Welcome to the Jazz Pharmaceuticals plc third quarter 2015 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, Head of Investor Relations at Jazz Pharmaceuticals.
Thank you, Whitley, and thank you to each of you for joining our investor call today. We reported our third quarter financial results and updated our prior 2015 financial guidance in a press release. The release and the slide presentation accompanying this call are available in the news and events section of our website. With me for today's call are Bruce Cozadd, Chairman of the Board and CEO, Matthew Young, Chief Financial Officer, Russell Cox, Chief Operating Officer, Michael Miller, our Head of U.S. Commercial, and Karen Smith, our Global Head of R&D and our Chief Medical Officer. Following some remarks, we'll open the call for your questions. I'd like to remind you that some of the statements we will make on this call relate to future events and future performance rather than historical facts and are forward-looking statements.
Examples of forward-looking statements include statements related to our 2015 financial guidance and goals, future product sales and volume, regulatory, litigation, and intellectual property-related events, clinical trials, our commercial goals and initiatives, including the potential approval of our NDA for defibrotide and commercial launch in the U.S., our development activities and corporate development efforts, the sustainability of and growth opportunities provided by our business model, and the timing of such events and activities. 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 slide presentation accompanying this call, and under Risk Factors in our Form 10-Q for the quarter ended June 30th, 2015, and our Form 10-Q for the quarter ended September 30th, 2015 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 expected 2015 adjusted net income attributable to Jazz Pharmaceuticals and the related per share measures and historical and expected 2015 adjusted SG&A and R&D expenses. 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 slide presentation accompanying this call. Both are posted in the news and events section of our website. I'll now turn the call over to Bruce.
Good afternoon, everyone, and thank you for joining us. During the third quarter, we achieved total revenues of $341 million, an increase of 11% compared to the third quarter of 2014, driven by solid sales of Xyrem and Erwinaze. We realized adjusted net income of $159 million in the third quarter of 2015. GAAP net income for the quarter was $88 million.
In addition to the strong commercial sales of our key products, we accomplished a number of regulatory and clinical goals during the third quarter, including receiving priority review status for our NDA for defibrotide with a PDUFA date of March 31, 2016, progressing the enrollment in the JZP-110 phase III trials, evaluating excessive daytime sleepiness in narcolepsy and obstructive sleep apnea, and implementing the approved Xyrem REMS and submitting our first REMS assessment report to the FDA in late August. I'll now update you on our key commercial, legal, regulatory and clinical development activities during the quarter, after which Matt will review our financial results for the quarter and provide comments on our guidance. I'll start my comments with our sleep therapeutic area and our lead product, Xyrem.
In the third quarter, the average number of active Xyrem patients grew to approximately 12,450 from 12,050 in the same period of 2014. During the third quarter, our bottle volume growth was 4% compared to the same quarter of 2014. Our year-to-date volume growth through the third quarter was 8% compared to the same period in 2014, and organic demand for Xyrem remains strong. In the third quarter, Xyrem product sales were negatively affected by operational disruption at the central pharmacy following the implementation of the approved Xyrem REMS that began in late August. The process under which enrolled patients receive Xyrem is complex and includes multiple mandatory steps by the central pharmacy.
The transition to the approved REMS led to significant operational changes at the central pharmacy, including revised forms and processes for the pharmacy, patients, and prescribers. As the central pharmacy, physicians and patients familiarized themselves with the revised forms and processes, the central pharmacy experienced an increased volume of calls that led to a backlog and resulted in delays in prescription fills. We and the central pharmacy have identified and are addressing the processes that have led to operational delays, and the central pharmacy has increased staffing to handle the workload. In the fourth quarter to date, we have observed an improvement in key metrics compared to the third quarter, and we expect to see continued improvements in pharmacy operations. We are continuing to work with the central pharmacy to optimize the processes to minimize further disruptions and any further impact on Xyrem product sales.
Our first priority is ensuring that patients continue to receive Xyrem therapy in a timely manner. As Matt will discuss in further detail, we expect Xyrem sales for full year 2015 to remain strong with an increase of 22%-24% as compared to 2014. We expect the operational disruption at the central pharmacy to be resolved toward the end of the fourth quarter, and we are narrowing sales guidance to $950 million-$965 million for full year 2015. We anticipate that 2016 Xyrem volume will once again reflect growing end market demand, as was the case before the REMS transition. Turning to a brief legal and intellectual property update on Xyrem. Patent litigation continues in the district court in New Jersey.
