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Jazz Pharmaceuticals Inc. Reports Operating Results (10-Q)

August 07, 2012 | About:
10qk

10qk

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Jazz Pharmaceuticals Inc. (JAZZ) filed Quarterly Report for the period ended 2012-06-30.

Jazz Pharmaceuticals Plc - Ordinary Shares has a market cap of $2.76 billion; its shares were traded at around $48.77 with a P/E ratio of 14.1 and P/S ratio of 10.1.

Highlight of Business Operations:

During the remainder of 2012, we expect to focus on executing on our strategy, as described above, as well as on completing the integration of our acquired businesses. Both this year and going forward, we anticipate that we will continue to face a number of challenges and risks to our business and the execution of our strategy. For example, while we now have a more diversified product portfolio, our financial results are significantly influenced by sales of Xyrem, which accounted for 69% of our net product sales for both the three and six months ended June 30, 2012. As a result, we continue to place a high priority on seeking to maintain and increase sales of Xyrem in its approved indications, while remaining focused on ensuring the safe and effective use of the product, and enforcing our intellectual property rights.

Xyrem product sales increased in the three and six months ended June 30, 2012 compared to the same periods in 2011, primarily due to price increases and to a lesser extent increases in sales volume of 11% in both periods. Luvox CR product sales increased in the three and six months ended June 30, 2012 compared to the same periods in 2011 due to price increases. Sales of products other than Xyrem and Luvox CR increased by $28.7 million and $53.1 million in the three and six months ended June 30, 2012, respectively, compared to the same periods in 2011 due to the inclusion of products from the Azur Merger and to a lesser extent, the inclusion of products from the EUSA Acquisition from the June 12, 2012 acquisition date. Prialt product sales included sales of $4.6 million in the six months ended June 30, 2012 related to a supply agreement to provide Prialt to Eisai Co. Limited for distribution and sale in Europe. We expect total product sales will increase in 2012 over 2011 due to growth in sales of Xyrem and Luvox CR and due to the inclusion of product sales from our expanded product portfolio resulting from the Azur Merger and the EUSA Acquisition.

An increase in royalties accounted for the modest increases in royalty and contract revenues in the three and six months ended June 30, 2012 compared to the same periods in 2011. We expect royalty and contract revenue to decrease slightly in 2012 as compared to 2011 due to a sales milestone payment received in 2011.

Cost of product sales increased in the three and six months ended June 30, 2012 compared to the same periods in 2011 primarily due to cost of product sales from the Azur Merger of $7.8 million and $14.2 million in the three and six months ended June 30, 2012, respectively, including purchase accounting inventory fair value step-up adjustments of $2.8 million and $5.2 million in the three and six months ended June 30, 2012, respectively. Cost of product sales related to products added to our portfolio as a result of the EUSA Acquisition from the June 12, 2012 acquisition date were not significant. Gross margin as a percentage of product sales was 88.0% and 88.9% in the three and six months ended June 30, 2012, respectively, compared to 94.7% and 94.5% for the same periods in 2011. We expect our gross margin percentage to decrease in 2012 compared to 2011 because of the effect of the Azur Merger and the EUSA Acquisition.

As of June 30, 2012, $475.0 million principal amount was outstanding on our term loan which is repayable in quarterly installments beginning in September 2012 equal to 5% of the original principal amount in the first year, 7.5% in the second year, 10% in each of the third and fourth years and 15% in each of the fifth and sixth years, with any remaining balance payable on the final maturity date. Borrowings under the term loan bear interest, at our option, at a rate equal to either the LIBOR rate, plus an applicable margin of 4.25% per annum (subject to a 1.0% LIBOR floor), or the prime lending rate, plus an applicable margin equal to 3.25% per annum (subject to a 2.0% prime rate floor). As of June 30, 2012, the interest rate on the term loan was 5.25%. Borrowings under the revolving credit facility bear interest, at our option, at a rate equal to either the LIBOR rate, plus an applicable margin of 4.00% per annum, or the prime lending rate, plus an applicable margin equal to 3.00% per annum, subject to reduction by 0.25% or 0.50% based upon our secured leverage ratio. The revolving credit facility has a commitment fee payable on the undrawn amount ranging from 0.25% to 0.50% per annum based upon our secured leverage ratio. We may make prepayments of principal without premium or penalty, except that a 1% premium would apply to a repayment via a repricing of the loan under the term loan effected on or prior to June 12, 2013. We are required to make mandatory prepayments of borrowings under the term loan (without payment of a premium) with net cash proceeds from certain non-ordinary course asset sales, issuances of debt (other than certain permitted debt) and casualty proceeds and condemnation awards; and, beginning with the fiscal year ending December 31, 2013, with 50% of our excess cash flow, as defined in the credit agreement (subject to increase to 75% if our secured leverage ratio exceeds 2.25 to 1.0, or decrease to 25% or 0% if our secured leverage ratio is equal to or less than 1.25 to 1.0 or 0.75 to 1.0, respectively).

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