Jazz Pharmaceuticals plc (JAZZ)

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Jazz Pharmaceuticals, Inc. (JAZZ)

May 21, 2013 9:30 am ET


Kathryn E. Falberg - Chief Financial Officer and Executive Vice President


Ami Fadia - UBS Investment Bank, Research Division


Ami Fadia - UBS Investment Bank, Research Division

Good morning, everybody. Thanks for coming to the UBS Conference. I'm Ami Fadia. I cover mid-cap spec pharma stocks at UBS. It's my pleasure to have Kate, who is the CFO of Jazz Pharmaceuticals, to present. What we'll do is, if we have some time at the end, we might ask a few questions here. And then we'll take it to the breakout session. Thanks.

Kathryn E. Falberg

Thanks, Ami, and good morning, everyone. Thanks for joining us here today. With me today is Kathy Littrell, our Head of Investor Relations. So if you haven't met her yet, she's fairly new with the company. She's sitting there in the back and she'll be with me throughout the day. So before I begin, I need to direct your attention to our Safe Harbor statement. I will be making some forward-looking statements today. Those are, of course, subject to a number of risks and uncertainties as detailed in our SEC filings. So I encourage you to read our most recent 10-K and 10-Q for more information. I'll also be discussing some non-GAAP financial measures that we use to manage our performance. We find them useful. You'll find a reconciliation from non-GAAP to GAAP in an appendix to this presentation, which is available on our website.

So now let me begin. We've listed here are a number of attributes that we think make Jazz Pharmaceuticals an interesting and attractive investment opportunity.

I'll start with the lower left on this chart titled Unique Products. We have a number of unique specialty pharmaceutical products. I'll talk about several of them today. They share some common characteristics. They have high margins, high-growth potential and also, strong and meaningful remaining exclusivity.

We also have, we think, an attractive pipeline. To date, it's comprised largely of life cycle management programs for our lead products, Xyrem and Erwinaze. We think that this is a nice lower-risk approach to R&D and is a good way to add value.

We also have, we think, good expansion potential. We have built a good platform commercially, administratively. We've got good R&D capabilities in both the U.S. and in Europe. And we think we've got a good platform now to expand and add on new products.

We've got strong financials. I'll show you some of the metrics in a minute. We're highly profitable, strong cash flows and a strong balance sheet.

We also have an efficient corporate structure. I think that with our Irish domicile, we are able to deliver very attractive net margins. So we drive a lot of revenue all the way down to the bottom line. That allows us to reinvest a large amount of cash back into growing the business. And it also allows us to have cash available to return to shareholders.

And I think we've demonstrated that we have a good track record. The yellow line on this chart is a graph of our stock price over the past 3.5 years, which is when Bruce Cozadd, our CEO, really began remaking the management team. I joined the company 3.5 years ago and since then, we have really remade the entire management team. And I think we've got a great team now with an excellent track record, and a team that's committed to continuing to grow shareholder value.

So looking at a snapshot of revenues. We do have growing revenues and we have made a significant progress in diversifying our revenues. On the left, the bar chart you see, revenues in 2010 were $174 million. And our most recent guidance for this year is a range of $830 million to $860 million, so tremendous growth there. You see a big leap up in 2012. Last year, we did 2 acquisitions. We acquired Azur Pharma in January and EUSA Pharma in June. Those brought significant -- significantly attractive new products to the company and also, broadened our scale. And then this year, with our guidance, you can see we're expecting significant growth, primarily driven by our lead products, Xyrem and Erwinaze.

And the pie chart on the right shows the distribution of first quarter sales. And you can see that Xyrem is about 60% of sales; with Erwinaze, the next largest product, at about 20%; and the other 20% is split between a number of different products. The one in that group that I'll talk about today is Prialt because we think Prialt has significant growth potential.

Looking at the bottom line. On the left-hand side, you see our GAAP income from continuing operations for the past several years and our guidance in yellow for this year. And then on the right-hand side, you see our adjusted net income. So I'll point out that the GAAP figures are impacted by a number of transaction-related expenses, as well as stock-based compensation. And in 2012, we had a large favorable tax adjustment because we released the valuation allowance against our NOL carryforwards.

The right-hand side of the chart, the adjusted net income, we think provides a clearer picture of the true operating performance of the business and it's really how we look at the business and manage it. And you see there a very nice growing trajectory, a very strong earnings generation. And we recently reported $84 million in first quarter adjusted net income and raised our guidance for the year to a total of $379 million to $392 million.

Read the rest of this transcript for free on seekingalpha.com