Jazz Pharmaceuticals Inc. has a market cap of $364.2 million; its shares were traded at around $9.45 with a P/E ratio of 30.5 and P/S ratio of 2.9. JAZZ is in the portfolios of Steven Cohen of SAC Capital Advisors.
Highlight of Business Operations:Although we have incurred significant cumulative net losses since our inception, we reported income from operations in our most recent quarters. This improvement in our operating performance was due to a significant increase in revenue from product sales. The improvement in our operating performance has allowed us to strengthen our balance sheet by raising $57.1 million in net proceeds through a public offering of shares of our common stock in May 2010 and by reducing and refinancing our debt, thereby lowering our ongoing debt service obligations. During the first half of 2010, we reduced our long-term debt from $119.5 million to $50.0 million and reduced the interest rate on our long-term debt beginning July 1, 2010 from 15% to a variable rate which was 5.75% at June 30, 2010.
Research and development costs were lower in the three and six months ended June 30, 2010 compared to the same periods in 2009 primarily due to lower spending on JZP-6 as we focused on the prosecution of our NDA for our JZP-6 product candidate and our ongoing safety study for JZP-6, which we expect to complete in 2010, partially offset by higher spending as a result of development work on oral tablet forms of sodium oxybate, the active pharmaceutical ingredient in both Xyrem and JZP-6. As a result, our direct development costs decreased $4.1 million and $10.1 million in the three and six months ended June 30, 2010, respectively compared to the same periods in 2009, when we were actively conducting our second JZP-6 Phase III clinical trial and enrolling patients in the long-term safety study. Our direct development costs consisted primarily of out-sourced study costs, including investigator payments and consulting fees, and do not include salaries and benefits or general administrative costs related to maintaining a research and development organization. Salaries and benefits expenses including stock-based compensation and accrued incentive compensation incurred in the research and development organization increased $890,000 and $1.7 million in the three and six months ended June 30, 2010, respectively, compared to the same periods in 2009. We expect research and development spending in 2010 to be lower than 2009 and to continue to be focused primarily on prosecution of the JZP-6 NDA, completion of the JZP-6 safety study, development work on oral tablet forms of sodium oxybate and JZP-8 activities.
Interest expense in the three and six months ended June 30, 2010 and 2009 relates primarily to interest on our $119.5 million of senior secured notes, which we repaid in part in March and May 2010 and the remainder in full in June 2010 and, to a small extent, interest on our liability under a government settlement. Interest on the senior secured notes was comprised of quarterly cash payments for interest, amortization of a debt discount related to warrants that were issued in conjunction with the senior secured notes and amortization of debt issuance costs. We expect a net decrease in interest expense in 2010 compared to 2009, due to the repayment in full of the senior secured notes, which bore interest at a fixed rate of 15%, partially offset by interest due on the $50.0 million principal amount of the term loan under our new credit agreement, which bore interest at a variable rate that was 5.75% as of June 30, 2010.
The loss on extinguishment of debt relates to the repayment of our senior secured notes in May and June 2010 and is comprised of $8.5 million of prepayment premiums and fees, and $3.8 million of non-cash expense related to the write-off of unamortized debt discount and debt issuance costs.
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