Very much. Thank you, everyone, for joining us here today at our 44th annual TD Cowen Healthcare Conference. I'm Joe Thome, one of the senior biotech analysts here on the team at TD Cowen, and it is my pleasure to have with me today, the team from Jazz Pharmaceuticals. We have Chairman and CEO Bruce Cozadd, the Executive Vice President and Global Head of R&D Rob Iannone, the Business Unit Head of the Sleep Division PJ Honerkamp, and the Business Unit Head of the Heme/Onc franchise, Abizer Gaslightwala. So maybe, Bruce, if you want to kick things off, it would be great to begin with just a brief overview of the company's recent progress and maybe some of your, highlighted goals for 2024.
Yeah. Great. Well, thanks for the invitation to be here. We appreciate it. I just want to say the majority of our executive committee is female, so I don't know how we happened to end up with an all-male panel today, just happenstance. Before I get into remarks, just a reminder: SEC filings for risk factors, see our website for a reconciliation of any of our non-GAAP figures to GAAP, and if I refer to guidance, it's as of the update we gave on our fourth quarter call on February 28th. Just a couple words, and I'm going to use the mic right now because you're going to ask questions, and they're going to answer all of them, so this is my only shot.
We had a great year in 2023, really good growth from the business, over $3.8 billion in revenues, our first billion-dollar quarter, in the fourth quarter, and importantly, our three growth drivers, Xywav, Epidiolex, and Rylaze, together grew 27% for the year. We're also seeing increased diversification of our business. In the fourth quarter, more than half of our revenues came from Epidiolex and our oncology business, and only 14% of our revenues came from high sodium oxybate. That's the combination of Xyrem sales and royalties on AG Xyrem. As we head into 2024, we gave guidance of $4 billion-$4.2 billion in revenues. That's about a 7% at the midpoint growth rate, so an acceleration of our growth rate, and we're expecting, again, great growth from our, key drivers, Xywav, Epidiolex, and Rylaze. They should grow double digits.
Combined, we also think our oncology business will grow double digits, and we think we're on track for our Vision 2025 revenue estimates with the sleep business annualizing at over $1.9 billion, Epidiolex annualizing at over $900 million based on the fourth quarter, and continuing to grow nicely in the US and ex-U.S., so that's on track to be a blockbuster product. Then the oncology business, north of $1 billion for the first time in 2023 and continuing to grow, with Zanydatamab being a 2025 or earlier launch and the potential to move Zepze lca into frontline in small-cell lung cancer. On the R&D side, we've got some upcoming milestones we're pretty excited about. We've already started the rolling BLA for Zanydatamab in second-line BTC.
We said we'll finish that in the first half of this year, and then we're expecting GEA pivotal data coming out toward the end of the year. We've also got a phase three reading out on Epidiolex in Japan and then the frontline combination data with Tecentriq for Zepzelca in small-cell lung cancer, either early or late this year or early next year, so a lot coming up on the R&D side. And then I'll just end with we're in strong financial position with $1.6 billion in cash and investments at the end of the year, good cash flow, $1.1 billion for 2023, so we're well positioned to continue being active on the corporate development side, and if you look at some of the recent transactions we've done, I'd point you toward Zepzelca and zanidatamab.
We're really pleased with the way those are playing out for the company, so excited to talk about the future as well, Joe.
Great. Excellent. And you did release the 2024 revenue guidance, between $4 billion and $4.2 billion. A large portion of that is on the neuroscience business. Maybe we'll start with the sleep side because that's a big investor focus. I guess with the launch of Xywav in narcolepsy and in IH, I guess in your guidance, what's sort of the expectation overall for growth there, and then maybe how are you factoring in, Avadel's continued launch and obviously the generic as well?
Yeah. So we were really pleased to see great growth in Xywav, 33% growth last year despite the introduction of some new oxybate products with the AG generic and the Lumryz product. You know, we remain the only low-sodium product on the market, and we think that's really important. We did point out that our royalty rate on AG Xyrem increased significantly on January 1st, so for the first time we gave guidance that we expect over $200 million in royalty income for the year. But with Xywav at $1.35 billion annualized and growing nicely, we particularly want people to focus on the IH growth opportunity. It's not that we're not continuing to invest behind narcolepsy. We are, and we're still seeing growth there.
