Welcome to the Jazz Pharmaceuticals Second Quarter 2016 Earnings Conference Call. Following an introduction from the company, we will open the call to questions. I'll now turn the call over to Kathee Littrell, Head of Investor Relations at Jazz Pharmaceuticals.

Thank you, Vince, and thank you or joining our investor call. Today we reported our second quarter 2016 financial results and updated financial guidance in a press release. The release and the slide presentation accompanying this call are available on the Investor section of our website. With me for today's call are, Bruce Cozadd, Chairman and CEO; Matt Young, our Chief Financial Officer; Russ Cox, our Chief Operating Officer; Mike 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 2016 financial guidance and goals, our corporate development efforts, future product sales and volumes, future litigation and intellectual property-related events, our manufacturing plans, future share repurchases, ongoing and future clinical trials and other product development activities, including regulatory events and the timing of such events and activities. These forward-looking statements involve numerous risk 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, under Risk Factors in our Form 10-Q for the quarter ended March 31 and our Form 10-Q for the quarter ended June 30, which we will 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 2016 adjusted net income and the related per share measures. Historical and expected 2016 adjusted SG&A and R&D expenses and adjusted income tax provisions and expected 2016 net adjusted income expense. 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 Investor section of our website. I'll now turn the call over to Bruce.

Thanks, Kathee. Good afternoon, everyone, and thank you for joining us. We've had a strong 2016 thus far, as we continue to build the foundation for future growth by advancing and broadening our portfolio. This has been a successful year on the corporate development front. Last month, we acquired Celator, which brings a near-to-market product candidate, Vyxeos, to our portfolio as well as Celator's proprietary nanoscale combination drug delivery technology platform, CombiPlex. We completed additional transactions, with a license and option agreement with Pfenex and an investment with Arrivo Bioventures, that provide us with opportunities to access attractive product candidates on a worldwide basis to further expand our R&D portfolio. These transactions complement our R&D and commercial expertise in our key therapeutic areas and have the potential to bring innovative products to patients with unmet medical needs. We're also successfully executing on the early stages of the Defitelio U.S. launch, with product orders from accounts representing over half of the bone marrow transplantation volume in the U.S. We continue to drive toward the accomplishment of our 2016 corporate goals of delivering strong top and bottom-line growth, expanding and advancing our development pipeline and identifying further innovative assets through corporate development efforts. We remain well positioned to accomplish these goals, which are focused on generating increased shareholder value, while executing on our mission of improving patient's lives. I'll now update you on key commercial, legal, regulatory and clinical development activities, highlighting some upcoming key events and then turn the call over to Matt to review our financial results for the quarter and provide updated financial guidance. I'll start my comments with our sleep therapeutic area and our lead product, Xyrem. During the second quarter, we delivered strong Xyrem sales growth. The average number of active Xyrem patients grew to approximately 12,850…

Thanks, Bruce, and good afternoon, everyone. We're pleased with our financial performance in the second quarter of 2016 as total revenues increased 14%, driven primarily by higher sales of Xyrem, Erwinaze and Defitelio compared to the second quarter of 2015. We expect strong top-line growth for 2016 and are updating our total revenue guidance in the range of $1.485 billion to $1.53 billion compared to previous guidance of $1.49 billion to $1.55 billion. Net sales of Xyrem for the first quarter were $281 million, up 13% from $248 million in the second quarter of last year. We are maintaining our guidance for Xyrem net product sales in the range of $1.095 billion to $1.13 billion and now expect mid- to high-single digit volume growth during 2016. Turning to Erwinaze, second quarter worldwide net sales were $50 million, up 8% compared to net sales of $46 million in the second quarter of 2015. As Bruce noted, while we successfully managed patient supply during the second quarter, we anticipate that we will continue to experience supply constraints for the remainder of 2016. As a result, we are lowering our guidance for Erwinaze net sales to a range of $190 million to $215 million compared to previous guidance of $200 million to $225 million for 2016. Worldwide Defitelio net sales were $33 million in the second quarter, an increase of $18 million compared to $15 million in the second quarter of 2015. Sales were driven by strong Europe and Rest of the World volume growth and a $9.5 million contribution from the initial launch of Defitelio in the U.S. We are updating our guidance for Defitelio defibrotide net sales for 2016 to a range of $105 million to $125 million compared to previous guidance of $100 million to $125 million, with approximately $80…

Thanks, Matt. We request that you limit your questions to one at a time and then feel free to re-enter the queue, if you have further questions. With that said, I'll turn the call back to the operator to open the line for your questions.

