Are we good? Yeah, great. We'll start a minute early. Perfect. Welcome back, everybody, to our next session. I'm Marc Goodman, one of the biopharma analysts. Thanks for joining us. And lucky enough, we have a robust group of people from Jazz Pharmaceuticals Public Limited Company, which I absolutely love that it's a public limited company, but, you know, whatever. Renee Gala, who everybody probably knows, President, who previously was the CFO, and you've been here five-ish years or whatever. And PJ Honerkamp is right down over here. And obviously, everybody knows Rob, who is head of R&D here. And I think people also know PJ pretty much too. You've been around a while as well, so got a lot of people. People kind of.
PJ's been here longer than the three of us, I know.
I was going to say, I was like, "How long have you been at the company?
Since 2004.
That's what I was going to say. All right. I figured it was a long time. Well, but anyway, thanks, everybody, for joining. We really appreciate it. And Renee, I'll let you make an opening comment or two, and we can get going into the Q and A.
Okay, sure. Great. Well, just as a reminder, we will be making forward-looking statements today, so please see our website and filings for more information about our business. Should we make reference to guidance, we're not updating or reiterating today. This is all as of February 28th, our year-end earnings. And you can also find full reconciliations to any non-GAAP measures we may reference on our website. So turning to the business, now that we got the housekeeping done, 2023 was a year of significant execution for Jazz. We had top and bottom line growth. We generated over $3.8 billion in revenue, had our first billion-dollar revenue quarter in the fourth quarter, and continue to see that growth, primarily driven by our key commercial products of Xywav, Epidiolex, and Rylaze. We also have an increasingly diversified revenue base.
Nearly half of our revenue in 2023, approximately half of our revenue in 2023, was generated from Epidiolex and oncology, with oncology now being a billion-dollar franchise for us. So significant transformation of our business. Looking forward to this year in 2024, we recently provided financial guidance, again looking for top-line growth. $4-$4.2 billion of revenue is our total revenue guidance for 2024, about 7% growth at the midpoint. We're looking for double-digit growth with oncology. In 2023, we had 27% combined growth across those key commercial growth drivers of Xywav, Epidiolex, and Rylaze. And we also expect in 2024 those combined growth drivers to generate double-digit growth for us. Now, as we look forward throughout 2024, not only do we expect growth at the top line, but also in neuroscience and oncology.
While we don't provide quarter-to-quarter growth, although, Marc, I know you would love to have that guidance, I will just remind you that in the first quarter of every year, we tend to see seasonality, in particular within our sleep business, related to reauthorizations and other, primarily healthcare insurance issues. So we would expect, again, to see that in the first quarter of this year. As we think about our pipeline, this has become an increasingly important, area for us, one that we spend a lot of time on. And as we look at 2024, we have a number of meaningful readouts, value potential catalysts ahead of us that we're really excited about. And at the end of this first half, Suvecaltamide and essential tremor will read out. In the second half of this year, we have, Epidiolex in Japan reading out.
Either at the very end of this year or early next year, our first-line study of Zepzelca in combination with Tecentriq in extensive-stage first-line small cell lung cancer. On top of that, we have a number of advancements across zanidatamab. We just started the first-line BTC study. We started the rolling submission for the BLA in BTC, and that should be completed within the first half. Then we're targeting reading out the GEA study, at least the first PFS readout, by the end of this year. So a lot of exciting things happening with zanidatamab. Importantly, we're well-capitalized, $1.6 billion at the end of 2023 in cash, supported by strong cash flow in the business.
So we're in a great position to continue to invest in the business, whether that be commercial growth drivers, the robust pipeline that we're looking at, or continued corporate development, all of which positions us well for Vision 2025.
Thank you.
Sure.
Back over to you, Marc.
Maybe we can just start with, I think spending guidance for 2024 was a little bit higher than people were expecting. There's also this 2025, you know, kind of guidance that's sitting out there with respect to margins. And maybe you can just kind of bridge how the company is thinking about those two, you know, kind of features of spending's a little bit higher versus, I think, people were expecting a little bit more leverage this year.
