Jazz Pharmaceuticals plc (JAZZ) Q4 2013 Earnings Report, Transcript and Summary

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 for 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 & 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 will 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 the future events and our future performances instead of historical facts and our forward-looking statements. These statements include future financial, commercial, development and regulatory plan, expectations and projection such as our 2014 financial guidance, anticipated growth prospects for our products, planned commercial efforts including the plan 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 plans and ongoing clinical trial. These forward-looking statements involve numerous risk and uncertainties that could cause actual event 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 end in 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 access 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 to comparable, reported GAAP measure. Reconciliations of GAAP and non-GAAP financial measures discussed on this call are included in today's press release, in the earnings slide presentation accompany in the call. Both are posted in the News & Events section of our website. I will 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 continue 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 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 depository shares and owned approximately 98% of the company. We have been working with our colleagues of 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 1-10 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 in our plans for JZP 1-10 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 schizoaffective disorder. Now, I will 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 will 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 of 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 positions contributed a strong volume growth throughout 2013. Increasing the use of Xyrem in our current prescriber, 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 diagnoses of narcolepsy. We're pleased with yearly response to 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 had a strong response in the pilot cities during two month test period with more than 1500 hits, the physician finder tool and over 600 requests for further information about narcolepsy from narcolepsylink.com. We are in a 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 deemed REM should be modified to enable the distribution of Xyrem through more than one pharmacy. While we had hope to reach agreement with FDA on the Xyrem REMS without the need to initiate formal dispute resolution procedures, a recent FDA communications office compelled us to initiate dispute resolution procedures which we will do by the end of this month. There are no prescribed timeline for this process and we do not know how we 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 patients and public safety. Separately, as we mentioned in last quarter, FDA requested an initial meeting with us and the current and the filers to begin negotiations of the single shared REMS for Xyrem and potential generic versions of the product. That meeting was held last month and follow-up is ongoing. We continue to believe that development of a single shared REMS is complex and that there are many issues that 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 time with any complex litigation matter actually timing may differ. Now I will spend a few moments talking about our two R&D programs in the sleep franchise. Regarding JZP-110, as a remainder we plan to evaluate this compound to treat excessive day time sleepiness in patients with narcolepsy and in patients with obstructive food apnea. We are formulating plans for our Phase 2 development program and anticipate request in an end to Phase 2 meeting with FDA targeted for midyear. We plan t provide more information regarding our planned Phase 2 program after we have met with FDA and finalized our plans. Regarding JZP-386, our deuterium-modified analog of sodium oxybate license from Concert, we have 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 products of 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, E. coli drug asparaginases, and acute lymphoblastic leukemia. With respect to our IV study submission, the FDA has request for the supplemental biological license application as an efficacy data was included in the original label amendment submission in December. We expect to submit the sPLA to FDA later this quarter. Also, we have finalized our study protocol for the planned trial in young adults. This study is expected the beginning enrolment in the second quarter and we anticipate in rolling approximately 30 patients age 18 to 39. Moving to Asparec, we have discussed our plans with FDA and are currently working a large cooperative oncology study group to finalize the study protocol for our Phase 2, 3 study in children and we will update eon the expected timing of first patient in once the protocol is finalized. Next I will comment on Prialt, our non-opioid intrathecally administered drug for adults with severe chronic pain. As I have 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 PRISM 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, 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 PRISM registry and a planning of series of abstracts and posters that include interim data analysis beginning 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, Pharmacovigilance Risk Assessment Committee or PRAC. The registry is required as part of post-approval commitment for Defitelio. We plan to launch the product in selected EU countries over the course of 2014 and expect the 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 for such approvals that 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 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 with severe hepatic veno-occlusive disease or VOD, the importance of early diagnosis and treatment and communicating a therapeutic value of Defitelio. We are 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 and other potential indications where there are significant unmet medical news such as the prevention of VOD and the prevention of acute graft vs. host disease. Regarding the U.S., we are in the process of evaluating comments from FDA regarding the defibrotide dataset and planned 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 the defibrotide in the Americas as we access and determine next steps for an NDA submission including whether we can submit an NDA to FDA with the current dataset or whether we will need to collect further data prior to submitting to FDA. Separately, we announced today that Kate is stepping down 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 her 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 of 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 of demonstrating effective leadership. We hire 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 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 in our business and 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 increased by 49%; adjusted pretax income increased by 55% and adjusted EPS increased 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 objective in the fourth quarter and professional services expenses related to significant corporate development assessments conducted in the fourth quarter. We also have foreign exchange losses and an increase in the fully diluted share account 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 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. U.S. 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 1200 patients worldwide in main patient programs including a cost recovery program under the U.S. treatment IMD and approximately two thirds of these patients were in the EU. The planned EU was expected to roll out country by country over the course of 2014 as we receive pricing and reimbursement approvals. We expect that patients receiving Defitelio on a name patient basis will continue to do so in countries with pricing and reimbursements pending until we are able to launch commercially. With that in mind, we continue to anticipate the net product sales of Defitelio this year which includes revenues under name 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 updated your models, please note that we will record a 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, simply have an ownership position in Gentium of little less than a 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 accepted adjustments. Earnings and operating expenses adjusted combined SG&A and R&D expenses for 2014 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 the 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 f JZP-110, Asprec, 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 partly due to the impact of the upfront payment to Aerial BioPharma for JZP-110, which has no associated tax benefit. For the full year, we repurchased 126 million of stock at an average price of $75 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 of $904 million and borrowing $300 million under an expanded $425 million revolving credit facility. Reflecting favorable re-pricing our term loan and our borrowings under the revolver they are interest at floating rates which are currently 3.25% and 2.66% respectably. 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 planned to continue to work to identify and evaluate attractive opportunities to extend 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 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 will 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 reenter the queue if you have further questions. With that said, I will turn the call back over to the operator to open the line for your questions.