Thank you. Our first question is from Louise Chen of Guggenheim. Your line is open.

Hi. Thanks for taking my question. So I'm just curious, more color on the Xyrem volume growth this quarter and some of the comments that you made regarding that. So how should we think about narcolepsy diagnosis and prior auths for the remainder of the year and how that reconciles with your Xyrem volume growth objective of mid to high-single digit? Thanks.

Yeah. So, Louise, this is Bruce. The guidance we're giving of mid to high-single digits reflects all the information we have right now. At 4% volume growth through the first half of the year, we're now heading for a back half of the year where we have a little bit easier comparison to last year, if you remember the implementation of our REMS, that started in late August of 2015. So I think that gets us to the growth rate that we're projecting. But we are having to work harder for the growth of Xyrem. We don't see the tailwind of a rapid increase in diagnosis in narcolepsy, which honestly is what we had seen over some of the recent years, perhaps I would say in part due to our focused investments in that area. And then we noted the continuing trend we see in increased scrutiny, I think across the board for specialty pharmaceuticals, not specific to Xyrem. So we are growing. We expect to continue to grow, but we just did want to note some of those additional pressures.

Thank you.

Thank you. Our next question is from David Buck of Northland Capital Markets. Your line is open.

Yes, thanks for taking the question. If I could just maybe sneak in two quick ones. First, on Erwinaze supply. Can you talk a little bit about what the impact there was on sales in the quarter and what's the ability to think about a backup supply for that looking out the next 12 months? And for Matt, just a quick question on the change in tax rate. What's the implication for actual cash flow from operations that you expect from that going forward?

Okay. So, David, let me take the first part on Erwinaze supply in terms of what impact that has on our sales. At this point, I think supply sort of limits the growth we can expect in sales. Any vial we can produce, we can sell. So our real job is to make sure we do satisfy product demand. I think we were able to do that in the second quarter. That doesn't allow us to build up as much inventory at quarter end as we would like to have on hand to make it easy for people to order. And our ability to do that at the end of each of the next couple quarters I think will be similarly constrained. It's very dependent on ongoing production. In terms of your question about a backup supply and how we handle this over the next 12 months, we and our partner on the supply side are working very hard to make improvements in production processes, better utilize available capacity, bring all resources to bear to make sure we do our primary job, which is helping patients with Acute Lymphoblastic Leukemia who are allergic to Oncaspar and, therefore, require treatment with Erwinaze. Sourcing Erwinaze from a separate manufacturing facility is not something that would be possible in any short period of time. That would be very much a longer-term effort. So all of our efforts for near-term supply really revolve around cooperative efforts with our existing supplier. And, Matt, let me hand the question about cash impact of the tax accounting change over to you.

Yeah, David, there is no impact in the cash tax we expect to pay nor impact on cash flow. So it's merely, again, complying with the SEC's guidance as it relates to an accounting convention here, which will lead to some increased volatility in our adjusted tax rate, as it will more closely track GAAP as a result, which means you'll have one-time events and discrete items that may influence quarter-over-quarter reporting. But, in general, the relative difference between the previously reported cash tax number and this new number will be fairly consistent over a longer period of time, meaning 4% to 5% differential, though, again, the actual cash taxes we will pay are completely unaffected.

And just to recap, I guess, Matt, so the cash tax rate you expect to pay for 2016 is what versus the new non-GAAP tax rate?