No trial dates have been set in any of the cases, although the expert discovery phase of a portion of the case against the first filer, Roxane Laboratories, is nearing completion, and we anticipate the trial of this case could occur as early as the first quarter of next year. Activity on challenges to our patents with the U.S. Patent and Trademark Office Patent Trial and Appeal Board, or PTAB, is continuing. In July of this year, PTAB instituted proceedings for inter partes review, or IPR, on six of our distribution patents listed in the Orange Book for Xyrem. We recently filed our responsive evidence and arguments in those proceedings.
In September, certain of the ANDA applicants filed an additional petition for IPR on the seventh patent covering our distribution system for Xyrem, and in October, two of the ANDA applicants filed petitions for IPR on Jazz's 306 patent. The 306 patent is a method of treatment patent that relates to the safe use of Xyrem for a patient receiving concomitant administration of divalproex sodium. We expect to file preliminary responses to these petitions in the first quarter and anticipate decisions from PTAB on whether or not to institute the review in the second quarter. Now turning to our development program for JZP-110. Enrollment is progressing in the phase III safety and efficacy studies. Additionally, we hosted an investor-investigator meeting in Europe during the third quarter. EU investigators were enthusiastic about the JZP-110 program, and EU sites have begun randomizing patients.
We expect that preliminary efficacy results from the phase III studies in narcolepsy and in obstructive sleep apnea will be available in the second half of 2016, and subject to these results, we anticipate submitting an NDA in 2017. Now on to the hematology/oncology franchise. First, Erwinaze. We continue to believe that Erwinaze has the potential to help additional patients in the adolescent and young adult population with acute lymphoblastic leukemia as more adult oncology centers have incorporated pediatric-inspired asparaginase protocols for the treatment of some of their ALL patients. As part of our preparation for a potential defibrotide launch in 2016, we completed a sales force sizing analysis and are planning for a joint Erwinaze/defibrotide sales force once defibrotide is approved in the U.S.
The size of the sales force is increasing by 10 representatives during the fourth quarter, and we anticipate that they will be supporting Erwinaze in their new territories in January. On Defitelio, we continue to observe good volume growth in the EU and are pleased to see better than expected usage of Defitelio in countries such as France, as individual hospitals and hospital groups have successfully managed to incorporate Defitelio into the treatment of appropriate patients with severe hepatic veno-occlusive disease, or VOD, following hematopoietic stem cell transplantation. Our focus in the EU continues to be on medical education around VOD pathophysiology, appropriate diagnosis, and prompt treatment with Defitelio, as well as expanding the base of experienced physicians in the EU to drive further volume growth.
On the U.S. regulatory front, we were pleased that we have received priority review for our defibrotide NDA with a PDUFA date of March 31. We have prioritized our regulatory resources to efficiently support the ongoing FDA review process for the defibrotide NDA as we work toward our goal of FDA approval in 2016. We are responding to all review questions in a timely manner and are preparing for anticipated manufacturing and clinical trial-related inspections in the coming month.s. In the U.S., our efforts are also directed to educating healthcare providers on the recognition of VOD through an unbranded disease awareness program, and we are ramping up our commercial preparation for the potential approval and launch of defibrotide in the U.S. Next year. Finally, we are moving forward with our plans to evaluate defibrotide for the prevention of VOD.
Our development team will be meeting with the FDA to discuss the clinical trial design, and we look forward to providing more details in early 2016 when we expect to finalize the protocol. We are excited about opportunities for defibrotide in other diseases and are in the process of evaluating other potential development programs for defibrotide. We're pleased that we have a number of defibrotide abstracts accepted for the American Society of Hematology 2015 meeting in December. We have one oral presentation of phase III pivotal trial outcomes, including analyses requested by the FDA, and five posters. We will also be presenting four posters focused on health economic outcomes research on the costs of hematopoietic stem cell transplantation and VOD and SVOD, the indirect costs of loss of productivity for patients with premature mortality, and the incidence of VOD and SVOD.
We announced last quarter that we plan to analyze the results of our Leukotac phase III clinical trial in the third quarter. Leukotac was evaluated in 100 patients who developed steroid-refractory acute graft-versus-host disease post-allogeneic hematopoietic stem cell transplant. The primary efficacy endpoint of the study was time to treatment failure, and overall survival at one year was a key secondary measure. Although some benefit was observed in the Leukotac-treated patients, it did not reach statistical significance, and therefore, the primary endpoint and key secondary endpoint were not met. After evaluating the results and discussing with key opinion leaders, we've decided to discontinue Leukotac development. We will continue to focus our investments on products that we believe can bring highly differentiated and important benefits to patients with significant unmet medical needs.