If you think about IH as a brand new indication, the only product with an IH indication early on in the penetration of that market, we've got a big market growth opportunity where we're the only product. Narcolepsy growth is a little more mature. It's still growing but not as fast, and we're not the only product, so we're differentially investing in the opportunity in IH.
Maybe on the IH part because you did mention that this is a huge growth opportunity for 2024 and you're putting resources behind that, maybe can you walk us through some of the key inflection points going forward? What are you doing from that perspective? And then maybe just talk a little bit about patient finding for IH. What has been hard? What have you been successful at?
Yeah. You know, as the first and only drug approved for idiopathic hypersomnia, we're really pleased where Xywav is. It's a tough... it's not narcolepsy, as you can see from the failure of the pitolisant trial, and we've seen really strong uptick, and what we're really focused on is driving on both breath and depth. And to do that, we've increased our sales force to address the IH population.
You know, over 70% of our doctors have indicated that they're going to increase their prescribing of oxybate in IH over the next six months, and so, we continue to educate them both, you know, on the foundation of the strong clinical data, both in excessive daytime sleepiness for the treatment of idiopathic hypersomnia, but also a lot of the secondary symptoms, which, you know, prior to Xywav being available, they really weren't focused on, and so really looking at the breadth of the disease and seeing real strong uptake from physicians right now.
The patients that you do find, are all patients eligible and should be on chronic therapy for treatment, or kind of how do doctors make that decision, and what are you telling them?
Yeah. So again, I think most of the focus has been on excessive daytime sleepiness because that's, you know, sort of what the patient presents with initially, and it's really sort of opening up the aperture for the doctor to understand that there's so much more going on. These are patients that sleep, and they sleep a lot, and they have sleep inertia, which is probably one of the hallmark symptoms that you see with these patients. So unlike narcoleptics, that are in and out of sleep over a 24-hour period, these people sleep for long periods of time, but they have a really hard time getting up.
I always think about the story of one MIT student, and his last alarm was a water gun that would shoot him in the face to wake him up, and so giving a agent at night really helps with that drive in the morning and helps get them up, and we saw that from the secondary endpoints in the trial on the IHSS. You see that dramatic improvement in sleep inertia, which was so important.
Perfect. And then maybe the other component of the narcolepsy, or the neuroscience franchise is on the Epidiolex side of things. Maybe what does continued expansion look like in Epidiolex? I know you mentioned ex-U.S. We have the Japan studies reading out. Maybe if you could talk a little bit about how big that opportunity is.
Yeah. So Epidiolex grew 15% last year, and that growth is coming both in the U.S. and ex-U.S. ex-U.S., we're a little bit earlier in that launch cycle than we are in the U.S. We're still rolling it out in additional markets. We've got 35 ex-U.S. markets already approved. We're continuing to launch in all of those markets and get reimbursement, in those markets. Japan in particular represents probably the second largest market behind the U.S. for Epidiolex. We estimate there are between 17,000 and 22,000 patients across the three indications, Dravet, LGS, and TSC, in Japan. The clinical trial is enrolled very well, so we know there's interest in having a new mechanism of action to treat these very serious childhood onset seizure disorders.
In terms of continued growth, we see optimized dosing, so people realizing that if you can get to higher doses of Epidiolex, you get more efficacy with excellent tolerability and durability of treatment. We've got great data going out three years that shows the magnitude of the benefit continues to increase. We're seeing increased use in the adult population, so I refer to childhood onset seizure disorders, but these people do grow up and require continuing treatment, and we're seeing more growth opportunity there. And then we're also seeing that we don't promote off-label. We're seeing increased use across other seizure types where there's good data on Epidiolex as a broad spectrum anti-seizure medication with a unique mechanism of action, good combinability with other agents, and excellent tolerability.
Perfect. Then maybe, jumping a little bit to the pipeline, the sort of near-term readout, in the back half of the first half of the year, is the Essential Tremor Program. Maybe if you could just talk a little bit on the supportive data that led you to start the phase two with ulixacaltamide, and maybe just a high level what the phase two is going to be measuring.