So roughly a 5 percentage point difference. It would have been in the 19.5% range for this quarter versus again a 24.9%. And, again, for the year the difference is fairly similar, but we would have been in the 19% to 20% range for the year, and we'll still be from a cash tax perspective. But the number for the year on the new basis will be in the low 20%s.

Okay. Thank you.

Thank you. Our next question is from Gregg Gilbert of Deutsche Bank. Your line is open.

Thanks. A couple on Vyxeos. Can you help us with any context around pricing for a product like this and the number of cycles you'd expect? How soon could you be ready to ship the product if it's approved ahead of schedule? And what are your thoughts for now on combination therapy trials to consider for the future? Thanks.

So couple parts to your question there, Gregg. On the first one, pricing. Just too early for us to comment on pricing at this point. As you saw with the U.S. launch of Defitelio, that's probably information we'll provide at the time of launch and I suspect not before then. On being ready to ship, our goal, as I said, is to get product to patients as soon as we can. And I'm confident the combined Celator/Jazz team is doing everything it can in that regard. Part of that is putting together a high-quality NDA submission. But as you point out, it's really getting ready for all of it, supplying product to patients among those things. I'm really proud of how we did that on Defitelio. We got approval of the product and had it available for shipment just days later. So we'll try to do the same with this product. Again, we think it's a product with an important survival benefit and we're going to want to get that to patients as soon as we can. In terms of the potential for combination trials, probably too early to comment at this point having just completed the acquisition last month. And with everyone very focused on moving quickly to that regulatory submission, I think we'll take a little more time to think about that and give a more thoughtful response on a future call.

Okay. Thanks.

Thank you. Our next question is from Jason Gerberry of Leerink Partners. Your line is open, sir.

Great. Hey. Good evening. Thanks for taking my question. Bruce, just curious, you, I think it was on the 1Q call, mentioned that we might get an update on Xyrem lifecycle programs by the end of the year. Just curious, as you think about a settlement process that's unresolved, how you reconcile those two things and if you're still planning on providing that update by end of year. Thanks.

Yeah, Jason, good question. I think I've said a couple times this year that this might be a year where we get more color on some of our sodium oxybate-related lifecycle management programs. And that was really driven by two things, where we might be in the process of litigation on the ANDA side, or potential settlement of that litigation. But it was also driven by the fact that enough progress on those programs might also prompt us to want to or need to do more disclosure around that. So I would say that's still the case. As we head toward the latter half of 2016, that it is certainly a possibility that there'd be more color about what we're doing on sodium oxybate beyond the existing product as we move to the back half of the year.

Okay. Thanks.

Thank you. Our next question is from Marc Goodman of UBS. Your line is open.

Hi. This is Ami on behalf of Marc. Could you give us some more clarity around Defitelio with respect to where you're seeing utilization of the drug? And what's the composition of the types of patients that are using the drug and also from an insurance coverage perspective? And the NTAP additional support, how does that impact either utilization or the net price realization on the drug? Thank you.

Okay. Ami, let me hand that over to Mike, at least with respect to the U.S. commercialization of Defitelio.

Thanks, Bruce. As we said, there are 83 unique accounts that initially ordered Defitelio in Q2, and about 75% of them reordered. Typically, in these accounts, they only reorder when there is a patient. So it's pretty indicative of drug in patient. We don't have the information yet down to a patient-level basis on adult versus ped. We believe that the majority is ped. And we do that by looking at the type of centers that are ordering or reordering. On the formulary side, with regard to at the institution, the P&T committees have gone very well. We haven't had any push back on that. I think our preparation in terms of having our health economic and our budget impact model ready at launch helped us a great deal in that regard. We have been successful so far. And then last on NTAP, NTAP, as Bruce touched on it, it's supplemental payment for about a period of two to three years during the DRG catch-up period. It takes two years for the DRG to catch up on it. It accounts for about half the cost. This is a supplemental payment for about half the cost. So an adult, that's about $75,000 for a 21-day treatment. That is not anything – in other words, we realize the full top-line effect of that use in the patient. The CMS supplements that payment to the institution.

So if I could just ask a clarification question. So the CMS supplements 50% and the other 50% is paid by?