For example, we are evaluating whether the acute graft-versus-host disease signal observed in the study of defibrotide in prevention of VOD warrants further consideration. In summary, 2015 has been a busy and productive year for us thus far. We've delivered on key commercial and R&D goals that we believe will drive significant value creation. We're preparing for a potential launch of Defitelio in the U.S. at the end of the first quarter. Our corporate development group remains active as we continue to evaluate a number of potential transactions to further enhance and diversify our portfolio and our business. Before I turn the call over to Matt, I wanted to briefly comment on current industry dynamics. It goes without saying that our sector is in a period of significant volatility, with unprecedented political and regulatory activity, which has naturally resulted in investor concerns.
The areas of greatest near-term concern have largely centered around the activities of companies pursuing substantially different business models and strategies compared to ours, which I hope is obvious from the business update that I just went through. I want to take a moment to reiterate our business model and growth strategy, which we've been pursuing for the past several years. We are focused on delivering clinically meaningful products to patients with disabling or potentially fatal diseases, such as narcolepsy, acute lymphoblastic leukemia, hepatic veno-occlusive disease with multi-organ dysfunction, and chronic pain. In most of these patient populations, our drugs are the only approved treatment option available for the patients who use our drugs.
We intend to invest in and further diversify our business by, one, pursuing focused development of product candidates in our current R&D pipeline, two, adding new pipeline assets to expand our R&D portfolio, three, acquiring on or near-market products, and four, growing sales of our existing products in existing and prospectively identified new indications and geographies. We believe that our international biopharmaceutical business model is sustainable and provides for future growth opportunities through organic product growth, our R&D pipeline, and future licensing and acquisitions. Matt, let me now turn the call over to you.
Thanks, Bruce, and good afternoon, everyone. We saw total revenues and adjusted EPS attributable to Jazz increase by 11% and 10% respectively compared to the same period in 2014, driven primarily by growth in the sales of Xyrem. Net sales of Xyrem for the quarter were $243 million, up 19% from $204 million in the third quarter of last year. Bottle volume growth year to date is 8% compared to 9% in the same period in 2014. We currently expect mid to high single-digit bottle volume growth for the full year 2015. To put this in perspective, I want to remind you that Xyrem had strong sales in the fourth quarter of 2014 due to a change in our early refill policy that created a one-time increase in bottle volume.
We are narrowing our guidance for Xyrem net product sales to a range of $950 million-$965 million for 2015 from our prior guidance of $950 million-$970 million. Turning to Erwinaze, third quarter worldwide net sales were $56 million, up 8% from $52 million in the third quarter of 2014. Product sales increased primarily due to increased product demand as well as a $4 million impact of initial inventory build at a new independent distributor to about 16 days, which is an increase of approximately one week above the inventory level held by our previous distributor and closer to industry norms. The volume increase in the third quarter of 2015 was partially offset by increased chargebacks and rebates resulting from increased utilization of 340B in Medicaid programs.
Foreign exchange rates negatively impacted Erwinaze net sales by approximately $2 million and $6 million for the three and nine months ended September 30, 2015, compared to the same period in 2014, respectively. We anticipate that we will see a further $3 million increase in Erwinaze inventory levels at the distributor in the fourth quarter of 2015 to an industry average of approximately 20 days. Taking these multiple factors into consideration, we are narrowing our guidance for Erwinaze net product sales to a range of $200 million-$210 million for 2015 from our prior guidance of $200 million-$215 million. For Defitelio defibrotide, third quarter worldwide net sales were $20 million, an increase of 4% compared to net product sales of $19 million in the third quarter of 2014.
We observed strong double-digit volume growth during the third quarter, offset by foreign exchange headwinds that reduced our Defitelio net product sales by approximately $4 million in the quarter compared to the third quarter of 2014. Net product sales of $52 million year to date were reduced by approximately $11 million due to foreign exchange headwinds compared to the same period in 2014 on a pro forma basis. We are pleased with the continued volume growth of Defitelio in the EU. However, taking into account the continued FX headwinds, we are lowering our Defitelio net sales guidance to a range of $70-$75 million from our prior guidance of $73-$83 million.
