Jazz Pharmaceuticals PLC (JAZZ) 2013 Q4 法說會逐字稿

Welcome to the Jazz Pharmaceuticals fourth quarter and year end 2013 earnings conference call. Following an introduction from the Company, we will open the call to questions. I will now turn the call over to Kathee Littrell, Vice President of Investor Relations at Jazz Pharmaceuticals.

Thank you. Thank you for joining the Jazz Pharmaceuticals PLC investor conference call.

Today, we reported our fourth quarter and year end 2013 financial results and provided 2014 financial guidance in a press release. The release and the earnings slide presentation accompanying this call are available in the news and events section of the Company's website.

With me for today's call are Bruce Cozadd, Chairman and CEO; Kate Falberg, CFO; Russ Cox, Chief Commercial Officer; Jeff Tobias, Head of R&D and Chief Medical Officer; and Matt Young, our Senior Vice President of Corporate Development. Following some introductory remarks, we'll open the call for your questions.

Before we begin, I would like to remind you that some of the statements we will make on this call relate to future events and our future performance instead of historical facts, and are forward-looking statements. These statements include future financial, commercial, development, and regulatory plans, expectations and projections such as our 2014 financial guidance, anticipated growth prospects for our products, planned commercial efforts, including the planned Defitelio launch, relating pricing and reimbursement approvals, and the timing thereof, expected interactions with the regulatory agencies regarding Xyrem and other products, anticipated litigation related events and the timing thereof, and the timing of planned and ongoing clinical trials.

These forward-looking statements involve numerous risks and uncertainties that could cause actual events, performance, and results to differ materially. These risks and uncertainties are identified and described in today's press release, the earnings slide presentation accompanying this call, and under Risk Factors in our Form 10-Q for the quarter ended September 30, 2013 and our Form 10-K for the year ended December 31, 2013 that we expect to file shortly. We undertake no duty or obligation to update any forward-looking statements we make today.

On this call we will discuss several non-GAAP financial measures, including historical, and in some cases expected, 2014 adjusted net income, adjusted pretax income, adjusted net income per share, adjusted SG&A and R&D expenses, and adjusted effective tax rate. We believe that these non-GAAP financial measures are helpful in understanding our past financial performance and potential future results. They are not meant to be considered in isolation or as a substitute for comparable reported GAAP measures.

Reconciliations of GAAP to non-GAAP financial measures discussed on this call are included in today's press release and the earnings slide presentation accompanying the call. Both are posted in the news and events section of our website. I'll now turn the call over to Bruce.

Thank you, Kathee. Good afternoon, everyone, and thank you for joining us. 2013 was an outstanding year for Jazz, as we delivered strong top line growth and continued to generate significant cash flow.

During 2013 we saw continued sales growth of Xyrem and Erwinaze, as well as further development and enhancement of our infrastructure to support our corporate development efforts. 2014 is off to a great start.

We've delivered on our corporate development strategy, completing the acquisition of Gentium and acquiring the rights to a late-stage investigational compound, ADX-N05, from Aerial BioPharma. We completed our tender offer for Gentium's ordinary shares and American Depositary Shares, and own approximately 98% of the company.

We've been working with our colleagues at Gentium to ensure a smooth transition and integration of employees and functions, and look forward to our planned launch of Defitelio in the European Union over the course of the year. ADX-N05 or JZP-110, as we refer to it now, is in development for the treatment of excessive daytime sleepiness in patients with narcolepsy. We will provide more detail on our plans for JZP-110 and Defitelio later in the call.

Earlier this month we launched Versacloz, our new product for treatment of patients with treatment resistant schizophrenia, and for reducing the risk of recurrent suicidal behavior in patients with schizophrenia or schizo-affective disorder. Now, I'll update you on key products in the commercial and development portfolio. Kate will then review our results for the fourth quarter and full year 2013 and provide 2014 financial guidance.

I'll start with our sleep franchise. Xyrem remains a key driver of our growth. During the fourth quarter of 2013, we achieved 10% volume growth compared to the same period in 2012, our fifth consecutive quarter of low double digit volume growth.

The average number of active Xyrem patients grew to approximately 11,250 during the quarter, compared to 10,450 in the same period of 2012. Our efforts to expand the prescriber universe through our focus on low-to-mid decile physicians contributed to strong volume growth throughout 2013.

Increasing the use of Xyrem in our current prescribers, identifying new physicians to add to our call universe, and expanding the size of our sales force from 80 to 100 sales representatives, are part of our plan to maximize the opportunity to deliver continued growth of Xyrem. The new sales representatives began covering their territories at the beginning of January.