The institution.

The institution.

Correct.

Okay. All right. Thank you.

Yeah, and, Ami, just important to remember in that that the institution is paid generally for these patients on a per transplant basis. Of course, not all of the transplant patients develop severe VOD and require treatment with Defitelio. So in those patients where Defitelio treatment is required, this helps them cover some of that cost. Of course, we think it also produces better outcomes for those patients and for that transplant center. And that's an important source of, I think, business for those transplant centers is to be able to show their payers what kind of outcomes they're getting all together.

And that's right, Bruce. And the other is that there are not that many Medicare-age patients in that patient group. But I do think the spillover to private and commercial pay is important and it's a real validation of the drug.

Thank you.

Thanks. Our next question is from Douglas Tsao of Barclays. Your line is open.

Hi. This is Morgan Williams on for Doug. I just wanted to ask a few questions. So, number one, does the approval and subsequent launch of the Ireland manufacturing facility have any implications in terms of the tax impact? And then, number two, I know that, Bruce, it sounded like you were confident in the potential success of all the educational tools around Xyrem reimbursement. But has the slowing in the diagnosis of narcolepsy impacted your thinking around potential contracting for the product going forward? And then finally, if you could just offer some thoughts on the relative strength of the '963 patent and whether that provides some comfort in the go-forward durability of Xyrem.

Okay, couple parts to the question there. On tax impact of supply of Xyrem out of the Athlone, Ireland plant, this gives us an additional source of supply. It won't be a primary source of supply and I wouldn't expect to see any meaningful change in our overall economics there. On the Xyrem reimbursement-related efforts we've made, our goal here is to make sure that patients who are properly diagnosed with narcolepsy for whom Xyrem would be good treatment do have access to the drug. We want to make sure we do everything we can to enable physicians to provide the best therapy to their patients, and we think those tools matter. I don't think that specifically relates to anything we would consider in the form of contracting. On the '963 patent, I certainly can't and don't want to comment on the strength of particular patents while we're in the midst of litigation with multiple parties. It is helpful to us to have many patents, patents in multiple families, patents that have already survived a PTAB challenge, either not been picked up or only picked up in part. And we think all of that contributes to our confidence that we have a durable asset in Xyrem.

Okay. Thanks, Bruce.

Thank you. Our next question is from Gary Nachman of BMO Capital Markets. Your line is open.

Hi. Good afternoon. Bruce, Defitelio ex-U.S. had a really nice uptick. Could you give a little more color on where you're getting the most traction there and how sustainable you think that is going forward, understanding there's some fluctuations quarter to quarter? And any new countries you plan to enter some time soon?

Yeah, Gary. Thanks for the question. I'm really proud of our ex-U.S. team and their efforts around Defitelio. It's nice to be able to talk about our early success with the U.S. launch. Of course, our European team's been at this for a couple of years and I think all of their efforts are really paying off. Maybe I can have Russ comment a little bit on what we're seeing over there that's contributing to the strength and what we might expect going forward.

Yeah, Gary, one area in particular that's doing quite well this year is that we saw a lot of movement from prophylaxis last year in the U.K. And the U.K. is actually now focused on what they can do for treatment and we're seeing that pick up in a pretty dramatic way. I think the team's done a really nice job of identifying how to do that and something that they've built that's sustainable going forward for the U.K. So, that's where a lot of improvement has gone. And I also say there's a number of other countries that had been waxing and waning that are picking up nicely as well. So, a very nice effort.

And any new countries that you're planning on entering some time soon? Or do you think you've maxed out in Europe?

Nothing substantial that we'll be announcing soon.

Okay.

And just remember, Gary, part of this process was really converting patients over to commercial over time, with full pricing and reimbursement approvals country by country. It wasn't necessarily thinking about it as off to on country-by-country.

Okay. Got it. Thanks.

Thanks. Our next question is from David Amsellem of Piper Jaffray. Your line is open. David A. Amsellem - Piper Jaffray & Co.: Thanks. So a question on 110. So you cited the pace of enrollment and the new timelines. Just wondering if you're contemplating any changes to the patient inclusion criteria for any of the studies and also if you're contemplating adding new sites. Thanks.