I'll remind you that foreign currency impact to our bottom line is minimal as we incur non-U.S. dollar expenses in our European operations. Prialt net sales were $6 million in both the third quarter of 2015 and 2014. I wanna note that the timing of sales to Eisai for the distribution of Prialt in Europe varies. In the fourth quarter of 2014, we had $3.8 million of Prialt sales to Eisai for distribution and sale in Europe. In the fourth quarter of 2015, in part due to short-term management of our global supply, we are not expecting any sales to Eisai. For the full year 2015, we are tightening the range of our total revenue guidance to $1.32 billion-$1.34 billion, compared to our prior guidance of $1.31 billion-$1.37 billion.
Turning to operating expenses, cost of product sales for the third quarter of 2015 was $28 million, which included approximately $3 million of inventory provisions, or $0.04 per diluted share after tax, primarily due to the discontinuation of Erwinaze. Adjusted SG&A expenses for the third quarter of 2015 were $85 million or 25% of total revenues, compared to $79 million or 26% of total revenues for the same period in 2014. The dollar increase year-over-year in adjusted SG&A expenses was primarily due to higher headcount and other expenses resulting from the expansion of our business. Adjusted R&D expenses for the third quarter were $23 million or 7% of total revenues, compared to $18 million or 6% of total revenues for the same period in 2014.
The increase was primarily due to increased costs for the development of our product candidates and life cycle management activities related to our existing products, as well as expenses related to the completed NDA submission for Defibrotide in the U.S. Our 2015 guidance for adjusted SG&A remains a range of $355 million-$365 million, and adjusted R&D guidance remains a range of $95 million-$105 million. We are narrowing our adjusted EPS guidance to a range of $9.45-$9.60 per diluted share from our prior guidance of $9.45-$9.75 per diluted share. As of September 30, 2015, cash and cash equivalents increased to approximately $1 billion, primarily due to cash generated from the business.
As of September 30, 2015, the principal balance of our outstanding indebtedness was $1.4 billion. Our revolving credit line had $80 million outstanding on September 30, 2015, which we repaid in full in October, leaving us with undrawn revolver capacity of $750 million. During the third quarter, we completed our prior $200 million share repurchase program. Last week, our board of directors authorized a new share repurchase program under which we are authorized to repurchase up to $300 million of our company shares. As with our previous program, we expect to repurchase shares over time, subject to capital markets conditions and alternative uses of cash, including corporate development.
In closing, we continue to focus on investing to grow our key commercial products, advancing our development pipeline, including working toward regulatory approval of defibrotide in the U.S., and pursuing corporate development opportunities to further grow and diversify our product portfolio and pipeline. Thank you for joining us on the call today. I'll now ask Kathee to make a brief comment about our Q&A session.
Thank you, Matt. We request that you continue to limit your questions to a maximum of one at a time, and then feel free to reenter the queue if you have any further questions. With that said, I'll turn the call back to the operator to open the line up for your questions today. Operator?
Ladies and gentlemen, if you'd like to ask a question, please press star followed by one on your phone. If you'd like to withdraw your question, please press star followed by two. Our first question comes from the line of David Amsellem, Piper Jaffray. Please proceed.
Thanks. High-level question about M&A. It's been some time since you've been active on the deal front and both in sizes big and small. I guess the question here is, you know, given the volatility in this group, given that you're talking more about share repurchases, is there anything that has changed regarding how are you thinking about M&A, what you're looking at, anything that's changed in terms of deal sizes, et cetera? Maybe help us understand your latest thinking, thanks.
Yeah, David, thanks for the question. I would say in general, as we look at where we sit right now coming up closer to the end of the year, you know, we've seen certainly a big change in asset prices, which as a buyer, I think is a positive change. We've continued to strengthen as a company, you know, growing top and bottom line, increase liquidity. I think we're well-positioned. You know, you mentioned it's been some time since we've been active. Active as defined as closing deals, I would agree with, but I would say we are active, very active in our evaluation process and in making sure we're identifying deals we think would be a great fit for us. On the share repurchase, I would say totally different topic.
We've had a share repurchase program in place for years that we completed. We're now putting another one in place. I think that's a good thing for us to be able to do, but I certainly don't think of as a substitute for a very active corporate development effort. Maybe I'll turn it over to Matt to talk a little bit about your question about size of transactions that might make sense for us.