We continue to make investments in narcolepsy physician education and disease awareness programs, which we believe are contributing to increased awareness and diagnosis of narcolepsy. We're pleased with the early response of these efforts. However, narcolepsy remains a large area of unmet medical need, and less than half of this population has received a diagnosis of narcolepsy.

During late 2013 we initiated a disease awareness campaign in two pilot cities, Charlotte and Indianapolis, using unbranded TV commercials to educate the public on the symptoms of narcolepsy. We've had a strong response in the pilot cities during the two month test period, with more than 1,500 hits to the physician finder tool and over 600 requests for further information about narcolepsy from narcolepsylink.com. We are in the process of evaluating the impact of this unbranded disease awareness campaign on the diagnosis of narcolepsy, which will help inform our decision on whether to expand in other regions later this year.

Turning to a brief regulatory update. The process with FDA to finalize REMS documents for Xyrem remains ongoing, and unfortunately we have not reached agreement on key terms, including whether the Xyrem REMS should be modified to enable the distribution of Xyrem through more than one pharmacy.

While we had hoped to reach agreement with FDA on the Xyrem REMS without the need to initiate formal dispute resolution procedures, a recent FDA communication to us has compelled us to initiate dispute resolution procedures, which we will do by the end of this month. There are no prescribed timelines for this process and we don't know how it will unfold. Based on currently available information related to the safe distribution of Xyrem, we continue to believe that a distribution system based on a single central pharmacy is the safest and most appropriate way to distribute Xyrem while ensuring patient and public safety.

Separately, as we mentioned last quarter, FDA requested an initial meeting with us and the current ANDA filers to begin negotiation of a single shared REMS for Xyrem and potential generic versions of the product. That meeting was held last month and a follow-up is ongoing. We continue to believe that development of a single shared REMS is complex, and that there are many issues that would need to be resolved during the process.

Regarding the ANDA litigation against Roxane, last week the court extended the discovery period by five months to late October. Therefore, we now anticipate that a trial would not occur until late 2014 at the earliest. Of course, in light of the uncertain timing of any complex litigation matter, actual timing may differ.

Now I'll spend a few moments talking about our two R&D programs and the sleep franchise. Regarding JZP-110, as a reminder, we plan to evaluate this compound to treat excessive daytime sleepiness in patients with narcolepsy and in patients with obstructive sleep apnea.

We are formulating plans for our Phase III development program, and anticipate requesting an end of Phase II meeting with FDA targeted for mid-year. We plan to provide more information regarding our planned Phase III program after we've met with FDA and finalized our plans.

Regarding JZP-386, our deuterium modified sodium oxybate licensed from Concert, we submitted the investigational medicinal product dossier at the end of 2013 to support a first in human trial this year in Europe. We have received the appropriate regulatory approvals to move ahead in human trials, and are working to manufacture clinical product for the study. We anticipate beginning clinical studies this year, when this is complete.

Now, let's turn to Erwinaze, which continues to perform well. We are continuing our efforts to educate health care providers on the importance of identifying hypersensitivity reactions to E. Coli derived asparaginase in acute lymphoblastic leukemia.

With respect to our IV study submission, the FDA has requested a supplemental biologic license application because efficacy data was included in the original label amendment submission in December. We expect to submit the sBLA to FDA later this quarter.

Also, we have finalized our study protocol for the planned trial in young adults. This study is expected to begin enrollment in the second quarter, and we anticipate enrolling approximately 30 patients aged 18 to 39.

Moving to Asparec, we have discussed our plans with FDA and are currently working with a large cooperative oncology study group to finalize the study protocol for our Phase II/III study in children. And we'll update on the expected timing of first patient in once the protocol is finalized.

Next I'll comment on Prialt, our non-opioid intrathecally administered drug for adults with severe chronic pain. As I've mentioned previously we made important progress during 2013 on our long-term growth strategy for Prialt, including our NAVIGATOR program, collaborations with Medtronic, and initiation of our PRIZM Prialt registry. We believe these initiatives are important to increasing Prialt's penetration in the intrathecal pain therapy market, and we observed some positive trends during the fourth quarter.

In our Medtronic collaboration, the sales teams have been working closely to identify new account opportunities, and we have received multiple physician referrals. We have several joint physician education programs planned in 2014. Finally, we are on track with patient enrollment in the PRIZM registry, and are planning a series of abstracts and posters that include interim data analysis beginning in the second half of 2014.