So maybe I'll have Karen answer that question on JZP-110.

Sure. So the studies are obviously blinded randomized placebo-based control studies (42:22) narcolepsy patients. And narcolepsy in particular, it's a rare disease so they're difficult to recruit studies. So originally I think when we designed the studies, they had very strict enrollment criteria and this led to screen study rates that we immediately identified and addressed. So we put in place a number of modifications that did include such things as increasing the number of sites and it also included such things as broadening the inclusion and exclusion criteria. And what we have seen is an increase in the OSA study enrollment rate. And while we did also see an increase in the narcolepsy enrollment rate, this was slower than earlier projections and is not where we would like it to be at this point in time. So we have made the modifications that we believe are appropriate to continue to reach a good pace and hit our timelines for the study and our filing. David A. Amsellem - Piper Jaffray & Co.: Can you maybe just elaborate on just what the issues were in the narcolepsy studies and what do you think has been the single biggest thing you've done to get enrollment back on track?

So the narcolepsy studies in particular were things like BMI that we increased to enable patients to enroll that may have otherwise been excluded. They were also cardiovascular parameters that we broadened to enable those patients to be enrolled. One of the mitigation strategies we deployed was to go back and look at the patients who had previously been excluded and invite them to re-enter the trial assuming that they met the other criteria. And a number of those patients did actually do that. And we did also open additional sites. David A. Amsellem - Piper Jaffray & Co.: Thank you.

And just as a reminder, it's helpful, David, to think about this, particularly on the OSA side, when we give you timelines to get to top-line data, of course you've got to back up from that data analysis, you've got to back up from that from that the treatment period, which for a number of these trials is 12 weeks. So we're actually pretty close to finishing the input side of the equation, at least on the OSA side. So we've got pretty good confidence around that. As Karen said, narcolepsy a little bit behind that.

It's also very difficult for narcolepsy patients who might be stable on a given treatment and the potential to go into a placebo arm could be concerning to some patients and could be a deterrent, for example, to entering into a clinical trial. So I think in particular for narcolepsy patients, once they're stable, it's often taken a while to actually get better and they're reticent to potentially take themselves off the treatment.

Thank you. Our next question is from Stephan Stewart of Goldman Sachs. Your line is open. Stephan Stewart - Goldman Sachs & Co.: Thanks and good afternoon, guys. Just wanted to follow up on the Defitelio U.S. launch and any early feedback you might have around physician education. I know VOD defection was one area that maybe needed some work. Just wondering how that's been going.

So maybe I'll let Mike address that.

Yeah, thanks, Bruce. We had a very, very nicely attended symposia, satellite symposia, that right after we saw a nice uptake with some centers. So we do believe that our educational objectives are on target. That is now getting expanded quite a bit this quarter with speaker programs and other things in terms of reach out to the community, reach out to patient advocacy groups and transplant support, the staff support, that really I think raise the awareness around the signs and symptoms of VOD for early detection. Stephan Stewart - Goldman Sachs & Co.: Great. Thanks.

Thank you. Our next question is from Annabel Samimy of Stifel. Your line is open. Annabel Samimy - Stifel, Nicolaus & Co., Inc.: Hi. Thanks for taking my question. I had a quick question on Vyxeos. I guess originally it's been sort of targeted to elderly high-risk patients. Coming out of ASCO, it looked like some physicians were talking about how it could have potentially a much broader utility in this population given the toxicity of current therapy. So just wanted to get your sense on that. And if I can quickly ask on Defitelio in the U.S., what exactly is the reason behind more pediatric patients right now? And will the NTAP payment help with the adult population at all? Can you just give us a little bit of color when we might see the transition to the adult population since it's weight-based dosing and has an impact?

All right. On the first question, Annabel, on Vyxeos and the right patient population for that, maybe I'll have Karen comment on that.