Sure. So, actually, we said first half of this year we expect the results, so we're getting excited that that's coming upon us. As you know, we in-licensed JZP385 after having seen the T-CALM data, and from that, we really thought we had proof of concept. We also felt that having those data helped us really identify the right patient population that's likely to respond, and also with the FDA's input, to refine the endpoints that we would measure, and I would say even how we measure those endpoints so we get reliable data. We learned things around, say, the performance scale really requiring on-site local measurement rather than sort of third-party visual because sometimes you have to ask patients to repeat a task or do it both hands, etc., etc., and that's hard to do post-hoc remotely.
So, you know, we learned quite a bit about how to set up the next trial. The trial that's ongoing is actually registrational. We consider it a Phase IIB. It has three different dose levels and is controlled for placebo. We have a once-daily formulation now, and one of the real differentiators for JZP385 is that it's a state-dependent modulator, and what that means is the potency for 385 is higher in those channels and pathways that are active in the brain, where it represents the disease sites for essential tremor. What that does ultimately is we think gives us a better therapeutic index, so that's allowed us to push the dose in the phase 2B up to 30 milligrams, so 10, 20, and 30 milligrams once a day.
So we think we have a highly differentiated molecule in a disease area where there's a high unmet need. You know, we say 50 years since the last approval, but propranolol is not a particularly good drug, and so we also think we have a design that's based on prior data, so quite excited to see those results.
We've seen other essential tremor therapies in development. Obviously, Praxis has their eluxicultamide agent. Can you touch a little bit maybe on the differentiation between the two compounds, and is it on the compound itself, or is it maybe some of the clinical trial components that you mentioned?
Yeah. I would say probably both, and maybe just to mention that I do think the Praxis data lends some credence to the target that we're, you know, the CAV3 target, but I think it's both, Joe. It's both in terms of how we've designed this trial, how we selected patients, what the endpoints are, how you measure the endpoints, but importantly, again, and this is published. It's available in publication. The potency of JZP385 is really dependent on whether the calcium channels are active or inactive, and so that allows you to sort of have a more targeted drug that benefits patients in terms of the disrupted brain pathways around tremor but are less, you know, less active in areas of normal brain.
And then maybe hopping over to the oncology business, the guidance for 2024 is already essentially the 2025 component of the oncology side of being over $1 billion. I guess first, what are the key growth drivers, do you think, over the next year? And then on the Rylaze side, I think that's one of the components that's obviously been growing very, very well. Obviously, we maybe didn't know the peak opportunity because of some supply issues with the first, kind of shot at this, but how big can Rylaze get?
Sure. So, just to speak, Rylaze's really happy and pleased being the only non-E. coli asparaginase approved in the U.S. Continue to see great growth as you saw last year. We continue to expect growth this year, particularly driven by the adoption of this product in the pediatric setting and continued growth in what we call our adolescent young adult segment. We saw some growth last year. That's a big focus for us this year into that older segment, again, using asparaginase, Rylaze, as an alternative to PEG-asparaginase, and other products that are used in that setting to get the best outcome. I think we believe Rylaze will continue to be that growth driver for this year and moving into 2025. We also have a rolling EU launch going on that started last year with Rylaze, our product that was approved in Europe last year.
Just to remind us, though, that the dynamics in Europe are a little bit different. There's a different competitive set. There's different pricing dynamics, so we do expect the U.S to contribute the majority of our Rylaze franchise sales, but we see growth coming both U.S. and ex-U.S. I think if we look about other growth drivers, we're really excited about, obviously, Zani. Speak to that. You know, we hope to have, we're going to complete with, as we said in the first half of the year, the BLA rolling BLA submission. Would love to get this product approved by the end of this year, maybe 2025 in biliary tract.
We have an end-of-year readout on gastroesophageal cancer, which we're really excited about based on the preliminary data, and we've got a Zepzelca frontline setting that's going to readout, we think, by the end of this year that will be a big growth driver for Zepzelca. Just to remind you, Zepzelca is the number one agent used in the second-line small cell lung cancer setting. We continue to see growth. If you saw kind of our net sales in the fourth quarter, continued incremental growth, we think this frontline opportunity will be a big kind of inflection point for the product as well.