Yeah. Thanks, Bruce. So, consistent with what Bruce said, I think, again, not a lot has changed in terms of the types of transactions we're going to be looking at in terms of continuing to seek out products that
Provide meaningful benefit for patients and or a strategic fit with Jazz, but also have a strong likelihood of bringing a good ROI to our investors. That is the same. As it relates to size, clearly there has been some dislocation in the leveraged finance markets for healthcare in general. While we believe, you know, our continued generation of cash flow shows we have a durable business, and as Bruce alluded to, with $1 billion of cash on the balance sheet and a $750 million undrawn revolver, we feel we're in a strong position from a liquidity perspective.
Further, that strategic deals with the right kinds of asset targets with a well-financed transaction could certainly enable leverage levels above where we are today, subject to market conditions at the time. You know, we still believe we can look at meaningful and sizable transactions, and we'll continue to do so in this environment. That said, again, we do recognize the environment's changed a bit.
Thank you.
Your next question comes from the line of Louise Chen with Guggenheim. Please proceed.
Hi. Thanks for taking my question. I was curious if you could give us more color on defibrotide opportunity in the U.S. and how it can enhance your overall franchise. That would be helpful. Thanks.
Sure. Maybe I can hand that over to Russ and Mike to comment a little bit, particularly given our experience in Europe and our plans for an upcoming launch.
Sure.
Sure. Just to give a flavor for the U.S. potential, there's about 20,000 hematopoietic stem cell transplantations that take place in the U.S. About 3,000 patients that are at high risk for VOD, and somewhere between, you know, 1,000-2,000 with the incidence of VOD. We anticipate that we'll have a label that'll be consistent with what we've seen in Europe. We think that the opportunity in the U.S. is actually pretty exciting. We're gearing up, and I'll turn it over to Mike just to give you a flavor of some of the activities that we're doing to get ready for that launch.
Thanks, Russ. Yeah, we are kicking off our unbranded disease awareness campaign around VOD. We think we can absolutely grow the diagnosis rate. In Q4, we are expanding our sales force, and it'll be the hem-on sales force that will also carry Erwinaze. By the end of Q4, they will be in territory and trained.
Your next question comes from the line of Marc Goodman with UBS. Please proceed.
Bruce, it feels like we've been down this path before with respect to the hub and you know some problems in the short term. Can you give us a sense of maybe what the volume growth you think would have been if there wouldn't have been this issue? Is there any way to have any idea about that? I mean, obviously, this is the first time I think we've seen the number of patients on Xyrem actually down from a quarter to the other quarter. So maybe you can help us with that. Then just a very quick question. In the other product line, that was $3.9 million, does that include the Gentium API revenues that was consistently like a couple million bucks a quarter and that's what's left in there, and there's barely any.
I'm just trying to understand what the run rate is of that line item. Thank you.
Very creative use of one question there, Marc. Let me hit the big part of your question first, and I'll have Matthew follow up at the end with the other line. On the number of patients, you know, maybe I'll ask Michael to comment a little bit on how we define that to give you a sense of what that is. It's really hard to know exactly what the volume growth would have been without any operational disruption because of course we didn't run that experiment. I will say we felt really good about our volume growth right up until we implemented the REMS, and we can track on a daily basis what that meant in terms of shipment of bottles, and it was very significant.
A very meaningful impact, but I'm not sure we can tell you exactly what the volume growth would have been, without it. Mike, maybe comment a little bit on how we define number of patients for that calculation.
Sure. The metric that we use is active patients, and those are patients who receive prescriptions. As Bruce said, the timely fill of prescriptions was affected by the operational challenges we had at SVS. Consequently, the number of active patients as we define the metric would be affected as well.
Marc, just coming back to your, to the last part of your question. On any other line, you're really mostly seeing the impact of the divestiture of some of our European business earlier in 2015. The old revenue recovery program for defibrotide in the U.S., which you're correctly noting we did stop partway through last year, did flow into the Defitelio defibrotide line, so that's on a different line.
Bruce, let me add one thing, is that right before we implemented the REMS in late August, our demand was quite good. To be clear, after the REMS implementation, organic demand and new starts are still very good. It is really the timely fill of these prescriptions to get out, if that makes sense. Okay.
Your next question comes from the line of Gregg Gilbert with Deutsche Bank. Please proceed.
Hi. Maybe just to follow up on your most important product, can you talk about what some of these logistics issues are in more detail? You know, what's different this time versus last time? I'm sure folks wanna hear a little bit more granularity. You sound confident in resolution, but maybe some more details in order. Thanks.
