Jazz Pharmaceuticals PLC (JAZZ) 2005 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q1 2005 Orphan Medical earnings conference call. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session toward the end of today's presentation. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's call, Mr. Tim McGrath, Chief Financial Officer. Please proceed, sir.

Thank you, and good morning. Thank you for joining us today for the Orphan Medical first-quarter 2005 conference call. On the line today, we have John Bullion, Chairman and Chief Executive Officer of Orphan Medical; Mark Perrin, Executive Vice President and Chief Commercial Officer; and Bill Houghton, our Chief Medical and Scientific Officer. The question-and-answer session will follow today's prepared remarks.

However, before starting, please be reminded that this conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as expects, anticipates, intends, may, should, plans, believes, seeks, estimates, could, would or the negative of such terms or other comparable terminology. Such forward-looking statements are based on current expectations and beliefs and involve numerous risks and uncertainties, both known and unknown, that could cause actual events or results to differ materially from those in these forward-looking statements.

The following factors, among others, could cause actual results to differ materially from these assumptions and expectations -- ability to obtain Orphan Medical stockholder approval for the pending transaction with Jazz Pharmaceuticals; the ability of Jazz Pharmaceuticals to obtain senior debt financing; the ability to satisfy other closing conditions associated with the proposed transaction; disruption from the transaction, making it more difficult to obtain relationships with customers, employees and suppliers; and the risk of new and changing regulations in the US and internationally. Additional factors that could cause Orphan Medical's results to differ materially from those described in the forward-looking statements can be found in Orphan Medical's most recent Form 10-Q or 10-K, as filed with the Securities and Exchange Commission. These documents can be accessed through the Orphan Medical website at www.Orphan.com. All forward-looking statements are qualified by and should be considered in conjunction with such cautionary statements.

The pending merger with Jazz Pharmaceuticals has not been consummated. Orphan Medical will file a proxy statement with the Securities and Exchange Commission and distribute the proxy statement to investors when approved by the SEC. The proxy statement will contain important information that should be read carefully before any decision is made with respect to the merger. These materials will be made available to Orphan Medical security holders prior to the stockholders' meeting that will be called to vote on the merger. In addition, all of those materials and other offering documents filed with the Securities and Exchange Commission will be available on the SEC's website at www.SEC.gov and on Orphan Medical's website, www.Orphan.com.

At this time, I will turn the call over to John Bullion.

Thanks, Tim. Good morning. Thank you for being on the call. We had a good start to 2005. Total revenues were 8.1 million, up 51% from last year's first quarter. Aggregate revenues from our three products -- Xyrem, Antizol and Cystadane -- were 6.7 million, growing by 52% over the first quarter of 2004. Xyrem revenue was 3.9 million, growing by 127% over 2004. Cystadane and Antizol generated 2.8 million on a combined basis. We also received 1.4 million in milestone licensing revenue from our European partner, UCB Pharma.

The net loss applicable to common shareholders was 1.5 million or $0.13 per diluted share in the first quarter of 2005, compared to the net loss to common shareholders of 4.3 million or $0.40 per diluted share in the first quarter of 2004. We ended the quarter with 9.5 million in cash, having used 3.2 million during the quarter, up 2.1 million from the fourth quarter of 2004.

Xyrem continued to grow steadily in the first quarter. A total of 9,800 Xyrem prescriptions were filled during the quarter, up 10% over the fourth quarter of 2004. Over 2,350 physicians have prescribed Xyrem through the end of the quarter, and the average number of new prescriptions written per physician has risen to over 5.4, indicating awareness and use of Xyrem continues to grow.

On the development side of the business, we submitted the sNDA to the FDA in January, and it was accepted for review by the agency in March. The proof-of-principal trial to evaluate Xyrem as a treatment of fibromyalgia is moving along according to plan, and we expect to announce results in July.

I will now turn the teleconference back to the operator to take questions.

(OPERATOR INSTRUCTIONS). Jeffrey Benson (ph), Littlegen Lifesciences (ph).