Thanks, Bruce. So Vyxeos is a fixed-dose liposomal formulation. It's a synergistic five to one molar ratio of cytarabine and daunorubicin, two well-established chemotherapeutic agents. The studies of the Phase III registrational study was conducted in older patients, so between the ages of 60 and 75 years, which is aligned to the actual disease of AML itself, where the average age is around 67 years. So these are generally older patients and remembering also that this study was in high-risk or secondary AML patients. So I think that the overall results were extremely good. Certainly overall survival was the primary end point and there was statistical significance achieved for Vyxeos compared to 7 + 3, which is the standardized free drug, if you like, of cytarabine and daunorubicin. So in terms of could you apply this in other patient groups or other patient populations or other diseases, I think the actual Vyxeos itself is definitely something we would consider, likewise for the platform could utilize more broadly, definitely something that we are currently looking at.

And, Mike, maybe you could comment on the rationale for more early uptake in pediatric and the potential for the adult side, including any impact event.

Sure. So, first, VOD actually happens at a higher rate in pediatric transplant patients than it happens in adults. And so that is one factor. The other is that because of our success with Erwinaze, we have good relationships in the ped centers. And I think naturally those relationships are working to the extent that we can get in there and get face to face with our customers more efficiently. The NTAP does not present a huge swath of new patients for us. I think it creates very nice access for those Medicare patients. But I think, as I said earlier, I think the spillover to private and commercial pay will be equally or more beneficial for the brand and our ability for more patients to access the drug. Annabel Samimy - Stifel, Nicolaus & Co., Inc.: Okay. Great. Thank you.

Thank you. Our next question is from Ken Cacciatore of Cowen & Company. Your line is open. Ken Cacciatore - Cowen & Co. LLC: Thanks. Bruce, just wondering with the recent PTAB decisions, what possibly is left for all parties to know about ahead of litigation? I know you have to, or there will be appeals to these PTAB decisions, but just trying to understand. We've gone now a few years and clearly having these PTABs out there and discovery out there, I would imagine all parties didn't fully understand what they were dealing with. But can you give us a sense now that the PTAB decisions have been issued, really what is outstanding for all parties to know about this litigation before you head to trial?

Yeah, so I think we've talked about the importance of patents. We've talked about the importance of the IPR process at PTAB as separate from but having an impact on the litigation. We've also talked about, on the regulatory side the process for getting approval, the need to have a REMS, either a single shared system or a waived REMS. I think all of those pieces go into the mix in thinking about the relative parties' positions as we go through this. And there are lots of moving pieces there. I think the recent IPR decisions and the non-pickup of an IPR challenge on the DDI side are a couple more pieces of the puzzle coming together. There's a lot that goes on in litigation, motions different parties have. And we've got some new pieces of the puzzle moving forward in litigation that previously hadn't been a part of what we thought would be the first Roxane trial. It's sort of been consolidated now. So there's some more work to do, which is one of the reasons the trial date is now pushed back to second quarter of next year. Remember, we had previously been saying it could be as early as third quarter this year. Well, frankly, we started the year saying it could be much earlier than that. So there are still, Ken, a number of moving pieces here that could have an impact on how the parties view the situation. Ken Cacciatore - Cowen & Co. LLC: Got it. Thank you.

Thank you. Our next question is from David Maris of Wells Fargo. Your line is open, sir.

Hi. This is Katie Brennan in for David. Thank you for taking the question. I don't mean to not give credit where it's due, but I will throw a corporate development question your way. Following the progress you guys made in the past few months, what are your thoughts on business development going forward? And if I can ask just for one clarification from Matt. I'm not sure if I missed it, but I did see that there's a $0.55 impact from the tax reporting change that is a difference between your previous guidance and your current guidance. How much of the rest of that $0.65 change in the midpoint is from Celator and how much is from the other changes in the business that you mentioned?

Yeah, Katie, maybe I'll ask Matt to just take that second one first. That's a pretty easy factual answer. And then we'll come back to BD. And no problem with your question. You don't just have to give us credit for past deals. As you know, our appetite remains strong to continue to invest our cash flow, use our balance sheet to bring additional assets into the company. And I think it's a great question. So, Matt, you want to hit the breakdown of the $0.65 first and then take that?