Sure. So with respect to our 2024 guidance, we did provide that. And what's embedded in that guidance from an OpEx perspective is continued investment in research and development and continued investment in commercialization of our products. In particular, we're investing a bit more to support our idiopathic hypersomnia indication in Xywav, particular growth drivers there with respect to expanding the breadth and depth of our prescribing. That's an important part of the future growth for Xywav. Getting to the operating margin, we have guided to $5 billion of revenue in 2025, $4.5 billion of that coming from our organic growth, $500 million as a placeholder related to corporate development. And our operating margin target is connected to that broad $5 billion estimate in revenues. Importantly, we're going to continue to invest in growth.
We will continue to look at what is the best way to invest across all of our capital allocation priorities to ensure that we have a sustainable and growing business.
How so? How should we think about the operating margin next year? I mean, like, how should we be thinking about?
So I would say we've provided the operating margin for 2024 as part of our guidance. It equates to roughly 43% at the midpoint. We've always said the operating margin wouldn't necessarily be linear in terms of the improvement for 2021 to 2025. In fact, we improved it from 43% to 48% going from 2021 to 2022. So I would think about the operating margin in 2025 as based on $5 billion of revenue, 48% operating adjusted operating margin. And, and we'll have to continue to see what the growth drivers are and where we are with corporate development because we've long said we're not going to do a bad deal just to meet a target.
Yeah, yeah. PJ, maybe we can start with IH. So what are the new investments in IH? What's, you know, how are we going to get this thing continuing to grow? Because in year one was pretty good or year one and a half or whatever it's been.
Yeah, I mean, it's it's really exciting. I mean, Xywav is the first NLA drug approved for the treatment of IH, which is, you know, different from the narcolepsy treatments that have always been focused on the treatment of a specific symptom. And this is the first time the FDA went out and gave the treatment for idiopathic hypersomnia. And, really excited to see the growth that we've already seen with that. There's a high overlap in the prescribing universe between narcolepsy and idiopathic hypersomnia. And many of those physicians are familiar with Xywav already. So it's really about educating them, and driving the the depth in those prescribers and and where IH fits. I think the the excitement for the expansion is really it's not just a sales force. It's a sales force. It's the medical team. It's the reimbursement team.
because there's a number of idiopathic hypersomnia prescribers that aren't as familiar with Xywav. And we believe there's tremendous opportunities to first and only treatment to really drive adoption and grow that breadth in that group going forward.
Yeah. And one more thing is the how do you think about the growth curve of this product? Because I think there is a little bit of confusion out there with respect to, oh, is it an orphan type of curve, or is it more of a long kind of winded curve, you know?
Yeah. So, I mean, before Xywav was approved, the focus was only on treating the excessive daytime sleepiness in patients with idiopathic hypersomnia. So really weren't because they didn't have any tools for any of the other symptoms. And part of the journey we've been on is really educating around the breadth of symptoms, including things such as sleep inertia. Because when you're focused only on the excessive daytime sleepiness, there's plenty of things in a physician's armamentarium around excessive daytime sleepiness, a lot of wake-promoting agents that they might pull. But when you start looking beyond excessive daytime sleepiness, you look at things like sleep inertia and, you know, what good's a wake-promoting agent if you can't get up to take it? And that's where the value proposition for Xywav comes in.
So, you know, that educational journey is obviously, you know, continue to see, you know, incremental growth with 70% of our physicians saying they're going to increase their prescribing of Xywav and idiopathic hypersomnia over the next six months. These incremental investments can certainly bend the curve. It's not going to go, not going to be a hockey stick, but I think it gives us an opportunity to really continue to drive and grow it. And really, with the failure of pitolisant in its phase III trial, the orexins focused on the orexin-deficient patients like NT1, IH is really an opportunity where we can really own share of voice for the foreseeable future.
Let's flip to Epidiolex and the growth of Epidiolex. Give us a sense of, you know, how the growth is going in the U.S. versus OUS and how we're thinking about the Japanese study and how important that's going to play into the growth in the future.
Yeah, absolutely. Well, Epidiolex is a long-term, durable growth driver for us. And it's a global product, as you said. So we're seeing growth in the U.S.. We're seeing growth in Europe. And when we read out the study in Japan in the second half of this year, we'll be well-positioned to be able to pursue regulatory filings in Japan. In terms of what does that market look like? There are about 20,000 patients in Japan that fall into our approved indication set that we're studying there. So we feel quite confident that that's a meaningful market.
