Jazz Pharmaceuticals(JAZZ) - 2022 Q4 - Annual Report

Product Development and Approvals - Xywav, approved in August 2021, is the first and only FDA-approved therapy for IH in adults and contains 92% less sodium than Xyrem[401] - Jazz Pharmaceuticals initiated a pivotal Phase 3 clinical trial for Epidiolex in Epilepsy with Myoclonic-Atonic Seizures (EMAS) in August 2022[415] - The company launched five products between 2020 and 2021, including Rylaze for ALL/LBL and Xywav for IH[414] - Vyxeos, approved for pediatric patients aged one year and older in March 2021, continues to see recovery in demand despite COVID-19 impacts[411] - FDA approved Rylaze sBLA for M/W/F IM dosing in November 2022, with a complete response letter received for IV administration in February 2023[422] - Epidyolex launched in all five key European markets by Q4 2022, with pricing and reimbursement completed in France[431] - FDA granted seven years of Orphan Drug Exclusivity for Xywav in narcolepsy, extending through July 2027[403] - Zepzelca launched in 2020 for SCLC treatment, with ongoing Phase 3 clinical trial in combination with Tecentriq for first-line extensive stage SCLC[409] - Epidiolex initiated a pivotal Phase 3 clinical trial for the treatment of Epilepsy with Myoclonic-Atonic Seizures (EMAS) in August 2022[66] - The first patient was enrolled in a Phase 3 trial of Epidyolex for LGS, DS, and TSC in Japan in October 2022[67] - FDA approved a sBLA for Rylaze with a M/W/F IM dosing schedule in November 2022, and an additional sBLA for IV administration was submitted in April 2022[74] Clinical Trials and Pipeline Progress - Jazz Pharmaceuticals initiated a pivotal Phase 3 clinical trial for Epidiolex in Epilepsy with Myoclonic-Atonic Seizures (EMAS) in August 2022[415] - The company initiated Phase 2 trials for suvecaltamide (JZP385) in essential tremor and Parkinson's disease tremor, and for JZP150 in PTSD[416] - Jazz Pharmaceuticals is advancing early-stage development of JZP324, an extended-release low-sodium oxybate formulation for narcolepsy[416] - Phase 1 trial for JZP815, a pan-RAF kinase inhibitor, initiated in October 2022[424] - Zepzelca Phase 3 trial in first-line extensive stage SCLC is ongoing in collaboration with Roche, with a confirmatory trial initiated by PharmaMar in second-line SCLC[420] - Phase 2 basket trial for Zepzelca initiated in 2022, exploring monotherapy in advanced urothelial cancer, PD-NECs, and HRD cancers[421] - JZP441, a potential treatment for narcolepsy and other sleep disorders, entered a Phase 1 development program in November 2022[70] - Zanidatamab is being evaluated in Phase 1, Phase 2, and pivotal clinical trials for HER2-expressing cancers, including a Phase 3 trial for HER2-expressing GEA[74] - The company initiated a Phase 3 pivotal clinical trial for Zepzelca in combination with Tecentriq for first-line extensive stage SCLC and a Phase 2 basket trial for Zepzelca monotherapy in advanced or metastatic solid tumors[73] - Vyxeos clinical development strategy includes multiple ongoing trials targeting new patient segments in AML, including collaborations with MD Anderson and cooperative groups[75] - Jazz is developing JZP150, a FAAH inhibitor for PTSD treatment, with a Phase 2 clinical trial initiated in December 2021[69] - JZP815, a pan-RAF inhibitor for solid tumors and hematologic malignancies, entered Phase 1 clinical trials in October 2022[76] Financial Performance and Sales - Total product sales increased by 18% to $3,641.4 million in 2022 compared to 2021[449] - Xywav product sales increased by 79$958.4 million in 2022, driven by higher sales volume and strong adoption in narcolepsy[451] - Epidiolex/Epidyolex product sales increased by 59% to $736.4 million in 2022, primarily due to a 16$281.7 million in 2022 following its U.S. launch in July 2021[451] - Total oxybate revenue bottle volume increased by 6% in 2022, with average active oxybate patients on therapy reaching approximately 18,000 in Q4 2022[453] - Royalties and contract revenues increased by 18% to $17.9 million in 2022, with further growth expected in 2023 due to the launch of an authorized generic version of Xyrem[456] - In 2022, 63$966.0 million, $656.3 million, and$421.4 million, or 21.0%, 17.6%, and 15.2% as a percentage of gross product sales in 2022, 2021, and 2020, respectively[128] - Chargebacks were $135.9 million,$91.4 million, and $45.6 million, or 2.9$186.6 million, $125.9 million, and$69.3 million, representing 4.1%, 3.4%, and 2.5% of gross product sales in 2022, 2021, and 2020, respectively[523] Strategic Partnerships and Licensing - The company divested Sunosi to Axsome Therapeutics, receiving an upfront payment of $53.0 million and retaining royalties on future U.S. net sales[408] - Company made an upfront payment of$50 million to Sumitomo for JZP441 licensing, with potential milestone payments up to $1.09 billion and tiered royalties on net sales[419] - Company exercised option for zanidatamab, paying$325 million upfront, with potential milestone payments up to $1.4 billion and tiered royalties between 10$15 million upfront with potential milestone payments up to $1.26 billion