Yeah, so there's a $1.20 adjustment to our prior guidance to our current guidance. Again, $0.55 was related to the change in the non-GAAP tax ETR. There was also $0.55 related to the Celator transaction. And then you'd have the remaining $0.10 related, again, to Erwinaze supply issues, which as you saw in our revenue guidance we took down Erwinaze revenue guidance for the year. And some slightly higher R&D expense related to JZP-110 and some other line extension programs would make up the remainder.

Matt, you want to take the biz dev part of the question?

Sure. Just as it relates BD, again, we're very excited to have completed a few acquisitions, licensing transactions and investments this year between both Celator being the largest or most notable of those, but also with the term transactions with Pfenex, Arrivo and otherwise. So we're deeply committed to continuing to bring new products to market and are very active in evaluating new opportunities. You may have also seen we did increase our revolver by $500 million. So while we did use some of our cash and balance sheet capacity, we continue to believe we have the firepower to do some meaningful transactions and also believe it's a favorable business development environment. So we are certainly going to make sure we get the value out of the things we buy and are excited to be working with the Celator team to move Vyxeos along toward patients as fast as we can. But we fully intend to continue to add growth and diversification drivers to the business.

Great. Thank you.

Thank you. Our next question is from John Boris of SunTrust. Your line is open.

Thanks. Thanks for taking the questions and congrats on the results. On Vyxeos, there was some pretty good data that was presented in Europe at one of the conferences on some subgroup analyses that were done on the product. Is there any plan to present additional data at ASH? And then seems like the timeline Celator had was to file in 3Q. I think you're filing before your (56:02) any read through on that? And then just back to a question on the REMS patents on Xyrem. FDA obviously has an ability to potentially help a company develop an alternative REMS, especially if a product could potentially be safer. Just your thoughts around that and linking it to your strategy to develop your line extension on Xyrem and how you're thinking about that going forward. The competitive threat and your own strategy to develop your own asset going forward.

Yeah, so maybe I'll take those in reverse order. On the REMS side, we have a REMS that we believe is very effective at doing what REMS are supposed to do, which is balancing the benefit of bringing an important treatment to patients who can benefit from that treatment while also minimizing the risk. In this case, both the risk to potential patients of inappropriate use or risk to others through misuse of this particular product. So we've got a lot of experience with our REMS. We recently upgraded to the final REMS in the third quarter of last year. We continue to collect data on the performance of our REMS, both that we submit to FDA as part of our ongoing assessment, but also to make sure we're doing our job well. And we believe that REMS does that. Are there alternative REMS that could also successfully balance benefit and risk of Xyrem, Xyrem-like products? Conceivably. But I would say we have high confidence that our particular approach works very well. On Vyxeos timing, it is true that Celator had been working toward a goal of a third quarter submission. We've revised that timeline in consultation with Celator to look to start a rolling submission in the third quarter, but get all of it in by end of year or early next year. We think that's the best strategy to achieve our real objective, which is a product on market as opposed to just getting the fastest submission in. And a lot of credit to the Celator team for the great work they did during the time that they were unblinding, analyzing data, going through an M&A process, integrating companies and continuing to move this program forward. We think they've done a really nice job. But all I would say is together we've determined that this is the best strategy to achieve the ultimate goal, which is product available to patients. On Vyxeos and ASH, I would say you can count on us being at ASH on Vyxeos, on Erwinaze and Defitelio. It's a really, really important meeting for us. I think in addition to having some good data across products, we'll be featuring a team on the hem/onc side that we've continued to strengthen over time. Even just since last year's ASH I think we've made a tremendous amount of progress on many fronts. And if any of you are at ASH, I hope you'll get a chance to see that in person.

Thanks.

Thank you. Our next question is from Irina Koffler of Mizuho. Your line is open.