Dravet, LGS.
NTSC.
NTSC.
Yes.
Versus how many would in the U.S. for those three? 50?
No, that I have those in front of me.
50-ish?
Probably even.
Yeah.
50 to 60, maybe. Yeah.
Yeah. A little bit north of there, when you sum them all up.
Yeah.
but as you think about where the growth will come from, because I think that's the important part, that you're getting at in terms of your question, we are growing in the U.S., and we expect continued growth in the U.S., similarly in Europe, and then also, of course, going into Japan. Where we're seeing more of the growth is an appreciation from physicians on the continued synergistic benefits when taking Epidiolex with Clobazam on seizures, but also beyond seizures, the data that we've published on cognition benefits.
That's what's resonating.
And that's really resonating, both of those things. We also see an opportunity in the adult segment and the adult long-term care segment. So we do think there's plenty of growth ahead of us. And we see Epidiolex as being on track to become a blockbuster product.
Yeah, that's what it seems like. Rob, I want to get to zanidatamab in a second, but can you talk about Zepzelca a second? There's a study that reports out around the end of the year, and it's probably one of those underappreciated kind of readouts, I think.
Really excited to see those results. So, you know, we have Zepzelca in second-line small cell lung cancer, where we think it's really highly effective in the treatment of choice there. What we've done is to move that to the front line in patients who get a limited course of chemotherapy. And the situation in front line, extensive stage small cell, is the patients tend to get a good response to chemotherapy, but they can only get it for about four cycles o r three months because they can't tolerate the continued platinum. So the hypothesis is do a switch maintenance where you introduce Zepzelca to those patients rather than waiting for them to progress. And we know that we're selecting for the population who are sensitive to Zepzelca because they're having a good response to platinum.
So you switch over, you preempt that progression, and you get a longer duration of therapy on ZEPZELCA, as well as capturing a larger proportion of patients. Because many times when patients do progress, they don't make it to second line, or they don't get durability out of second line because their condition has deteriorated. So we think that the switch maintenance, where you're randomizing Zepzelca versus nothing else, is a high probability of success. We also have data, and there was a publication at ESMO in combination with Keytruda. We think that giving Zepzelca in that setting with atezolizumab will synergize with immunotherapy, give an opportunity also for overall survival benefit.
For moving from a second line to a first line, how many extra patients are we talking about?
Yeah, we go from.
Yeah, so.
A friend here to help me on that.
Sure. So roughly, there are about 27,000 patients with extended stage lung cancer that are treated in the front line. That number drops significantly below 20,000 when you get to second because you have a number of people who just fall out of the treatment paradigm or are too sick to get further treatment. So we doubt everything is a significant increase in terms of the eligible patients in that front line setting.
And then, importantly, much longer duration of therapy in front line.
Yep. Yep. Let's talk about zanidatamab. I think everybody's, you know, understands the lead indication, but it's some of the backup indications, I think, are still a little bit underappreciated.
Yeah.
If you can talk about that.
So, you know, where I would start with that is zanidatamab is a highly differentiated HER2 therapy. It's not like anything that's come before it. And the data we have really are bearing that out. So it's a biparatopic antibody, which means that each of the Fab fragments of a single antibody necessarily have to bind to different receptors. We have a Nature Communications publication that shows that when that happens, you get much more effective clustering of receptors on the cell surface and internalization and then interference of those growth pathways. And remember, that's HER2 growth pathway, but also HER3 has to dimerize with HER2 in order to signal. And so zanidatamab actually interferes with that dimerization. It also induces complement fixation. So in addition to ADCC, we see complement-dependent cytotoxicity as well. And that's why it's differentiated.
Experimentally, preclinically, you see that it outperforms Herceptin, outperforms a combination of Herceptin and PERJETA. That holds up in the clinic as well. So, BTC, for example, no approved therapies. HER2-approved therapies will be the first. The data that we have in monotherapy far better in terms of response rate and durability than you would see if you give Herceptin and Perjeta combined. That's been published. So, that'll be our first to market. We've already initiated the front-line trial, so we'll ultimately expand into front-line BTC. We have an ongoing front-line gastroesophageal adenocarcinoma trial that we've said we're targeting PFS results by the end of the year. Obviously, it's event-driven, so we don't have a precise timing just yet.