Finally, with respect to Defitelio we are focused on approval of our patient registry protocol, through the European Medicines Agency, Pharmaco-vigilance Risk Assessment Committee, or PRAC. The registry is required as part of the post approval commitment for Defitelio. We plan to launch the product in selected EU countries over the course of 2014, and expect to begin these efforts in the first half, subject to Defitelio's patient registry design receiving the anticipated positive recommendation from PRAC, and opening the registry for recruitment.

Pricing and reimbursement submissions are underway in many EU markets where such approvals are required prelaunch. Timing for pricing and reimbursement approvals in EU varies by country, with a range of one month to over a year. We expect to receive approvals for key EU markets, such as the UK and Germany, in the second quarter. Our emphasis is on establishing solid pricing foundation for a common EU price for Defitelio.

The Defitelio launch meeting is planned to coincide with the European Society for Blood and Marrow Transplantation meeting in Milan at the end of March. We anticipate a combined total Erwinaze, Defitelio, EU sales force of approximately 35 representatives, once we receive approval of pricing and reimbursement in all EU countries over the next year. This is a rolling process, and we plan to begin our launch efforts with approximately 14 sales representatives.

Our efforts will be focused on driving awareness of severe hepatic veno-occlusive disease or VOD, the importance of early diagnosis and treatment, and communicating the therapeutic value of Defitelio. We're excited about the near-term commercial opportunity to provide this therapy to patients with severe VOD in the EU, and eager to continue the development of this compound in other potential indications where there are significant unmet medical needs, such as the prevention of VOD, and the prevention of acute graft versus host disease.

Regarding the US, we are in the process of evaluating comments from FDA regarding the defibrotide data set, and plan to request an FDA meeting to discuss the regulatory pathway for defibrotide. We also plan to work with Sigma-Tau, who has commercial rights to market defibrotide in the Americas, as we assess and determine next steps for an NDA submission, including whether we can submit an NDA to FDA with the current data set or whether we will need to collect further data prior to submitting to FDA.

Separately, we announced today that Kate is stepping down as Chief Financial Officer to pursue other interests, and that Matt Young will be succeeding Kate as CFO. As some of you may know, Kate has been traveling from her home in the LA area to our Palo Alto office for years, and we thank our for that dedication and the significant contribution she has made. Kate has played a key role in developing and implementing our growth strategy and in creating shareholder value, as well as expanding and strengthening the Company's finance and corporate development organizations.

We will certainly miss Kate, but we are well-positioned for the future. As part of our succession planning process, we seek key individuals that fit well with our corporate values and culture while demonstrating effective leadership. We hired Matt Young, a highly experienced life sciences investment banker in early 2013, to head up our corporate development group.

Matt has successfully led a corporate-wide effort to develop a proactive corporate development strategy, and execute against that strategy. The Gentium and JZP-110 transactions are early results of this effort.

I'm pleased that Matt will be succeeding Kate as CFO, reporting to me. Matt 's knowledge of our business, his strong leadership, and extensive experience in life science banking positions, position him well for success in his expanded role. Kate, let me turn the call over to you.

Thanks, Bruce, and good afternoon, everyone. We are pleased with our strong performance in 2013, as we saw total revenues increase by 49%, adjusted pretax income increase by 55%, and adjusted EPS increase by 31% compared to 2012. Total revenues of $872 million were in the middle of the range of our prior guidance, as all of our growth products performed well in the fourth quarter.

Adjusted EPS for 2013 was $6.31, at the lower end of prior guidance. Factors contributing to this included higher SG&A expenses in the fourth quarter than in the third quarter, primarily due to an increase in incentive compensation based on our strong performance for the year, which included achievement of corporate development objectives in the fourth quarter, and professional services expenses related to significant corporate development assessments conducted in the fourth quarter.

We also had foreign exchange losses and an increase in the fully diluted share count for financial reporting purposes, due to a higher average stock price. In the aggregate, these items reduced fourth-quarter adjusted EPS by approximately $0.10 per diluted share.

Looking ahead, we expect strong top and bottom line growth this year, driven by revenues from Xyrem, Erwinaze and Defitelio. We expect total revenue for 2014 to be in the range of $1.1 billion to $1.16 billion, up 26% to 33% on a reported basis from 2013. We anticipate our 2014 non-GAAP adjusted EPS to be in the range of $8.00 to $8.25, which represents growth of 27% to 31% compared to 2013.