(Operator Instructions) Your first question comes from a line of David Amsellem with Piper Jaffray. Please proceed.

Thank you. I just like to -- first, can you talk about the specifics on the disagreements with the FDA on the REMS? And since we are entering into dispute resolution procedure, is it safe to assume that the FDA maybe is pushing for a more expansive REMS that perhaps encompasses more than one specialty pharmacy? And then my second question is on the 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 get into specifics but if you can talk about may be competitors that we should think about as useful guide for pricing, that would be helpful? Thank you.

Thanks, David. On REMS this agreement with FDA, yes part of it and the part we called out specifically is disagreement about whether distribution would be through one centralize pharmacy or potentially through more than one pharmacy. That's not necessarily the only disagreement but that is something we have consistently pointed to all the time. On pricing, for Defitelio in EU, we cannot get specific yet because we do not have all the feedback yet, but we have generally been setting expectation that one competitor you might use as 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.

Your next question comes from the line of Gregg Gilbert, Merrill Lynch. Please proceed.

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 is the most important objectives are for the management team in 2014 other than the financial targets you highlighted? Thank you.

So Gregg, I would say I felt that now is the right time for a number of reasons. Bruce highlighted my long commute which I have been doing for multiple years very willingly and it just been a wonderful experience. But I felt like this was the right time for me personally to make that change. Then, 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 have spent working with Matt all give me great confidence that the company is in great shape. And so, I felt like the company can go on without missing a beat and all will be well from here.

And Gregg, on key objectives for the year, we have 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 from narcolepsy recognizing that we are attacking only a small part of that market today, which are those patients who are already diagnosed and treated, continuing to grow Erwinaze two lunches a Defitelio in the EU and Versacloz in the U.S. doing a nice job on both those launches. A tremendous amount to accomplish on the development side, really across the portfolio are getting some key programs in the later state 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 have done a nice job in the last couple year, not only in defending the IP we have but continue to expand the IP that is in place to protect key products. And then, our corporate development efforts remain upfront and center. We're in the midst of integrating Gentium right now, but I think we have signaled we have got the financial capacity, the organizational capacity, the management capacity to take on additional assets moving forward. And then a U.S. 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 it is not a promise. That would be next but I think that is where our focus is. So if we can execute well on the commercial side, the development size and then continue to redeploy cash flow in our strong balance sheet to continue to grow our portfolio of commercial development assets, I think we will have an another terrific year in 2014.

