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Jazz Pharmaceuticals, Inc. (JAZZ)
Q1 2010 Earnings Call Transcript
May 5, 2010 5:00 pm ET
Kate Falberg – SVP and CFO
Bob Myers – President
Bruce Cozadd – Chairman and CEO
Janne Wissel – SVP, Chief Regulatory Officer and Chief Compliance Officer
Oren Lizark [ph] – Jefferies & Company
Andrew Finkelstein – Leerink Swann
Ann Trimble – Barclays Capital
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I would now like to turn the call over to, Ms. Kate Falberg, Senior Vice President and Chief Financial Officer. Please proceed, ma’am.
Thank you, Dominic, and good afternoon everyone. Welcome to our first quarter 2010 conference call. I am pleased to kick off today’s call and introduce the participants. With me today are Bruce Cozadd, Chairman and CEO, and Bob Myers, President.
After I provide the details of our results, Bob will share updates on our commercial activities in the first quarter and discuss our expectations for the rest of the year. Bruce will then wrap up with comments regarding the state of our business overall and will review our financial guidance for 2010. Following our prepared comments, we will open up the call for questions.
As a reminder, remarks that we may make today on this call about future expectations, plans and prospects for Jazz Pharmaceuticals constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements related to Jazz Pharmaceuticals' financial performance and growth potential, including 2010 financial guidance; the potential impact of Xyrem price increases and the sufficiency of Jazz Pharmaceuticals cash resources; statements related to Jazz Pharmaceuticals' JZP-6 product candidate, including future clinical and regulatory matters and the potential approval and commercialization of JZP-6; and statements related to the future product development and growth, including statements related to establishing a new supplier for sodium oxybate and future developments of new dosage forms of sodium oxybate.
Any statements we may make today on this call that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause Jazz Pharmaceuticals' actual results to differ significantly from those projected, including, without limitation, those risks and uncertainties detailed in Jazz Pharmaceuticals' filings with the Securities and Exchange Commission, including under the heading "Risk Factors" and elsewhere in Jazz Pharmaceuticals' Securities and Exchange Commission filings and reports, including in its Annual Report on Form 10-K for the fiscal year ended December 31, 2009 filed by Jazz Pharmaceuticals with the Securities and Exchange Commission on March 4, 2010.
Our first quarter 2010 financial results were reported in our press release issued earlier today. We plan to file our Form 10-Q for the three months ended March 31, 2010 with the SEC tomorrow. These documents will also be available on our corporate Web site.
Now moving on to the results. Total product sales were $34.3 million in the first quarter, an increase of 61% over the first quarter of 2009 driven primarily by price increases taken on Xyrem during 2009 and to a lesser extent increased Xyrem and Luvox CR sales volumes.
Gross margin on product sales was 91.6% compared to 90.9% in first quarter of 2009. Total revenues were $35.2 million for the first quarter of 2010 compared to $22.1 million in the first quarter of 2009, representing an increase of 59%.
I would like to comment briefly on the impact of the recent healthcare reform legislation on our business. We estimate that approximately 12% to 15% of our combined sales are reimbursed under the Medicare and Medicaid programs and that the cost to us of the new required rebates would be approximately $1 million in 2010, which will be reflected as a reduction to our net sales. We have factored this impact into our sales guidance for 2010. And we are in the process of more fully analyzing the new legislation for any additional impacts on our business.
Total operating expenses were $27.9 million for the first quarter 2010, a decrease of 5% compared to the first quarter a year ago. R&D expenses of $6.2 million in the first quarter of 2010 were down 46% compared to the first quarter of 2009 due to the reduced level of clinical trial activities for JZP-6.
R&D spending in the first quarter of 2010 was primarily focused on the prosecution of our new drug application for our JZP-6 product candidate; our ongoing long-term safety study for JZP-6, which we expect to complete midyear 2010; and development work on oral tablet forms of sodium oxybate, the active pharmaceutical ingredient in both Xyrem and JZP-6.
SG&A expenses were $16.8 million for the first quarter of 2010, an increase of 18% compared to the same period of 2009, as we are beginning to invest in preparations for our potential launch of JZP-6 in fibromyalgia, if approved by the FDA. The increase in SG&A also reflects increases in compensation costs for employees, including non-cash stock-based compensation.
Due to our substantial net operating loss carryforwards, we have no provision for income taxes in the first quarter and do not expect any tax provision for 2010.