Net sales of Xyrem for 2013 were $569 million, up 50% from 2012. 2013 revenue bottle volume growth was 12%. Our Xyrem net sales guidance for 2014 is a range of $755 million to $775 million, representing expected growth of 33% to 36%, reflecting a Xyrem price increase of 12% taken earlier this month and our continued expectation of low double-digit volume growth this year.

Turning to Erwinaze, worldwide net sales for 2013 were $174 million, up 32% compared to 2012. US sales exceeded the $124.5 million sales milestone, and triggered a $50 million contingent payment to former EUSA shareholders to be made this quarter. Today, we are providing 2014 guidance for worldwide Erwinaze net sales in the range of $185 million to $200 million.

Regarding Defitelio, in 2013, Gentium had approximately 1,200 patients worldwide in named patient programs, including a cost recovery program under the US treatment IND, and approximately two-thirds of these patients were in the EU. The planned EU launch is expected to rollout country by country over the course of 2014, as we receive pricing and reimbursement approvals.

We expect that patients receiving Defitelio on a named patient basis will continue to do so in countries with pricing and reimbursement pending, until we are able to launch commercially. With that in mind, we continue to anticipate that net product sales of Defitelio this year, which includes revenues under named patient programs and the treatment IND, will be in the range of $42 million to $52 million. We anticipate that net product sales of API manufactured in the Gentium facility will be approximately $6 million to $8 million, and will be recorded in other product sales.

As you update your models, please note that we will record 100% of Defitelio and API sales, and related expenses of the acquired Gentium business, from January 23, 2014, the date we acquired majority ownership of Gentium. However, since we have an ownership position in Gentium of a little less than 100%, the net income attributable to the non-controlling interest will be deducted from consolidated net income, with reported EPS being based on the net income attributable to Jazz Pharmaceuticals PLC. Our guidance reflects this small expected adjustment.

Turning to operating expenses, adjusted combined SG&A and R&D expenses for 2013 were $278 million or 32% of revenue, compared to $202 million or 34% of revenue in 2012. For this year's guidance, we break out adjusted SG&A and R&D expenses.

Our adjusted SG&A expenses are expected to be within a range of $315 million to $325 million, or 27% to 30% of 2014 revenue guidance. SG&A increases are expected primarily due to investments related to Xyrem and the planned Defitelio launch.

Adjusted R&D expenses are expected to be in a range of $55 million to $65 million, or 5% to 6% of 2014 revenue guidance. R&D expenses are expected to increase, primarily due to investments in clinical development of JZP-110, Asparec, JZP-386, and Erwinaze in young adults.

Our adjusted non-GAAP effective tax rate is expected to remain in the high teens in 2014, similar to 2013. Our GAAP effective tax rate is expected to be higher in 2014 compared to last year, largely due to the impact of the upfront payment to Ariel BioPharma for JZP-110, which has no associated tax benefit.

For the full year, we repurchased $136 million of stock at an average price of $75.00 per share. We currently have $64 million left in our $200 million share repurchase program. Subject to market conditions and alternative uses of cash, we plan to resume our share repurchase program this quarter.

In January, in connection with the acquisition of Gentium, we amended our credit agreement, increasing our outstanding term loan balance to $904 million, and borrowing $300 million under an expanded $425 million revolving credit facility. Reflecting favorable repricing, our term loans and our borrowings under the revolver bear interest at floating rates, which are currently 3.25% and 2.66% respectively.

Our pro forma leverage ratio as of December 31, 2013 was less than 2.5. We believe that we have sufficient financial capacity to pursue additional corporate development initiatives, and plan to continue to work to identify and evaluate attractive opportunities to expand our business.

In closing, we are very pleased with the strong results for 2013. And we expect significant positive momentum in 2014, with expected strong top and bottom line growth driven by Xyrem, Erwinaze, and the launch of Defitelio in the EU.

I also want to take a moment to acknowledge that my past four years at Jazz have been exceptionally fulfilling, and I want to express my thanks to Bruce in particular for his support and leadership, as together with our entire executive team we undertook a significant amount of change to build the Company to where it is today. I am confident that Bruce, Matt and the entire Management team are well-positioned to continue to fulfill our company's mission to serve patients, while also creating long-term shareholder value.

Thank you for joining us on the call today. I'll now turn the call over to Kathee.

Thanks, Kate. In order to allow everyone to ask questions, we request that you limit your questions to a maximum of two at a time, and then just re-enter the queue if you have further questions. With that said, I'll turn the call back over to the Operator to open the line for your questions.

(Operator Instructions)

David Amsellem, Piper Jaffray.