Maybe we'll start there. On the frontline small cell study, I guess what's sort of the accurate comparator for maybe what Atezolizumab would do alone, and maybe what's the bar for what you want to see on top of that to be commercially viable?
Sure. So this is published in the New England Journal of Medicine, and atezolizumab certainly was, you know, created an incremental benefit for patients, but I think a key message in that paper is that it's still a very poor prognosis to see, so median overall survival about 13 months, median progression-free survival about 5.2 months in that paper, so very poor prognosis. And an interesting thing is these patients actually tend to respond pretty well to their upfront chemotherapy. Problem is they can't get it for long. They get about 4 cycles of platinum-based chemotherapy before they have to stop, and if you look at that New England Journal paper, patients are relatively stable, and then as soon as you stop their chemo, they drop off. So a key principle here is switch maintenance.
You know, before these patients progress, switch them over to a drug that's highly active and can maintain that progression-free status. So we think that Zepzelca is well-suited for that because if you take patients who are not primarily resistant to platinum, those are the ones that tend to respond well to Zepzelca, especially, so we think we can maintain these patients and really bend that curve. We only need PFS for approval. We know that from our FDA interactions, provided that, you know, there's no negative trend on OS.
So we think this is a high POS study where we're going up essentially against nothing, and the key thing for small cell is many patients, when they progress, it's so rapid that they deteriorate quickly and never make it to second line or they are given something in second line, but it's just too late, and so it deteriorates the results. We think you'll get more patients. You'll get patients for a longer period of time, and we think you'll see a better benefit from Zepzelca given what I described, and furthermore, there's emerging data that it actually synergizes with the atezolizumab, so we hope that ultimately you might even see a benefit in overall survival over time.
Perfect. And, zanidatamab has been an increased focus, it feels like, for the company. Indicated on the last call, it could be a $2 billion asset. Maybe just to start because obviously BTC is going to be the first indication, hopefully approved. Can you just outline the commercial opportunity there, for BTC and maybe where are you at with the rolling submission?
Yeah. I'll give quick updates on the commercial aspects to Rob for the kind of where we're at the filing and timeline. So as we think about on zanidatamab, the $2 billion, how do we get there? Well, we haven't given specific guidance on exactly which indication, how much money, but just imagine concentric rings is the way we like to think about it. The epidemiology for HER2 positive biliary tract worldwide in the markets that we own. Again, remember, this is a U.S., Europe, Japan. We own global rights with the exception of one or two markets, ex-US. 12,000 patients incident on HER2 positive biliary tract patients that we have an opportunity to go after. That's the first set, and we have compelling data. If you remember, best of, biliary tract data was one of the best of ASCOs over June.
We continue to see data that looks really promising. Stay tuned for more data that's going to come out later this year, and so we feel really good about that opportunity in the second-line space in totality. The next kind of big ring is gastroesophageal cancer. We think about 63,000 patients HER2 positive worldwide. That's a 5X opportunity right there from biliary tract based on that population. That data is reading out at the end of this year. Really, really exciting Phase II data that we think has a great opportunity to demonstrate consistent kind of efficacy and safety in the pivotal that we hope to see data by the end of this year. And then you think about breast cancer, obviously big opportunity, 150,000 patients HER2 positive worldwide. That's the opportunity we're going after.
Rock can speak to where we're thinking about that, more to come in our R&D day, but I'll turn over to Rob.
Yeah. I mean, I do hope you come, listening to the March 19th R&D day because we'll have a chance to really go, in greater detail, not only on the development plan but also on the molecule itself, and there's a lot of data in the public domain right now, actually quite a bit more even since we did the deal, but I want the message I want to give you is zanidatamab is highly differentiated. It's very different than any of the HER2 antibodies or therapies that have come before it. Great publication in Nature Communications showing why this is. The biparatopic nature of it means that it binds two epitopes and necessarily has to bind different receptors, so it much more effectively clusters receptors, interferes with signaling, causes downregulation, internalization, but further interferes with signaling, and more effectively marks it for immune destruction.