Sure. This is Mike. Before we implemented the launch, we began an educational campaign in the field to prescribers, letting them know of new changed forms and processes around the REMS. Despite that effort, which went on about a month, there's clearly a learning curve for patients and physicians to learn these forms. For example, there are a lot of common errors about not completing all the fields or missing signatures, and that created hard stops for these prescriptions in the pharmacy process. That resulted in increased call volume as the pharmacy then had to go out and contact these physicians and patients in an effort to actually fill in or correct missing items in the form. All this resulted in timeliness of the fills.
On the resolution side, we have identified the issues in Q3 and already have begun remedying those. We hired and trained new pharmacists starting in October. We began another concerted effort to educate or familiarize physicians and patients to the new change processes and forms. We've actually made changes on the online forms to catch missing items or not to allow incorrect information to be entered. We've changed a number of processes and software to streamline the timely prescription fills. Again, we have seen to date, in the fourth quarter, we've seen improved metrics that we are pleased with, and we expect to normalize by the end of Q4.
I'll just add to what Mike said. I think, SDS, who's performing the pharmacy operations, has been a great partner through this. Their hiring of new personnel, and work, as Mike said, to ensure that this process does result in filling prescriptions for patients who rely on Xyrem. You know, all of those efforts, I think, have already begun to pay off.
Your next question comes from the line of Jessica Fye with J.P. Morgan. Please proceed.
Hey, guys. Thanks for taking my question. Question is on Xyrem pricing. I noticed you didn't take the second price increase this year. I was hoping you could just talk about sort of your view of the appropriate price for Xyrem, whether that's gonna continue to move higher over time. It's been a focus in the sector, so I'm curious to hear your comments there.
Sure. This is Mike again. You know, we do believe that the scrutiny generated by the news and the political stance will. I don't think it'll impact our ability to take appropriate price increases or in fact price our new products appropriately based on the value they bring to patients. Right now, our managed care coverage remains strong, and no change, and we see the PAs grew about 7% in Q3 year-over-year. We don't provide forward-looking comments on price increases, obviously, but I think the trend that we have taken is pretty evident.
Your next question comes from the line of Jason Gerberry with Leerink Partners. Please proceed.
Hi. Thanks for taking my question. On Xyrem line extension, I realize you guys aren't gonna say much, but just curious directionally, if you guys can comment, Flamel has indicated they're going to start their pivotal phase III on their once nightly micropump sodium oxybate in the fourth quarter of this year. As you think about these five or 10 products that you have, that you're working on behind the scenes, how comfortable are you that you're close to them in the race to have an improved version of sodium oxybate on the market, just in terms of a timing perspective and a competitive perspective as well to have a competitive product offering? Thanks.
Yeah, Jason, you know, we obviously aren't saying too much publicly at this point other than the fact that we have multiple efforts underway that could include both a focus on the potential for once nightly dosing but also other potential improvements over the existing Xyrem product. You know, I think we've said for a while now our focus is on getting a product out that is differentiated in the minds of patients, prescribers, payers, and regulators and having that be the best product we can make it rather than on just doing the fastest possible program.
You know, in terms of the race, you know, I don't think anyone's particularly close to the market yet, and we feel confident that our efforts are the right efforts to position us in the best possible way.
Okay. Thank you.
Your next question comes from the line of Gary Nachman with Goldman Sachs. Please proceed.
Hi, Bruce. Can you give an update on the shared REMS discussions with generic companies? Is there an actual target for that? When could we potentially hear about a trial date with Roxane? Typically, how soon after discovery is completed? Thanks.
Gary, on the first question, which is a single shared system question, our goal, as it has been, remains to work with the ANDA applicants to develop a single system. We have said and continue to believe this will be the best outcome for patients and other stakeholders when generics enter the market. We, you know, are not the only party in those discussions, and so we can't predict whether this will ultimately happen or how the FDA will handle the requirements for REMS for the ANDAs if we don't develop a shared REMS. You know, can't say more at this point, or we'd just be speculating. On when we might first hear of a trial date, it's conceivable we could hear that before the end of this year.
That doesn't mean we necessarily will, but that's a possibility. Once we are through the you know, currently scheduled items, there'll be a status conference, and it is possible that a trial date would be outlined at that point.
Okay. Thank you.