And we think that the data that we've published, both zanidatamab plus chemo or zanidatamab plus a PD-1 inhibitor, atezolizumab, and chemo, really bode well for the outcome of that trial. Then we're super excited about getting into other tumor types. And the data we have so far really suggests that anywhere that HER2 is amplified or overexpressed, zanidatamab is going to work, and it's differentiated in how it works. Breast cancer is really the next big opportunity, 150,000 new breast cancer patients in the U.S., Europe, and Japan every year. That whole field has really changed in that, and HER2 is currently in second line, is very likely to get to front line. And the way the field has changed is docs really don't have the data to support what to give after in HER2. And the reason is that there may be some cross-resistance.
So we've generated some data showing activity of zanidatamab after other HER2 therapies like the combination of Herceptin and Perjeta, like TDM1, like TDXD, or what's known as in HER2. And we think we would be positioned well, in that setting as well. Just broadly, Mark, and in the interest of time, I'll be brief, but broadly, in addition to those advanced metastatic settings, there's a lot of interest in using zanidatamab in the early cancer setting because it's so well tolerated. So we envision ultimately getting into early stage gastric cancer, especially early stage breast cancer where we're already partnered with I-SPY on a neoadjuvant study. We're partnered with MD Anderson also on a neoadjuvant study. And the reason is this is a curable population of breast cancer patients who get six months of chemotherapy, with a lot of toxicity associated with that.
The idea is to maintain that efficacy and really have a better tolerated treatment.
Yeah, it's interesting. Jazz has done a lot of deals over the years, and all of them have been in niche areas where the populations are smaller. This is probably the biggest population, right, breast cancer, that you would be going into?
Yes.
So that's definitely a big change. Let's talk about Rylaze. just for a second, another growth driver, just to come back to it, maybe just the quick and dirty on why Rylaze is still a growth driver.
Yeah, sure. So just to kind of summarize, we had about 40% growth year-over-year for Rylaze sales, netted over $100 million—I mean, sorry, $394 million—in the U.S. last year. Feel really good about the uptake, in particular in the pediatric segment for leukemia, acute lymphoblastic leukemia. And we're universally adopted in all the treatment protocols for pediatrics, and that's been driving a lot of the growth. What we're really excited about is our growth opportunity in the adolescent young adult population. That's, again, in the kind of 18 year to 30 year old group roughly, and where we kind of see asparaginase is used, maybe not in all patients. It's our opportunity and focus this year as we continue to educate healthcare providers on they get the best outcomes with asparaginase therapies, and Rylaze is a piece of that.
We continue to expect growth, double-digit growth in Rylaze, driven by that adolescent young adult market this year.
Yeah. Rob, let's come back to another pipeline asset, suvecaltamide, which, we've already heard data's coming this year. Talk about that asset and the differentiation and why we think this is going to work.
Yeah. I mean, so first of all, prevalent disease and essential tremor, high unmet need. You know, we say there hasn't been approved therapy in 50 years, but really none of the approved therapies, propranolol or primidone, work particularly well. Alcohol is probably a better treatment for essential tremor than anything that's approved. We now are, you know, we're increasingly convinced that this is a tractable target, CAV3, calcium 3 channel. We have proof of concept data with the T-CALM study that was completed before we unlicensed the agent. Of course, there are other molecules in development that I think provide additional proof of concept around that target.
In doing the T-CALM study, we think we learned a lot about how to optimize and ensure success of the pivotal trial that's ongoing in terms of selecting the right patient population, selecting the right endpoints, which we have FDA agreement on, also learning how to measure those endpoints. There are some pitfalls in doing measuring the performance endpoints that we learned from. And I would say, importantly, we've been able to dose up even beyond the exposures that we achieved in T-CALM. We now have a once-daily formulation. One of the reasons we think we can dose up is that suvecaltamide, unlike some of the competitor molecules, has much more potency for active ion channels, meaning that it's state-dependent. If you give it to a patient with essential tremor, the impact is much more likely to be in those disease pathways in the brain that regulate tremor.