First thing, you talk about the specifics on the disagreement with the FDA on the REMS. And since you're entering into dispute resolution procedures, is it safe to assume that the FDA maybe is pushing for a more expensive REMS that perhaps encompasses more than one specialty pharmacy? And then my second question is on defibrotide, maybe you can give us a little more color on how we should think about pricing in Europe, and maybe, I know you can't get into specifics, but if you can talk about maybe comparators that we should think about as useful guides for pricing, that would be helpful. Thank you.

Thanks, David on the REMS disagreement with FDA, yes, part of it, and the part we've called out specifically, is disagreement about whether distribution would be through one centralized pharmacy or potentially through more than one pharmacy. That's not necessarily the only disagreement, but that's something we've consistently pointed to over time.

On pricing for Defitelio in EU we can't get specific yet because we don't have all the feedback yet, but we've generally been setting expectations that one comparator you might use is our European pricing for Erwinaze. Which obviously, depending on size of the patient could range from $25,000 or $30,000 up to $60,000, $70,000, $80,000, pretty variable depending on dosing, but that gives you some sense.

Okay, thank you.

Gregg Gilbert, Merrill Lynch.

Thanks, good afternoon. Kate, pardon the personal question but could you maybe share some color around why now is the right time, and congrats to you, Matt. And for Bruce, could you share what the most important objectives are for the Management team in 2014? Other than the financial targets you've highlighted? Thank you.

So, Gregg, I'd say I felt that now was the right time for a number of reasons. Bruce highlighted my long commute, which I've been doing for multiple years, very willingly, and it's been a wonderful experience. But I felt like this was the right time for me personally to make that change.

And in addition, I felt like particularly with the strong year that we just put under our belt, the two recent deals that we did, the past year that I've spent working with Matt all give me great confidence that the Company is in great shape. So I felt like the Company can go on without missing a beat and all will be well from here.

Gregg, on key objectives for the year we've highlighted on the commercial side, in addition to the specific financial guidance we gave you, certainly maintaining volume growth on Xyrem by expanding the prescriber base, and potentially impacting the diagnosis rate for narcolepsy recognizing that we're attacking only a small part of that market today, which are those patients who are already diagnosed and treated. Continuing to grow Erwinaze. Two launches, Defitelio in the EU and Versacloz in the US, doing a nice job on both those launches.

A tremendous amount to accomplish on the development side really across the portfolio, getting some key programs into later stage development that we believe could be a real key contributor to our growth in future years. We always say strengthen and defend IP, I think you can understand why that remains critically important to us, and I think we've done a nice job in the last couple of years not only in defending the IP we have but continuing to expand the IP that's in place to protect key products.

And then our Corporate Development efforts remain front and center. We're in the midst of integrating Gentium right now but I think we've signaled we've got the financial capacity, the organizational capacity, the management capacity to take on additional assets moving forward. I think a US commercial asset is probably first on our priority list right now. Deals don't always come along exactly in the order we would like them to so that's not a promise that would be next but I think that's where our focus is.

So if we can execute well on the commercial side, the development side, and then continue to redeploy cash flow and our strong balance sheet to continue to grow our portfolio of commercial development assets I think we'll have had another terrific year in 2014.

Thanks and good luck, Kate and Matt.

Thanks, Gregg.

Louise Chen, Guggenheim.

Thanks for taking my questions. So first one I had is, Kate have you disclosed where you are going to be going next? Have you made a decision there?

And then secondly, with respect to defibrotide, does Jazz have the opportunity to take back rights for this product from Sigma Tau in the US? And if so, when? Thanks.

So, Louise I don't have any plans to take another full-time role at least in the near-term. I am on some public company boards and look forward to continuing in that capacity, but this is not a move to another company.

And on defibrotide, good question on Sigma Tau rights in the US. We do not have the unilateral right to take back those rights, and we're currently working with Sigma Tau to develop the best strategy for US commercialization of the product. Could there be a change in that relationship in the future? Of course, as would be true of any relationship on any product, but nothing specifically we can say on that.

Thanks.

Jason Gerberry, Leerink Swann.

Hi guys, it's actually Chris Keuhnle in for Jason. A couple quick ones on the REMS, I appreciate that you can't give us any specific timelines, but could you maybe ballpark that for us? Should we be thinking in a one-year timeline or maybe two years?

And then as a quick follow-up to that, what's the backstop to that? Is that resolution going to be binding or is there a potential appellate process behind that? Thanks.