Your next question comes from the line of David Buck with Northland Capital Markets. Please proceed.
Yes, thanks for taking the question. Bruce, for Xyrem, it seems like you avoided taking the price increase, perhaps due to the implementation of the REMS. Can you talk a little bit about whether there's been any other pricing moves during the reported quarter or during the fourth quarter to date? Anything else that led to the strength in Erwinaze besides the inventory? Was there any pricing there? Thanks.
Yeah, no significant price increases on any of our products during that timeframe. Erwinaze, Mike, you wanna comment on the Erwinaze trend?
Yeah, there were two price increases that were small. One was Erwinaze in July, 3%; Prialt in July of 1.5%.
Erwinaze, we're very pleased with the traction that we have gained with Erwinaze. I think the base demand is quite good. We think we are making inroads. As you probably know, the pediatric space, we believe, is pretty close to penetrated. But we believe that there's a lot of adolescent young adult patients who could benefit from Erwinaze therapy. Right now, there is very much good literature out there around the adoption of pediatric protocols in these patients. It's a good thing.
Your next question comes from the line of Corey Davis with Canaccord Genuity. Please proceed.
Thanks very much. If you said it, I missed it, but with respect to the timing on the two trials going on with JZP-110, I just see from the slide deck that they were started in Q2 2015, but any more comments about rates of enrollment, whether or not it's slower or faster than you expected, and when could we expect to see data and in which indication first?
Corey, let me hand that question over to Karen.
Hi, Corey. Thanks very much for the question. You may be aware that we have recently increased the number of sites and opened up sites into Europe for JZP-110. We obviously also have sites in Canada and the U.S., and all of the studies, the three phase III and the open label extension, are all recruiting patients into those studies. At the moment, all of our studies are on track and we are planning to submit the NDA in 2017.
Are you having trouble at all finding patients, or is it just a matter of finding the right sites?
No, you know, we have a good list of sites. Many of our sites are open and initiated. All of our U.S. sites are initiated. We are still in the process of initiating some of our European sites. The sites that have opened are actively recruiting, and already in Europe, we have our first patient randomized into one of the sites there. I wouldn't say we're having trouble finding patients.
Yeah, Corey, this is the timeline we've had all along.
Yeah. Okay. Thanks very much.
Your next question comes from the line of Liav Abraham with Citi. Please proceed.
Good afternoon. Just a follow-up question on capital allocation. You mentioned your good liquidity earlier and your efforts on the M&A front. Given where valuations are at the moment, could you comment on the priority of M&A over the near term versus a buyback? Thanks very much.
Sure. Our first priority will always remain corporate development. I think we want to bring additional growth drivers into the company. We will absolutely be ensuring we have the appropriate and available liquidity to pursue what we believe are the right investments as it relates to that. Obviously, that said, we certainly hope to be buying back our stock and in the capital markets environment we're in, and would expect to do so. Just as with our previous program, which we took about two years to complete in terms of the $200 million program previously, we will repurchase stock. You know, at times, you know, depending on the, again, the capital markets, our stock price, and also what we're doing on the corporate development front, but that remains the priority.
Thank you.
Your next question comes from the line of Annabel Samimy with Stifel. Please proceed.
Hi, thanks for taking my question. We've heard a lot about discontinuations of several programs this year, and you mentioned that you're reprioritizing your R&D dollars on programs with a greater return. I guess I haven't really seen any changes to your current investment program. Can you give us a little bit more granularity there? Where are you prioritizing your R&D dollars that's different now? We haven't heard any discussion about defibrotide and GVHD with the discontinuation of Leukotac. Is that still a focus for you? Thanks.
Yeah, thanks. We've discontinued one program, which is Leukotac, which just as a reminder for anyone who followed us when we were doing the Gentium acquisition originally, we valued that in terms of expectations for a future product launch at pretty near zero. We were obviously wanted to finish the trial and look at the data, but you haven't heard us trumpeting the conclusion of that phase III program over the last year. I think we've been pretty balanced in our disclosure. On other R&D programs, we haven't discontinued any. We certainly are looking at how best to move forward an improved asparaginase product, and we've got some early work ongoing on that, but we still think that remains an opportunity.