Last week, when you had the conference call regarding the merger, the more I listened it, the more upset I got. Because you were talking about how smart these fellows over at Jazz were, and they are going to do a great job selling Xyrem, and it's going to get out there and patients are going to be very happy, and the drug is going to do well. And my feeling is I'm in the stock because I want the drug to do well, I want the patients to do well, and I want to make money. And this stock over the last two years has had a trading range of 8 to 13, and you are selling the company in the midpoint of that range. And people that don't know the story saw that the stock was in the 8's when you sold the Company, and oh boy, there's a 20% premium, but the stock was as high as 10 in March. I didn't sell a share at 10 in March, so I don't understand why you are selling the company for 10.75, because there's a lot of upside. You have the sleep meeting coming up in a month, and that's usually when your sales start going up. Fibromyalgia is a tremendous indication, and that is coming out in July. And you are selling the Company with the sNDA filed for narcolepsy, and that hasn't hit the sales yet. So I think the timing is very bad, and I think Jazz is very smart, because they are buying the Company for a song.

Well, Jeff, I appreciate your comments. Obviously, we're not in a position to discuss all of the points you raised at this stage. We need to get the proxy statement out, and once that is out, I think that that will explain the effort and the evaluation that went into the process. And then at that time, we will be able to talk openly about the decision-making process, as well as the process that we went through.

Well, isn't narcolepsy a much bigger market than cataplexy? And you have the sNDA filed, and that should help sales go up? The problem that you had is you didn't have the capital, you were saying, to go forward if fibromyalgia worked. Well, that's a good problem to have, because if fibromyalgia worked, you would be able to get the money to do the trials, because that's a million people with fibromyalgia.

Jeff, again, let's hold these questions until we have the proxy out because, again, until the proxy is out, as I said, we can't openly talk about the process and the decision-making that went into it until that is out. And then that document, I believe, will explain in much more detail the decision that the Board took to engage in the acquisition by Jazz Pharmaceuticals.

Okay. You have a drug in the pipeline, Butamben, for pain relief. We get no upside for that? Jazz gets it?

Jeff, I --

All right, John. I --

I appreciate your honesty.

I'm upset.

All that is in our financial statements, and it has been for a long time. The market has been aware of all of our activities and, again, the proxy statement will explain that. It will describe the business, as well as where we at, and what the rationale was behind the process. We are just not in a position to talk about it today. I wish I could, but we are just not right now.

(OPERATOR INSTRUCTIONS). Ernest Andberg, Feltl & Co.

It's a little moot issue at this point, but why was spending on R&D so low in the quarter? I read the press release, but after your last conference call, I think we made an assumption that it would be significantly higher. Is it just a matter of difficult-to-predict timing, or what's going on?

We will let Bill answer that one, because he's in charge of our development spending.

Quite a bit of the spending that relates to the fibromyalgia trial, which is the only trial ongoing at the moment, is yet to come. The patient accession (ph) has been very active, but the major payments are accrued at the completion of the trial, and then the data entry and analysis timing. So we are approaching that; patients are almost finished the trial. We are functioning right on the timeline that we predicted, and so patients will finish the trial at the beginning of May. That will incur a significant expenditure, and then, of course, we have got all the data entry and analysis costs. So it's a gating item. We amortize R&D spending across the year, and it doesn't quite work like that; it comes in mountains and troughs, and the next major spend will be in the next quarter.

John, you gave us a summary balance sheet, and other assets went up significantly. I am presuming that is why your cash burn was significantly above the reported loss. What went on in that side of the balance sheet, or on the asset side of the balance sheet, where it looks like you're spending money?

Prepaid insurance. It's the fiscal year insurance that was paid upfront.

(OPERATOR INSTRUCTIONS). Gentlemen, you have no further questions at this time. Please proceed to your closing remarks.

Well, again, thank you very much for being on the call. And, as I indicated earlier, we are in the process of developing the proxy describing the transaction with Jazz Pharmaceuticals. We expect to have that out in the coming weeks, and that will explain quite a bit of the information that was requested earlier. With that, again, thank you very much for attending the call, and we look forward to getting that and providing more information to you. Thanks.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.