Our next question comes from the line of Louise Chen with Guggenheim. Please proceed.

Thanks for taking my questions. So first one I had is, Kate, have you disclose where you are going to be 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 products from Sigma-Tau in the U.S. and if so when?

So Louise, I do not 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 U.S., we do not have the unilateral right to take back those rights and we are currently working with Sigma-Tau to develop the best strategy for U.S. commercialization of that 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.

Our next question comes from the line of Jason Gerberry with Leerink Swann. Please proceed.

Hi, guys it's actually Chris Keuhnle for Jason. 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 may be two years? And then, as just a quick follow-up to that, what is 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 than 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 multi stage dispute that gets escalated within or even beyond FDA, way too early to tell. I do not think it is simple dispute. Well, I do not know the answer, my guess is longer rather than shorter, but we really do not know the act. As I indicated, we -- our plan to formally initiate dispute resolution before the end of the month meaning, we have not done it yet. So we do not even have the first volley back from FDA yet, we do that to respond too. So at this point, I just cannot really give you any guidance.

Your next question comes from the line of Daniel (inaudible) from Brean Capital. Please proceed.

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Yes, so I cannot comment specifically on exactly what the current use is, whether that is third. What I can tell you is that we have done extensive market research with key thought leaders and we actually have 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, but I can tell you that the willingness from physicians to use more is certainly there. And Jeff do you want to comment on GVHD.

Right. So we are very interested in that it's a potential indication certainly the data that we've generated and published in the Lancet article in 2012 suggested there is potentially important fact there. The study wasn't designed specifically to look at GVHD. So we're going to be evaluating in different context what that might look like and hopefully we will have more on that later in the year.

Your next question comes from the line of Marc Goodman, UBS. Please proceed.

Marc, are you there?

Marc?

Well, operator, let's go to the next question.

Our next question comes from the line of Ken Cacciatore with Cowen & Company. Please proceed. 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; they have the rights to defibrotide in the U.S. I was wondering if you could answer whether it would 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 then I hate to ask this other question but because of the timing of ramps in the FDA. Is it possible 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.

Yes, and those are some very specific questions. I think I'm going to decline to comment on FTC risk of a potential transaction we haven't disclosed whether we would be interested in. So I'll skip that one. On what FDA could or couldn't do, we've said really for a longtime now, probably a couple of years now, we're not sure what it would mean if FDA "approved" and ANDA if that ANDA approval didn't come with unapproved REMS whether than 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 narrow regulatory question, which I do understand I will just remind you that we got complex and ongoing litigation on many patents of varying pipes with expiration dates up 2019 to 2024. So even if we go down the road of what could happen in the way of on 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.

Our next question comes from the line of Douglas Tsao with Barclays. Please proceed.

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 there a function of what your expectation of this year seems a little bit sort of more tampered that we're waiting some of the new initiatives especially the results of the AYA trial in order to sort of have another leg up for the product?

Yes, 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 U.S. which I think is meaningful growth for sure. Having said that, it's a small patient population, we've done a really nice job in making progress with the pediatric population. At the same time we've been creating initiatives that we believe will get us to broader population anyway and ultimately we think that the initiation of PDM allows us to find patients who actually have starting with hypersensitivity. So we do think that's where the growth would be coming from in 2014. I will say that we had a number of centers come on last year too that really helped with our 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 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 sort of anecdotal but this is resulting in diagnoses of narcolepsy with actual patients and that they are actually getting put on to Xyrem?

Yes. Great question. So we are really encouraged by the results and I've commented before that we had over 1500 people go to 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 client feed and doing a little bit more market research which we think that data will be coming late March, but we're pretty encourage what with we've seen so far.

Your next question comes from the line of Annabel Samimy with Stifel. Please proceed.

I actually had a question on defibrotide. You gave some pretty nice guidance for first year 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, and so we can get some color there. And then a follow-up question on Versacloz under the impression that Versacloz is always there to sort of maintain that psychiatric portfolio for may be additional business development is that how you're still thinking about it or you thinking of this could be another area of growth for you? Thanks.