So that gives us a therapeutic index that we think we can dose up against. We see that as being differentiated relative to other compounds that are in development. So that readout is late this year for late in the first half of this year. We're super excited to see those results.
Excellent. Maybe we can talk about orexin just for one second. What's the latest on orexin? And just so I'm clear, when you brought the product in from Sumitomo, they had had a phase I study, and then you went and did your own phase I study that was separate, right?
Yes.
And so maybe you can just talk about where the issues that have come up that have caused you to halt the study, which one were they in, and what's the plan now?
Right. So at the time that we initiated our phase I program in healthy volunteers, Sumitomo had dosed to a certain level in healthy volunteers in a very traditional paradigm where healthy volunteers dosed in the morning, et cetera. We dosed and did a dose escalation in healthy volunteers who were sleep deprived. So we dosed it through the evening and kept them sleep deprived and measured their MWT so that we could establish proof of concept, in that dose escalation.
So they didn't get to the maximum tolerated dose?
So they didn't get to the maximum tolerated dose, nor did they have an estimate of the wake-promoting effect using an established paradigm, like the MWT in sleep deprivation. So first of all, we established proof of concept at a level that we think is on par with competitors. In the course of that dose escalation, we identified some tolerability issues, in particular around cardiovascular effects that we were getting from our automated ECG recordings, as well as noting visual disturbances. So we've taken a pause in that program. We haven't discontinued it, while we did a deeper examination of the findings. What we're trying to establish is, you know, do we have a therapeutic index in patients ultimately? Therefore, our next steps will be based on that. So I appreciate that we now announced that pause a little while ago.
We certainly will be forthcoming as soon as we have a plan for.
I mean, it's certainly going to be this year, right, that you're going to have a plan?
Certainly.
I mean, I give you a lot of time by saying this year.
Yeah, it's early in the year. Sure.
I'll not be holding you too much there. But if you decide not to pursue that asset, what's the plan? Do you have a backup that you would do?
So, we certainly think the orexin pathway is interesting and important, and we are continuing to invest in it, and we have multiple backup programs around it. It might be worth my commenting a bit in terms of, you know, how I view orexin generally in narcolepsy. I mean, certainly, again, we think it's an important area to be active in. We see it based on the data that have been published both in healthy volunteers, and in patients as one of the more effective wake-promoting agents. And I go back, you know, 15 years or so in my career when I worked on H3 antagonists, and we've seen other mechanisms come along. I think clearly this is a potent wake-promoting agent. You know, it has inherent with that some of the issues that you have with wake-promoting agents.
You certainly want to be able to give this during the day and have the intended effect without it bleeding over into the night. You know, we know that if the compound has too long a half-life or you've overdosed, that you'll get insomnia, and that will be sort of counterproductive for narcolepsy patients. We also think that, giving an orexin agonist is not the same as correcting the underlying pathophysiology. It's not like replacing orexin. It's an agonist at the receptor. And therefore, we do not expect, nor do we know of any data to suggest that it will correct the fundamental underlying problem in narcolepsy or IH or in any other sleep disorder, which is abnormal nighttime sleep.
We do see it as complementary to Xywav, which ultimately is the only drug oxybates are the only drugs on the market that really improve the quality of nighttime sleep in those populations.
Sorry, my head just dragged in there. Okay, thank you. So orexin's either this product's moving forward or the backup's moving forward. You're committed to orexin.
Yeah, and I do think it's early in the field to see, you know, what ultimately will be the best in class, you know, which compound has the best characteristics, etc.
Renee, talk about business development a little bit and how it's evolved from when you got here to where we are now as a company.
Absolutely. So Jazz has had a long history of both, you know, diversifying and growing revenue through corporate development, but we've also leveraged it to expand our pipeline. The GW acquisition, for example, was a transformational transaction for the company, bringing in Epidiolex, expanding our capabilities. And it was one that we were able to both transact on and then deliver on delevering very quickly. What we've been more focused on right now is not necessarily a quote unquote transformational transaction because our underlying business right now has multiple growth drivers affording it. But we are looking for late stage and on-market products. You've also seen us doing some early deals recently, which continue to expand out the entire pipeline.
