $1,092.0 million of cash from operations reflecting strong business performance and continued financial discipline.

2024 Financial Guidance

Jazz Pharmaceutical’s full year 2024 financial guidance is as follows:

(In millions)

Guidance

Revenues

$4,000 – $4,200

–Neuroscience (includes royalties from high-sodium oxybate AG)

$2,800 – $2,950

–Oncology

$1,120 – $1,220

(In millions, except per share amounts and percentages)

GAAP

Non-GAAP

Gross margin %

89 %

93%1,6

SG&A expenses

$1,346 – $1,426

$1,170 – $1,2302,6

SG&A expenses as % of total revenues

32% – 36%

28% – 31%

R&D expenses

$877 – $935

$800 – $8503,6

R&D expenses as % of total revenues

21% – 23%

19% – 21%

Effective tax rate

(22)% – (3)%

10% – 13%4,6

Net income

$385 – $530

$1,275 – $1,3506

Net income per diluted share

$5.80 – $7.70

$18.15 – $19.356

Weighted-average ordinary shares used in per share calculations

71

71

___________________________

1.

Excludes $125-$145 million of amortization of acquisition-related inventory fair value step-up and $17-$19 million of share-based compensation expense.

2.

Excludes $176-$196 million of share-based compensation expense.

3.

Excludes $77-$85 million of share-based compensation expense.

4.

Excludes 32%-16% from the GAAP effective tax rate of (22)%-(3)% relating to the income tax effect of adjustments between GAAP net income and non-GAAP adjusted net income, resulting in a non-GAAP adjusted effective tax rate of 10%-13%.

5.

Diluted EPS calculations for 2024 include an estimated 6.4 million shares related to the assumed conversion of the 2.00% exchangeable senior notes due 2026, or the 2026 Notes, and the associated interest expense add-back to net income of $20 million and $18 million, on a GAAP and on a non-GAAP adjusted basis, respectively, 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 2024 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. GMT) to provide a business and financial update and discuss its 2023 full year and 4Q23 results and 2024 guidance.