JAZZ

Jazz Pharmaceuticals plc (JAZZ)

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Jazz Pharmaceuticals, Inc. (JAZZ)

March 12, 2013 9:00 am ET

Executives

Bruce C. Cozadd - Co-Founder, Executive Chairman and Chief Executive Officer

Analysts

Douglas D. Tsao - Barclays Capital, Research Division

Presentation

Douglas D. Tsao - Barclays Capital, Research Division

[Audio Gap]

started. My name is Doug Tsao with Barclays. I cover U.S. tech pharma. Up next, I am pleased to have Bruce Cozadd with Jazz Pharmaceuticals, who -- I think Jazz continues to be sort of one of the most interesting and exciting companies in the sort of tech pharma universe. And I'm going to sort of ask you a starting question, but as a -- sort of it's amazing -- as an observation, I'll start with just, how much of a change from when I first met you, I think we talked about this a little last night, this was probably about 18 to 20 months ago, the first time I met you, how our conversation was focused solely on Xyrem and how different the story is today. So with that, maybe, Bruce, you can sort of provide an update on where the company is, what -- how you see things, the progress you've made and sort of how you're looking forward.

Bruce C. Cozadd

Great. So thanks, Doug, for having us, and I'll keep my opening remarks short because I know Doug has good questions. He tried out a couple of them on me last night.

So Jazz Pharmaceuticals has really been transformed in the past 12 to 18 months, if you've been following the story. From a company that certainly had shown it could take a highly specialized product in Xyrem, get it out in an orphan population and really make some progress, to a company with 3 growth drivers in Xyrem, Erwinaze and Prialt, as well as a very active business development effort. If you look at the 3 core franchises, they all have some similar characteristics, products that are highly differentiated, a target of very at-need patient population, have great exclusivity and all have current growth and, we believe, substantial future growth in front of them. We are trying to optimize the value of each of those franchises and then take the cash flow from those franchises, and we've estimated adjusted net income, which is a relatively good proxy for cash flow, at north of $350 million this year, that's on top of almost $400 million in cash coming into the year, to redeploy that both into growing our existing franchises; business development deals, whether that's for on-market products or late stage products in development; and then selective R&D investments to continue to grow our franchises.

So we think we're well-positioned, Doug, not only in terms of our 2013 guidance we just gave, but really as a platform to continue to grow the company over the medium and the long-term.

Question-and-Answer Session

Douglas D. Tsao - Barclays Capital, Research Division

Just perhaps to start with Xyrem, perhaps provide an update on what's going on with the ongoing IP litigation, as well as I think this -- early this year, the end of last year, you had a second ANDA filer and if, in your perspective, that necessarily changes anything.

Bruce C. Cozadd

Yes, so Xyrem, we're fortunate to have very strong IP protection around Xyrem. We have 11 issued patents covering the product. Those patents include formulation patents, method of use patents and patents around our restricted distribution system, as Xyrem is a controlled substance with very, very tightly controlled distribution. So we do have 2 ANDA filers, as Doug points out. We're in litigation with both -- that litigation, though, the first -- in the first case has been ongoing for several years, is still in a fairly early stage. No trial date has been set. We still haven't had expert discovery. And right now, activities in that case are stayed while we wait for the judge to decide whether to consolidate 2 recently issued patents into the rest of the litigation. Although this product has been on the market for more than 10 years now, we continue to pursue aggressive intellectual property, both development of new intellectual property, as well as protection of the intellectual property we already have. So we had new patents issue in September and December last year. Some people know we have additional patents winding their way through the system, including at least 1 that's now been allowed. So the litigation remains complex.

Douglas D. Tsao - Barclays Capital, Research Division

And then, with the 4Q report, you did announce the partnership with Concert Pharmaceuticals, perhaps talk about how -- what advantage -- what you see from this Deuterium platform in terms of life cycle management, as well as opportunities to improve the existing formulation, of Xyrem.

Bruce C. Cozadd

Yes, so Xyrem, which treats narcolepsy, is an exceptionally effective product. It really works for these patients given at night to improve their sleep, and therefore, reduce the 2 primary symptoms of narcolepsy, which are excessive daytime sleepiness and cataplexy, but it's not a perfect product. And one of the ways it's not a perfect product is that it's dosed as a liquid with a very short half-life, half-life of 0.5 hour to 1 hour, and what that means in practice is that patients need to take 1 dose before bedtime and another dose 2.5 to 4 hours later. Taking patients with an underlying sleep disorder and asking them to get up in the middle of the night to take a second dose of medicine is not ideal. I will point out that narcolepsy patients without medication are often up 8 to 10 times a night, so I don't want to overdramatize the problem. But we clearly think there could be a better formulation of sodium oxidate in the future. And one possible route to that is our partnership with Concert around C-10323, which is a pre-clinical compound we plan to file an IND on this year. Because it's deuterated, it has different pharmacokinetics, we believe a longer half-life and thus offer at least the possibility that there are some things we could do to make this an even better product for patients.

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