and mid-single-digit royalties[425] - The company made upfront payments of$375.0 million, $15.0 million, and$50.0 million in 2022 for licensing and collaboration agreements with Zymeworks, Werewolf, and Sumitomo, respectively[465] - Contingent obligations to third parties as of December 31, 2022, included $1,387.5 million under the license and collaboration agreement with Zymeworks and$1,260.0 million under the global license and collaboration agreement with Werewolf[509] - Jazz collaborates with third parties for R&D in hematology and precision oncology, including partnerships with Codiak, Ligand, XLp, Redx, and Werewolf[78] Financial and Operational Metrics - Gross margin as a percentage of net product sales decreased to 85.2% in 2022 from 85.7% in 2021, primarily due to increased fair value step-up expense[458] - Cost of product sales increased by 23% to $540.5 million in 2022, primarily due to a$50.3 million increase in fair value step-up expense[457] - The company anticipates a reduction in cost of product sales in 2023, driven by a decrease in fair value step-up expense[458] - Selling, general and administrative expenses decreased by $207.9 million in 2022 due to lower GW integration costs, partially offset by restructuring costs of$22.1 million and program termination costs of $42.6 million[459] - Research and development expenses increased by$84.7 million in 2022, with clinical studies and outside services costs rising by $35.5 million and personnel expenses increasing by$29.9 million[461] - The company recorded an IPR&D asset impairment charge of $133.6 million in 2022 due to the discontinuation of the nabiximols program[464] - As of December 31, 2022, the company had cash and cash equivalents of$881.5 million and a long-term debt principal balance of $5.8 billion[470] - Net cash provided by operating activities increased by$493.5 million in 2022, driven by increased product sales and decreased GW Acquisition-related costs[478] - Net cash used in investing activities decreased by $4,765.9 million in 2022 compared to 2021, primarily due to reduced acquisition-related outflows[479] - The company repurchased 338 ordinary shares in 2022 at a total cost of$0.1 million, with $431.2 million remaining under the share repurchase program[475] - The company incurred restructuring costs of$10.3 million in 2022 related to research and development activities[461] - The company made upfront payments of 444.1 million in 2022 for acquired IPR&D, including 375.0 million to Zymeworks and $50.0 million to Sumitomo[480] - The company repaid €208.3 million ($251.0 million) of the Euro Term Loan in March 2022, with the loan bearing an interest rate of 4.43% during its term[484] - The interest rate on the Dollar Term Loan as of December 31, 2022, was 7.88%, with an effective interest rate of 4.56%[486] - The company had an undrawn Revolving Credit Facility totaling $500.0 million as of December 31, 2022[486] - Voluntary repayments of$300.0 million were made on the Dollar Term Loan in September 2022, with quarterly principal repayments of 1.0% per annum of the original 3.1 billion principal amount[490] - The company recorded an acquired IPR&D asset impairment charge of 133.6 million in 2022 due to the discontinuation of the nabiximols program[531] - The Secured Notes bear interest at a rate of 4.375% per year, payable semi-annually, and mature on January 15, 2029[494] - The 2026 Notes have an interest rate of 2.00% per year, payable semi-annually, and mature on June 15, 2026[500] - The company expects research and development expenses to increase in 2023 due to anticipated data read-outs from clinical trials and additional development work[462] - Sales returns as a percentage of gross product sales were 0.3% in 2022, compared to (0.1)% in 2021 and 0.7% in 2020[519] - The company's income tax benefit was 158.6 million in 2022, primarily due to payments for acquired IPR&D and the impact of the impairment of the nabiximols program[468] - The interest rate and effective interest rate on the Secured Notes as of December 31, 2022, were 4.375% and 4.64%, respectively[499] - The 2026 Notes are exchangeable at an initial exchange rate of 6.4182 ordinary shares per 1,000 principal amount, equivalent to an initial exchange price of approximately $155.81 per ordinary share[503] - The 2024 Notes have an initial exchange rate of 4.5659 ordinary shares per$1,000 principal amount, equivalent to an initial exchange price of approximately $219.02 per ordinary share[506] - Rebates were$630.3 million, $440.8 million, and$288.1 million, or 13.7%, 11.8%, and 10.4% as a percentage of gross product sales, in 2022, 2021, and 2020, respectively[517] - The company's long-term noncancelable purchase commitments were $36.1 million at December 31, 2022, primarily related to agreements with third-party manufacturers[508] - The 2024 Notes may be redeemed on or after August 20, 2021, in whole or in part, if the last reported sale price per ordinary share has been at least 130$575.0 million, used to repay $500.0 million in outstanding loans under the revolving credit facility[504] - The company's deferred tax assets realization