Well, Chris the second part of your question is important in answering the first part of your question which is trying to predict the overall timeline really depends on how things go. And is this a quick discussion and reaching agreement in a short time period, or is this a multistage dispute that gets escalated within or even beyond FDA, way too early to tell. I don't think it's a simple dispute, so while I don't know the answer my guess is longer rather than shorter but we really don't know yet.

As I indicated we plan to formally initiate the dispute resolution before the end of the month meaning we haven't done it yet. So we don't even have the first volley back from FDA after we do that to respond to. So at this point I just can't really give you any guidance.

Okay, thanks, guys.

Daniel Brims, Brean Capital.

In the past Gentium has given some color on how much prophylactic use is in the EU. Do you happen to know what, if that's increased or is it remaining about one-third of the use that they see there?

And second, are you planning on still pursuing graph versus host disease? And I know you -- they had some trials going on in Japan, are those still going on?

I can't comment specifically on exactly what the current use is, whether that's a third. What I can tell you is that we've done extensive market research with key thought leaders and we actually had learned that their willingness could be more on a one-to-one ratio between prophylaxis and treatment. But at this point in time we don't have actual data in terms of what that usage looks like that but I can tell you that the willingness from physicians to use more is certainly there.

And Jeff, you want to comment on GvHD?

Right, so we are very interested in that as a potential indication, certainly the data that was generated and published in the Lancet article in 2012 suggests that there is a potentially important effect there. The study wasn't designed specifically to look at GvHD, so we're going to be evaluating in different contexts what that might look like and hopefully we'll have more on that later in the year.

Thanks.

Mark Goodman, UBS.

Mark? Are you there?

Mark?

Operator, let's go to the next question.

Ken Cacciatore, Cowen & Company.

Congratulations Kate, good luck on what you're going to be doing next. I wanted to ask a little bit more about Sigma Tau, follow-up on the question, understanding of the rights to defibrotide -- [do] they have the rights to defibrotide in the US? Was wondering if you could answer, would there be any FTC reasons why there couldn't be a combination of the two? I know that they market Oncaspar, so just kind of a factual, is there any FTC reasons why Jazz and Sigma Tau couldn't come together?

And I hate to ask this other question but, it goes to the timing of REMS and the FDA. Is it possible that the FDA can just take unilateral action and approve an ANDA now and then you move forward with dispute resolution? Or dispute resolution prevents them from taking any action on an ANDA approval? Thanks.

Wow, Ken those were some very specific questions. I think I'm going to decline to comment on FTC risk of a potential transaction that we haven't disclosed whether we be interested in, so I'll skip that one.

On what FDA could or couldn't do, we've said really, for a long time now, probably a couple years now. We're not sure what it would mean if FDA quote-unquote approved an ANDA, if that ANDA approval didn't come with an approved REMS. Whether that REMS was a single shared REMS that we were part of developing and negotiating and agreeing to, or some separate REMS subject to a waiver. And again I'm not sure exactly how that REMS would meet the goal of safe distribution of this product, ensuring patient and public safety.

But even beyond that narrower regulatory question, which I do understand, I'll just remind you that we've got complex and ongoing litigation on many patents of varying types with expiration dates out to 2019 to 2024. Even if we go down the road of what could happen in the way of an approval or what that approval would mean, which I'm not sure. I don't think we're looking at actual launch of a competitive product so long as that litigation remains ongoing and I just gave you a new timeline for that litigation earlier in the call.

Great, okay, thank you very much.

Yes.

Douglas Tsao, Barclays.

Bruce, just in terms of your guidance for Erwinaze. Is this a function -- last year you enjoyed very strong growth, which I think surprised many people. Is it a function of what you're expectation is this year? Seems a little bit more tempered, that we're waiting some of the new initiatives, especially the results of the AYA trial in order to have another leg up for the product?

Good question, Doug, let me turn the second half of that over to Russ but I'll say we weren't surprised by the growth in 2013. We had expected and in fact, delivered good growth. But let me have Russ comment a little bit on our expectations for 2014.

Yes, if you think about 2013 over 2012, you're looking at 32% growth in the US, which I think is meaningful growth for sure. Having said that, it is a small patient population, we've done a really nice job at making progress with the pediatric population.

At the same time we've been creating initiatives that we believe will get us to broader population in [AYA], and ultimately think that the initiation of TDM allows us to find patients who actually have silent hypersensitivity, so we do think that's where the growth will be coming from in 2014. I will say that we had a number of centers come on last year too that really helped with that growth, and some of that has fallen off a little bit, but we don't think that there isn't more opportunity out there in terms of future centers.