It's really the only antibody that induces complement fixation and complement-dependent cytotoxicity, so there's a strong rationale for the mechanism. Preclinically, you see that when you dose it, say, compared to combinations of antibodies like Herceptin and Perjeta. Looks better preclinically. Clinically, it looks better. Our BTC data, over 40% response rate with more than a year of durability in those patients responding. It's unheard of for BTC. If you look at the combination of Herceptin and Perjeta in that same population from the MyPathway study, it's more like, I think, 23% or 24% and not that durable. So, and then you could also look at the clinical data in activity after patients have immediately progressed on Herceptin and Perjeta are responding to Zepzelca. Patients who've.
Xenodatameb.
Sorry, zanidatamab. Thanks, Bruce. Patients who've progressed on Enhertu are also responding. So I would really love for you to get familiar with the data, and I would just emphasize that point about breast cancer. So why do we think we can compete in the breast cancer space? Well, first of all, it's a highly differentiated molecule, as I mentioned, but the breast cancer space is highly disrupted now, although there are a lot of HER2 therapies there, and HER2 is moving to frontline in all likelihood, and none of those other HER2 therapies have data showing efficacy after Enhertu, and there's reason to think there would be cross-resistance. So there's an opportunity for zanidatamab to get into breast cancer in a way that maybe there wasn't, you know, even five years ago, so we're excited to lean into that.
And then as you just look across indications, this drug is active wherever HER2 is amplified or overexpressed, regardless of what other prior HER2 therapies they've gotten, so that's where we come up with that $2 billion+.
I'll also just point out that at our R&D day, we will have some external KOLs available to also talk about their experience with zanidatamab.
And then maybe for the BTC indication, if this does go forward and is approved, can you talk about maybe the sales force expansion or anything else that would need to happen, or are you able to kind of leverage?
Sure. Happy to give some outline. So I think what we feel really confident about, the $1 billion plus that we're generating in oncology is based on a really solid commercial infrastructure that we have, US, ex-US as well. So we have a great solid tumor franchise. Zepzelca, like I said, is the number two agent in small cell lung cancer. Well, in those clinics and those oncologists where we that treat lung cancer, they also treat GI cancers as well, like biliary tract or gastroesophageal, so we have the kind of footprint and the people and the team and experienced personnel, many that move sell HER2 agents in a previous life, that will be selling zanidatamab in those same places that we talk about Zepzelca.
So, high customer overlap, really leverageable infrastructure, great kind of connections with our channel reimbursement teams as well, so we feel really good about the launch in terms of how we can leverage our existing infrastructure.
And maybe a beat that I would just add that certainly launching in BTC, which of course is a smaller indication, I think is really going to help the zanidatamab franchise. Same Doxy, treat BTC, treat GEA, so if you look forward to less than a year from now, we could be on the market with BTC, have positive data in GEA, which I feel would be rapidly taken up into guidelines, and we'd be, you know, super well-positioned also with ongoing trials in breast cancer.
Maybe on the Phase III GEA, I guess, is there an improvement in PFS that you're looking for specifically as sort of a bar to be clinically meaningful in the indication?
Yeah. I mean, we haven't said exactly what we think agencies would find to be approvable, but you could look at recent precedent, you know, KEYNOTE- 811 was, you know, less than three-month median difference in PFS. We certainly are well-powered to that kind of effect, and so much so that we felt we could increase the sample size to get better power on OS and still maintain the PFS readout on the original sample size because we're so well-powered to that.
And then on that expansion, can you talk a little bit about what, I guess, was what overall led the expansion? Was that an internal discussion or sort of anything?
Yeah. Now, what I want to be really clear about is we didn't see any data. In fact, we can't. We're blinded to it. It wasn't anything that we saw that made us change that. At the time of our due diligence, that was a conversation we had with Zymerworks around, okay, you know, the trial's about the same as keynote 8/11, which had two arms, and we have three arms, so, you know, clearly we're going to be less well-powered for overall survival there. You know, what could we do to make sure we get better OS power and not delay the re the first readout for global approvals? And that was, you know, that's what Zymerworks was struggling with, you know, how could we actually, you know, satisfy both?