Hi. Thanks for taking the questions. I was wondering if you could comment on the Xyrem pricing environment as we head into next year. Do you feel it's a little bit more restrictive or about the same? And then with respect to the additional expense for Celator as we ramp into the back half of the year, is it going to be mostly higher in the fourth quarter, lower in the third quarter, lumpy? How should we think about the build?

Yeah, Irina, thanks for the questions. On Xyrem, I would say no particular change in our view of the pricing environment for that product. Mike, anything you want to add there?

No, I'd say that I think as with all specialty and drugs in the orphan space, there's increasingly stringent PAs and re-offs, but this is the space. What is good is that our approval rate is still very steady at 80%. So we're very pleased with that. And Bruce touched on the field reimbursement team that will be out this quarter. We're very excited about that helping practices with the PAs and the re-offs, so for both diagnosis and treatment.

And then on your question on Celator-related expense, Irina, I would say the interest expense part of that is pretty straightforward to figure out. Us taking on additional expense associated with Celator and now expanding some of our capabilities to finish off this program and then prepare for a launch, some of that expense will ramp up as we get through the back end of the year and certainly as we head into 2017 to be ready to do a high-quality launch. I can't say there won't be any lumpiness in there, but I think that's the best way to think about it is calculate the financial impact of the increase in debt and the reduction in cash and then factor in some level of ongoing expense. There's some expense that goes away, a little lack of duplicative expense across the two organizations. But I think in general we'll be adding some expense as we push this to the market.

Okay. Thank you.

And, operator, this will be our last question now. Thank you.

Thank you, ma'am. Our last question is from Jessica Fye of JPMorgan. Your line is open.

Hey, guys. Thanks for taking my question. I had a couple. First, based on the comments you had about biz dev and still having a strong appetite, can you just remind us what your highest net debt to EBITDA ratio you would go up to is? Second, both in the hem/onc space, what's the ideal label you would like to see for Vyxeos? Might you try to get a broader label than what you studied? And is that even possible? Also, on Defitelio, just trying to reconcile the patient numbers. When you say the majority of use is coming from peds, and I see that they get VOD more often, but there are just so many fewer stem cell transplants in peds. I'm just trying to reconcile that. Maybe I'll stop there. Thank you.

Yeah, maybe I'll have Mike take that last one first in terms of the comment on pediatric use of Defitelio.

Sure. Yeah, so as I said, the incidence in peds is higher in VOD, but there are fewer patients. I would agree with that. And also keep in mind that this is a weight-based drug and so you're going to use less vials per patient in the peds space. But in pediatric transplant, they are aggressive with their treatment. And that's what drives a lot of the VOD that you see in kids. And these kids are primarily ALL, but some AML. And so it's certainly a beginning for us that we're very proud of I think going back, again, to our access and knowledge in the peds space. But more importantly we're looking forward to driving that adoption in the adult space.

And I would say, Jess, on this, remember that as we got ready to launch, we forecast that we expected more uptake quickly in the pediatric side. And just a reminder that under the treatment IND, we also saw a little more weighting toward the pediatric side.

Okay.

On the question about potential label for Vyxeos, I think since we're headed for an ongoing dialogue from FDA, probably won't comment publicly on that. Again, this is we think a pretty important clinical result that we saw in a disease where we haven't seen a lot of meaningful improvements in objective data, in this case, survival. So we'll certainly be focused on appropriate label for the product. But, again, the goal is to get it to patients as soon as we can. And maybe I'll have Matt address your comment on capacity for additional business development activity.

Yeah, as it relates to that, Jessica, we have mentioned before and would still say we'd be comfortable pushing up our leverage to, as we've said, as high as 5 or so times for the right transaction. I do think it's quite dependent on the type of acquisition we're doing and the types of reliability and predictability of the cash flows of that acquisition and what would the de-leveraging profile look like. As we've said before, we reflect on what consideration to use based on the risk and size associated with any particular asset. But we're absolutely prepared to lever up on the right situation.

Got it. Thank you.

All right, operator. Thank you for joining us today for this call. We will be participating in the Morgan Stanley Healthcare Conference next month and we hope to see many of you there. This now will end our call.