Okay, and then just one other follow-up question on the Xyrem. Obviously you've begun your unbranded advertisements in a couple of cities and you've given some metrics in terms of the hit rate you're getting on the Physician Finder tool. Are you seeing any evidence, be it actual numbers or anecdotal, that this is resulting in diagnoses of narcolepsy of actual patients, and that they're actually getting put on to Xyrem?

Great question, so we are really encouraged by the results and I've commented before we had over 1,500 people go to the Physician Finder and so you could say those are unique visitors that are actually looking at whether they can seek out a physician to ultimately use Xyrem.

We do have anecdotal information that says yes, they are going into offices, they are asking about narcolepsy, and we do believe that some of our treaters are in fact initiating with Xyrem. So we think that there is some anecdotal value there. But the real test for us is looking at claims data and doing a little bit more market research, which we think that data will be coming late March, but we're pretty encouraged with what we've seen so far.

Okay, great. Thank you very much.

Annabel Samimy, Stifel.

I actually had a question on defibrotide, you gave some pretty nice guidance for first year of sales. I was just trying to think about how you're thinking about the adoption curve of this product, as well as overall opportunity, especially in light of what you just mentioned, which is difficult to diagnose? So maybe you can give some color there.

And then a follow-up question, on Versacloz, I was under the impression that Versacloz is always there to maintain that psychiatric portfolio for maybe additional business development. Is that how you're still thinking about it, or you thinking that this could be another area of growth for you? Thanks.

Yes, on defibrotide, in terms of adoption curve, I would say this is reminiscent of the conversion of Erwinaze in the EU from named patient use to a commercialized product in those markets where it has an approval. Unfortunately that was invisible to most of you because a lot of that happened before we acquired EUSA, but that provides a good template for us.

Remember that some of our sales that we'll generate in 2014 will in fact be a continuation of that named patient basis distribution prior to official commercialization. So it's building off an existing base and slowly increasing that market by market as we do our commercial rollout, post pricing and reimbursement approvals.

In terms of difficult to diagnose I would just say this is one of those many cases where until there is an approved treatment for something the question is, how much are people really trying to get to a precise diagnosis once there is an agent out with proven efficacy. In this case very meaningful improvement in survival rate of the patients who progress to severe VOD. I think people are going to be more likely to look for it carefully knowing the importance of a correct diagnosis and best treatment for their patients.

On the psych portfolio, is it an area of growth? We've really had mixed trends in the psych business over the past couple years, as a couple products have encountered new generic competition those sales have necessarily fallen. We've actually been really pleased with the performance of our team in hanging onto sales and in some case growing sales were we don't have generic competition. So, you're going to see as we move through 2014 a continuation of that full-year impact in 2014 as some of the earlier generic competition but with the continued efforts of our focus team on FazaClo and Versacloz to in fact grow that business.

Operator? Next question.

Irina Rivkind, Cantor Fitzgerald.

I just wanted to explore the shared REMS a little bit more. So it sounds like your discussions with Roxane on the shared REMS are progressing in parallel with the FDA dispute potentially, could you talk about -- if one, the dispute gates the shared REMS discussion? For example, if you progress through several layers of the FDA and don't get anywhere and you request an advisory meeting, would that then slow the shared REMS conversation down?

Yes, Irina, good question a little bit of a complex one. First of all I'll point out the shared REMS discussions aren't just with Roxane, they are with all the ANDA filers, and when we say are those moving in parallel, it just started last month. So, super early days on that.

Our expectation is those things are moving in parallel at least for the time being. How and when those marry up or don't marry up is a little hard to predict right now. We are engaged in those discussions and expect we will continue to be engaged in those discussions in the upcoming months, even while a dispute resolution process goes forward.

And then just a follow-up on Xyrem DTC so it sounds like you're waiting on some data in March? Once you go through that, is that going to be a go, no go decision for you in terms of whether you want to do a nationwide DTC campaign on Xyrem? Thanks.

Sure, we have two options there. We can go at a staged fashion if we choose to or we can go national all at once. I think it really depends on the robustness of the data to make that decision. But it certainly is an option to go national at that time.

Thank you.

Gary Nachman, Goldman Sachs.

First, with the expanded sales force on Xyrem, how many more docs will you be calling on? Could you describe how effectively you'll hit the low and mid decile docs and are you expecting an acceleration of volume growth? I know you said double-digit, but should it actually accelerate from 2013?

And then Kate, why does the tax rate stay at the same level as 2013? Shouldn't Gentium actually bring it down a little bit? I think that's what you said. Thanks.