Yes, on defibrotide in terms of adoption curve, I'd say this is reminiscent of the conversion of Erwinaze, in the EU from main patient use to 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. And remember that some of our sales that we generate in 2014 will in fact be a continuation of that main patient basis distribution prior to official commercialization. So it's sort of 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 our people really trying to get to a precise diagnosis once there is an aging out with proven efficacy in this case very meaningful improvement in survival rate of those -- the patients who progress with severe VOD. I think people are going to be more likely to look for carefully knowing the importance of correct diagnosis and best treatment for their patients. On the site portfolio, is it an area of growth, we really had mixed trends in the site business over the last couple of years as a couple of products have encountered new generic competition and those sales have necessarily fallen. We've actually been really pleased with the performance of our team in hanging on the sales and in some case growing sales where 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 with some of the earlier generic competition but with the continued efforts of our focused team on FazaClo and Versacloz to in fact grow that business.

Operator, next question.

Your next question comes from the line of Irina Rivkind with Cantor Fitzgerald. Please proceed.

I just wanted to explore the shared REMS a little bit more. 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 with that then slow the shared REMS conversation down?

Yes, Irina good question, a little bit of a complex one. First of all point out that the shared REMS discussions aren't just with Roxane that we're holding and the 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 it's a little hard to predict right now, but 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 moves forward.

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

Yes, so we have two options there. We can go on the staged fashion if we choose to; we can national all at one. I think it really depends on the robustness of the data to make that decision but it's certainly is an option to go national at that time.

Your next question comes from the line of Gary Nachman with Goldman Sachs. Please proceed.

First, with the expanded sales force on Xyrem, how many more docs will you be calling on? Can you describe how effectively you will hit the low and mid decile docs and are you expecting an acceleration of volume growth and 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 word that I was using, but what I will say is I think we're in a position to really make a meaningful difference in those decile positions, which we attempted last year, we saw that the data was meaningful, we're now going forward additional 20. What it does is it takes us from what's the basis point of about 3500 physicians to a target universe of about 5000 now. So we're really now looking at if I take just out 5 through 10 and I ask myself where do we believe the growth is coming from if we model that we take that forward into 2014. It will actually give us similar type growth that we saw for 2013. So that's our hope and we're obviously going very hard after those targets to see if that 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 adjusted effective tax rate to be in the high single to low-double-digit. 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 let along this deal. And so you're correct, the Gentium associated incremental tax rate is lower than our average corporate tax rate and so overtime 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 overtime, I mean you're at around 18% overtime you could actually make your way down to somewhere in the mid teens with the help of Gentium?

So overtime it will depend on the entire product mix as a company, new deals the company does and the growth of the various products. But you're correct it's certainly possible that the tax rate could go lower in the future depending on what the company does.

Right. 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 drive shareholder value. We want to grow the adjusted net income for our shareholders overtime and while low tax rate sounds good, we all understand that. 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 may be the better outcome. So low tax rate is not the most important consideration, its overall growth on our revenue stream and our profitability, and as Kate correctly said 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 overtime.

And operator, we will take our last question now.

Our final question comes from the line of Bill Tanner, FBR Capital Markets. Please proceed.

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Yes, Bill without getting into too much details, because I will refer people to our filings on that. Essentially, Roxanne had remember we're suing them and they are the defendant had announced their defense that it was probably a different argument and required some additional discovery and this is 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 that the judge thought it was appropriate for that. So I wouldn't put this in the category of just unexpected delay I would 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 will probably change.

And then just secondly, it's being contemplated that you would replace that with another BD person yet seems like you guys have just now getting going or is it -- that now it's going to be wearing both hats trying to understand a little bit, if this signals anything or not or case is going to go up and have some fun I guess hopefully.

So we have a really strong corporate development team here as we said publicly for sometime distributed over four of our geographic locations Palo Alto, Philadelphia, Dublin and Oxford, Maxwell is a great group, they work well together. I think we will have to see how we add additional talent to that team overtime and at what level I don't think we're prepared to talk publically about what exactly we're going to do. This is all fairly late breaking information as you guessed. I think Matt has been the one spending the time with this 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 got ambition to continue to grow our presence in this area overtime. But we're in good shape as we sit here today.

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 are looking forward to seeing many of you at those conferences. Have a great afternoon.