depends on future taxable income, which is uncertain and requires significant judgment about forecasts of future taxable income[535] - The fair values of the Secured Notes, 2024 Notes, and 2026 Notes were estimated to be approximately$1.3 billion, $568.0 million, and$1.2 billion, respectively, as of December 31, 2022[543] - A hypothetical 10% strengthening or weakening in the exchange rates for sterling and euro would have increased or decreased net income by approximately $63.5 million and$7.4 million, respectively, for the year ended December 31, 2022[544] - The company held foreign exchange forward contracts with notional amounts totaling $505.0 million and a net asset fair value of$17.4 million as of December 31, 2022[545] - A hypothetical 10% adverse fluctuation in exchange rates would decrease the fair value of foreign exchange forward contracts by approximately $8.5 million as of December 31, 2022[545] - A hypothetical 1$27.4 million, based on $2.8 billion in outstanding borrowings as of December 31, 2022[541] - The company issued$1.5 billion in 4.375% senior secured notes due in 2029, $575.0 million in 1.50$1.0 billion in 2.00% exchangeable senior notes due in 2026[542] Market Competition and Challenges - Epidiolex/Epidyolex faces competition from generic products and non-FDA approved cannabidiol preparations[439] - Xywav faces competition from authorized generic versions of sodium oxybate starting January 2023[437] - The company's product Xywav faces increased competition from new branded entrants like pitolisant, which is FDA-approved for treating cataplexy and EDS in narcolepsy and is in late-stage development for IH[111] - Epidiolex faces competition from generic products, with ANDA filings received in November and December 2022, leading to patent infringement lawsuits and a potential 30-month FDA approval stay[115] - COVID-19 continues to impact healthcare systems, affecting patient access and treatment changes[434] - Inflation Reduction Act of 2022 introduces drug pricing reforms, potentially impacting Medicare drug pricing and rebates[444] Corporate Strategy and Vision - The company's Vision 2025 strategy focuses on commercial execution, pipeline productivity, and operational excellence to drive sustainable growth[396] - The company's corporate strategy includes building a diversified product pipeline through acquisitions, in-licensing, and partnerships to develop highly differentiated products with significant commercial potential[116] - Jazz collaborates with third parties for R&D in hematology and precision oncology, including partnerships with Codiak, Ligand, XLp, Redx, and Werewolf[78] - The company aims to scale its sales force to support growth in specialty markets and potential European launches, leveraging operational synergies in hematology and oncology[84] - The CombiPlex platform is being evaluated for various therapeutic formulations in oncology, utilizing proprietary nanoscale delivery platforms[77] - The company is advancing multiple early-stage cannabinoid programs, including suvecaltamide (JZP385), JZP150, and JZP441, as part of its neuroscience therapeutic area focus[65] Employee and Workforce Development - Jazz employs approximately 2,800 people worldwide, with 48% in the U.S. and 52% outside the U.S., primarily in the U.K., Ireland, and the EU. Over 700 employees (25% of the workforce) support research and development activities[86] - The company has a field force of hematology sales specialists in Canada and approved European markets for Defitelio and Vyxeos, and medical affairs personnel in non-approved markets[82] - The company provides employee development programs, including digital learning platforms, leadership training, and tuition reimbursement for career growth[98] - The company's DEIB strategy focuses on building a diverse workforce, investing in diverse talent development, and fostering a culture of inclusion and belonging[89] - The company's performance management process supports a culture of continual feedback, coaching, and employee development through individual development plans[97] - The company provides market-competitive and locally relevant compensation and benefits to attract, retain, and reward highly talented employees[101] - The company introduced enhanced global leave and time-off policies in 2022, including minimum standards for new parent leave, family caregiver leave, and bereavement leave[102] - The company's flexible working model, "Jazz Remix," aims to provide eligible employees with greater flexibility and agility to globally connect, collaborate, innovate, and perform[105] - The company has established diversity goals, focusing on increasing representation of females and people of color, particularly at leadership levels[92] Regulatory and Compliance - The company's manufacturing authorization in the EU requires compliance with EU cGMP standards, and non-compliance may result in civil, criminal, or administrative sanctions[154] - The company's deferred tax assets realization depends on future taxable income, which is uncertain and requires significant judgment about forecasts of future taxable income[535]