Importantly, when we look at our business today, we have a number of commercial growth drivers, but we also have full end-to-end capabilities and expertise in research and development that affords us the ability to go after multiple new targets like orexins, for example, to be able to take on something like zanidatamab. When we brought that in, it was such an incredible deal for a transaction for Jazz and, quite frankly, for patients to be able to see something where we paid $50 million upfront.
We were able to see the data, then fully opt into that program and then more move it forward very rapidly to be able to now expand it to also look beyond BTC, beyond GEA to go after breast, which we think, again, for patients is a much better outcome to be able to have the drug in-house in an area where, from a commercial perspective, we believe we're well positioned to be able to launch in BTC and continue to build out the program needed to make that launch successful. Wheny we look at zanidatamab as being the biggest potential product in our portfolio, not just in our current commercial construct, but potentially in our current portfolio at $2+ billion, we get really excited about that as a global product as well.
Rob, maybe you could just talk about how the R&D organization has changed from a capabilities perspective.
Certainly. So I've been at Jazz, you know, five years now, and we really have steadily been building both organically and through acquisitions to have end-to-end capabilities. You know, we now have our discovering molecules in our chemistry labs and bringing them into development. We certainly have a couple of examples like Xywav and Rylaze where we brought them from the preclinical stage quite rapidly, you know, to approval. As we brought in different companies like as we brought in zanidatamab and the employees from Zymeworks, we've built new capabilities in oncology that I think are now complementary to what we've.
Which you didn't have before.
Which we certainly didn't have before.
In oncology.
You know, mainly for myself, I've been working in oncology, you know, pretty much, since I finished my fellowship in 2001, on drugs like Keytruda, Imfinzi, Trodelvy. I've brought in people who have, you know, similar experiences at some of the big companies, both in terms of clinical development, you know, our clinical operations, even our translational and research capabilities. So I feel like if you talk about business development, I feel like over the five years that I've been at Jazz, we are increasingly, you know, a credible partner. And in fact, I think we sometimes have an advantage because once the partner's convinced that, yeah, you can do right by this compound, they'd rather work with a company like Jazz that's relatively small, pretty flat structure, is not so complicated. And believe me, I sit on external boards where we have collaborations with bigger companies.
It's not so simple.
Yeah. BD has evolved a little bit because of those capabilities where, I mean, we're looking at oncology assets are continuously being brought in. Is that the focus now, or is that kind of equal, equal across?
I would say, we look at areas where there's a significant unmet need, where we think Jazz has a unique insight. We're looking across neuroscience. We're looking across oncology. We've even looked at and will continue to look at other rare orphan diseases outside of those two therapeutic areas because the vast majority of our products currently are within that rare orphan space. So there is a level of expertise and knowledge that can be transferred over to other therapeutic areas. As we look at growth drivers going forward, ensuring that we're able to identify the unmet need, that it is a focused patient population and call point to be able to cover the market opportunity efficiently.
It's also important to note with our global footprint that opens up a lot of additional opportunities for us to scale by leveraging that footprint in the U.S., in Europe, and even beyond.
Last question outside of Zani, which I think would be the answer to the what's the most underappreciated aspect of Jazz, but what would be like the second or the third most underappreciated behind Zani? What would you say?
Yeah, I would back up and say more thematically the breadth and depth of our pipeline as well as the underlying commercial growth drivers that we have. I think they're not fully appreciated.
So the fact is people don't believe that the idiopathic hypersomnia has as good a growth as you think or Epidiolex or Rylaze. Like, that's one aspect of it.
Yes.
Just the longevity, the duration and the growth.
I think that's one aspect of it, certainly the longevity and the growth, as you stated. And also looking ahead at the catalysts in our pipeline just in the next 12 months is pretty incredible with suvecaltamide, Epidiolex in Japan, with Zepzelca first line, and then we've just spent quite a bit of time on zanidatamab.
Perfect. Thank you.
Great.
Thanks for being here.
Thank you.
We're looking forward to the Zani Day. When's Zani Day? March 19th?
March 19th.
March 19th, not too far from now. Okay.
Great.
Thank you.
Thank you.
Thanks for joining us.