I'll take the first part of your question. Acceleration was not the words that I was using, but what I will say is that I think we're in a position to really make a meaningful difference in those lower decile physicians, which we attempted last year. We saw that the data was meaningful, we're now going forward with additional 20.

What it does is it takes us from what was a basis points of about 3,500 physicians to a target universe of about 5,000 now. So we're really now looking at, if I take deciles 5 through 10 and I ask myself where do we believe the growth is coming from. If we model that and we take that forward into 2014 it will actually give us similar type growth that we saw from 2013. So that is our hope and we're obviously going very hard after those targets to see if it will make a difference.

And then Gary on the tax impact of Gentium, you're correct that we said when we announced the Gentium deal we expected the adjusted effective tax rate to be in the high single- to low double-digits. And we also said that we expected a fairly modest bottom line contribution all-in from Gentium in 2014. Partially because of the financing costs that went along with the deal.

And so you are correct, the Gentium associated incremental tax rate is lower than our average corporate tax rate. And so over time as that becomes a bigger part of Jazz's business, it should start to be visible. But in 2014, it's not large enough to move the needle. Does that make sense?

Yes, it does but over time, I mean you were at around 18%, so over time you could actually make your way down to somewhere in the mid teens with the help of Gentium?

So, over time it will depend on the entire product mix at the Company, new deals the Company does and the growth of the various products. But you're correct, it is certainly possible that the tax rate could go lower in the future depending on what the Company does.

Great, okay.

I'll just chime in on this one because I think it's worth taking a minute to make sure people are focused on what we think drives shareholder value. We want to grow the adjusted net income for our shareholders over time. While low tax rate sounds good, we all understand math, if low tax rate means Gentium is getting bigger and Xyrem is growing less quickly. And a higher tax rate means Gentium is doing really well, but Xyrem is doing really well too, that maybe the better outcome.

So low tax rate is not the most important consideration, it's overall growth in our revenue stream and our profitability, and as Kate correctly says, the mix of where that profitability comes from will drive the tax rate, but I don't want people overly focused just on tax rate. It's really about driving the best results over time.

Understood. Thanks.

And operator we'll take our last question now.

Bill Tanner, FBR Capital Markets.

Want to wish Kate best of luck, I think the stock is up about [$30] since when you joined, so good luck on that, congratulations on that, good work. Bruce, as it relates to the litigation, and we had I think noticed last week at the filing, is there anything to read into how it's become protracted? Or is that just the vagaries of the court and the system and how things go through? And I have a follow-up, please.

Yes, Bill without getting into too much detail because I'll refer people to our filings on that. Essentially Roxane had remember we're suing them and they're the defendant, had mounted a defense that was a slightly different argument and required some additional discovery. And this was just the judge saying, yes in fact, if they want to include that as part of their overall defense strategy, it's going to take more time for the parties to get through that and five months was the calendar change that the judge thought was appropriate for that.

So I wouldn't put this in the category of just unexpected delay, I'd put it in the category of a considered opinion that more time is required, because there's a new piece of the overall mix, and that's what drove the change.

Okay. And then just secondly, is it being contemplated that you would replace Matt with another BD person? It seems like you guys are now just getting going, or is that Matt is going to be wearing both hats, just trying to understand a little bit? If this signals anything or not -- or Kate is just going to go off and have some fun I guess, hopefully?

We have a really strong corporate development team here, as we've said publicly for some time, distributed over four of our geographic locations: Palo Alto, Philadelphia, Dublin and Oxford. Matt's built a great group, they work well together. I think we'll have to see how we add additional talent to that team over time and at what level. I don't think we're prepared to talk publicly about what exactly we're going to do, this is all fairly late breaking information as you've guessed. Matt's going to want to spend some time with his team figuring out the best way to do that.

But I will say maintaining strength and flexibility in our corporate development team is critically important to the company. Which is to say if Kate weren't departing, we still might be looking for more talent too, right? We've got ambition to continue to grow our presence in this area over time.

Great.

We're in good shape as we sit here today.

No doubt. All right, thanks very much.

All right, operator we're going to end the call. Okay, I have just one thing to say before we close here. In order to allow everyone -- excuse me -- thank you for joining us today. Kate, Matt and I are planning to attend the upcoming Cowen Conference in Boston and Bruce and I plan to attend the Barclays Healthcare Conference in Miami, so we're looking forward to seeing many of you at those conferences. Have a great afternoon.

Ladies and gentlemen that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.