I think the clever idea we had was let's see if the agencies will allow us to use that original sample size for PFS, maintain that timeline, and then after that, it's just a matter of the incremental investment as an insurance policy for OS. And when we found out by consulting not just FDA but global health authorities, that we could accomplish both, you know, have your cake and eat it too, it was a little bit of a no-brainer.
Perfect.
Yeah. They were comfortable with that in part because we promised we'd finish the full enrollment before we did that PFS on the subset.
And then on the breast cancer indication specifically, maybe can you just give us a high level of what data you've shown already, and then on the second component, whether in breast cancer or some of these other oncology indications, what will trigger additional investment in starting more internal studies with Xeni?
I mean, I could take the first one. So we've actually published quite a lot in breast cancer. We've published in HER2 positive breast cancer, in combination with taxane in front line. Looks really strong. And what I want to emphasize is don't just look at the response rates. Look at the durability and how that compares to other agents. It's really amazing. It's so well-tolerated that patients can continue it, but also it's highly effective, and so you get this long durability. In patients who are double positive, HER2 positive, and estrogen receptor positive, we studied a combination, with other non-chemotherapeutics, you know, basically estrogen-targeted drugs like CDK4/6 and Fulvestrant, and saw really impressive data there as well. That was published at San Antonio just last December.
And then we have early-stage breast cancer data, which were early in terms of the small sample size, but that trial is ongoing, showing really pretty remarkable data in the neoadjuvant setting as well. So we have a lot of confidence in the breast cancer experience, and as I mentioned earlier, these are patients who, because we also have some later-line data, would have progressed on Herceptin and Perjeta, standard in front line. They're patients. We have a group of patients who progressed on Enhertu, and we just continue to see consistent activity. So when you put that together with other tumors where you're head-to-head to Herceptin, so look at the GEA data we published a year ago at ASCO GI, really compares favorably to chemo Herceptin, Zepzelca, I'm sorry, zanidatamab chemo.
If you look at the data we published at ESMO where you added a PD-1 inhibitor, atezolizumab, compares really favorably. So wherever you're head-to-head comparison to either Herceptin or Herceptin and Perjeta, Xeni does better, and that's what makes us confident that even in a breast cancer setting, that we should do well. And then what triggers other opportunities? And we're still kind of, you know, thinking through that. I mean, certainly a scenario where we're on the market, with BTC, we've got positive GEA data, we're well underway with some, you know, critical breast cancer programs, I think we'll have increasing confidence about, you know, getting even deeper into certain tumors like early-stage gastric, early-stage breast cancer, and then, you know, other tumor types as well.
I will point out that our guidance for 2024 on R&D expenditures does assume we move forward aggressively in breast cancer as well, so R&D as a percentage of revenues is about constant 20%, in 2024 as we reported in 2023, but the biggest component of that is zanidatamab, and that doesn't contemplate moving forward based on what we already know.
And then in terms of the 2025 guidance, historically, there was a little earmark for either BD or or something else from the pipeline. I guess what proportion of that do you think will be filled maybe by zanidatamab, and and I guess how do you see the need to do a BD transaction?
Yeah. So when we rolled out Vision 2025, which was just over two years ago, we wanted to remind people that we've got a history of doing corporate development, we've got the cash flow, the balance sheet, to support that, and we continue to see great opportunities. We said deals we did post-giving that guidance, would contribute to about a $500 million potential additional revenue slug. We are not projecting zanidatamab will do $500 million in 2025, but it will contribute, but we have the capability to do more.
whether that's exactly that amount in 2025 or something that contributes more growth going forward remains to be seen, but remember, this is a core part of our strategy, and again, if you look at where we've been with Zepzelca, where we were with the GW deal, that product's already contributed over $2 billion in revenue to the company since we did it, or the more recent zanidatamab deal, you know, we continually add new things to our commercial portfolio and our R&D portfolio that contribute to that higher growth and sustainable future for the company.
Perfect. And with that, we are at time, so thank you all very much for joining us.
Thank you, Jeff.
Thank you.