In terms of priorities, you know, once we get by the clear first priorities, which are moving to an approval of defibrotide in the U.S. and completing our phase III program for JZP-110, I would say we also have a lot of excitement around programs that will build around existing products we have, whether that's the Xyrem-related programs, JZP-386 and other, whether that's around other potential indications for JZP-110, whether that's other places we can evaluate defibrotide. We specifically mentioned in the call today moving into prevention of VOD as one high priority area. You brought up acute graft-versus-host disease as something where, you know, there was a signal in an earlier study, not a perfectly designed study for this purpose, but there was certainly a signal that there's potential utility there.
We're gonna follow up on that and make a determination as to whether we wanna move that forward. I think we've been clear in saying we see a number of opportunities for potential application to defibrotide that could be very exciting to us.
Your next question comes from the line of Irina Koffler with Mizuho. Please proceed.
Hi. Thanks for taking the question. It looks like a couple of the motions to dismiss your REMS patents and the Valproate patent, they've been terminated. Just wondering if that gives you additional confidence as you're heading into the Roxane trial, or if there's anything that you learned through that process that might be helpful. Thanks.
Yeah, good question. I'm probably not gonna say much in response. You know, the overall landscape with the ANDA filers and the various ways they're challenging our patents is, you know, has a lot of different pieces to it. In general, I'd say we've been pleased with how things have been going, either in, you know, things not being picked up for review or being narrowed if they are picked up for review. We've had some motions in the court cases that have gone our way. In general, I think we feel good about how things have been developing.
you know, clearly this is a situation where we would say we have patents that the generics do infringe and that are valid patents, and they're obviously gonna try to prove the opposite. I would say, in general, we feel good about how things are going.
Operator, this will be our last call.
Our final question comes from the line of Douglas Tsao with Barclays. Please proceed.
Hi. Good afternoon. Thanks for taking the question. Since I'm last, maybe I'll try to sneak in two. Just in terms of the REMS program and some of the disruption that you spoke about, do you have any color? Was this largely in for refills of patients, or was this new patient starts? As well as sort of potentially, was it affecting primarily sort of like your lower decile writers who obviously just in some ways might not have had as much experience or didn't necessarily focus as much on sort of in terms of the training? Mike, I think, made a comment that you saw a 7% increase in PAs or prior auths this quarter. Just curious in terms of what that 7%, is it, you know, sort of represents. Is that covered lives?
Is it the actual, you know, plans? Just sort of trying to understand exactly what that reference is to. Thank you.
Okay. Maybe I'll have Mike talk a little bit about whether the impact was on refill or new patient starts and a little bit of color on the PAs.
Sure. With regard to the REMS impact, just by the math, it has more impact on the refill because of total prescriptions, refills are by far the greater number. In that sense, it was the refills in terms of numbers. However, new were impacted as well. It really had no bearing whether the patient was new or refill for that matter, because in this case, the prescription forms had to be correct, whether those prescriptions were for new or refill. That on the RX or on the prescriber side, that's a great question. I would say that, you know, based on the efforts that we put across our entire prescribing audience, we see actually pretty even error rates.
We actually see in our high decile docs, we see, you know, an error rate that would have surprised me, given the amount of times we're in there and educating. In lower, obviously, you do see if they're a new prescriber, they'll not be familiar with it. You know, what we've done is we've pulled back and we're now doing another wave of education in the field to everyone, and I think that will bear some fruit. We've already seen the error rate come down, so we're very pleased with that. On the PAs, that is the absolute number of PAs generated that quarter for Xyrem. It's a number that we monitor. You do see it swell in Q1.
You know, 7% year-over-year increases. I would not take that as Xyrem-specific direction. I would take that more around you know, the continued interest in pharma cost and payers' response to it.
Okay, great. Thank you very much.
Since, Doug, you asked two questions instead of one, I'll provide a bonus answer, too, since you're the last question. Just say I you know I just wanna summarize the call by saying to people, you know, we're continuing to see good top and bottom line growth. We did narrow our guidance a little bit, but all on both top and bottom line within our prior ranges and our priority development programs, Defitelio coming to the U.S. market and JZP-110 are moving along well. I think the business is operating well. We obviously think our liquidity position continues to improve and that there are interesting corporate development opportunities out there for us to continue executing on a strategy that I think makes every bit as much sense in today's environment as it has over the last couple of years.
Kathee, let me turn it back over to you.
Thank you, Bruce, and thanks, Whitley. Thank you again, everyone, for joining us today. We will be participating in a number of conferences this quarter, so we will be at Credit Suisse, Jefferies, and the Piper Jaffray healthcare conferences, and hope to see many of you at those. This now ends our call.
Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.