Thank you very much for joining us today. My name is Mohit Bansal. I'm one of the biopharma analysts here at Wells Fargo, and this is my first session, not the conference's first session. I'm happy to have the team from Jazz Pharmaceuticals with us. We have Phil Johnson, the CFO of the company, and Amal Bartrand with us. She's the Vice President, Oncology Therapy Area Head, and most importantly, Jenny, Clinical Development Head. We'll have a lot of questions for you. Thank you very much for joining us today.
Thank you for having us.
Phil, why don't we start with the overview? You were here last year, and how do you see the year has been for you and the investment thesis at this point, which investors should care about?
Thanks, Mohit. Thanks for the invite to be here. It's always a pleasure. There's quite a buzz in the hallways this year as well. Great to have a chance to meet with a number of investors. It's been a really fun last year. I've been really pleased with the decision that I had made to come join Bruce, Renée, Amal, and others on the Jazz team and the progress that we've been making driving the business, both on the commercial side as well as on the R&D side with progression of Zanidatamab clinical trials and on corporate development as well. We've had a couple of recent announcements. Before I get started with remarks, let me just reiterate some of the disclaimers.
For a full understanding of the risks that may impact our business, please do consult our SEC filings, some of those recent updates we've provided, look at our second quarter earnings materials. If we do refer to guidance during the Q&A session today, know that that's the guidance that was issued as of our second quarter call. Maybe start with a couple of comments, Mohit, on just recent developments, even since we would have had our earnings call. Really pleased that we've received approval for earlier than the PDUFA date. Many were concerned about would there be regular and consistent interactions with FDA that would lead to a timely action on our Midaso or Dodavapene application. Really pleased here we actually got approval prior to the PDUFA date. Are already out now serving patients.
This is a really dreadful disease, effectively this K27M mutant diffuse midline glioma, often affecting pediatric and young adult patients. It really had no therapeutic option and really nothing new since the advent of radiotherapy 50, 60 years ago. Really pleased with that development. It shows our ability to spot and then acquire opportunities to advance patient care in really hard-to-treat diseases with a significant unmet need. Initial read in these first few weeks has been really strong. I look forward to providing an update when we get to our third quarter call as well. Also, concluded a licensing transaction to build out our epilepsy franchise, a preclinical deal we did with Saniona for what we think could be a best-in-class asset. Really pleased to have announced that. Notably announced the conclusion of the CEO search looking for Bruce Cozadd's replacement.
I'm very pleased that Renée Galá has been selected and looking forward to her continued leadership. I think her and the management team board are very focused on driving the legacy that Bruce has created, but then also taking it further. I think Renée has got the insights to be able to do that and knows, I think, the strengths she can build on here at Jazz and also the things that we can do much better at as well. Looking forward to that new leadership that Renée will provide. I'm also pleased with the way the year has been going. Really strong results with Xywav. Really strong net patient adds in the second quarter, four hundred or so within idiopathic hypersomnia where the only approved treatment and have no near-term competition.
We continue to see really strong performance in narcolepsy as well, where there is another branded competitor and we have authorized generic competition as well. I think this points to the value that patients and physicians see in low sodium in these patient populations, those with narcolepsy and idiopathic hypersomnia. They are at an increased risk of cardiovascular events. Certainly driving up sodium in these patients is not probably something that physicians would want to be doing. At a recent sleep meeting, I had presented data from our Xywav study, in fact, showing that when patients go from a high sodium oxybate to a low sodium oxybate, that produces clinically meaningful reductions in blood pressure. This is a benefit that only Xywav can offer.
I feel we're really well positioned with that franchise here and the strong net patient adds in the first half of the year as we think about the second half of the year. Maybe I'll turn it over to Amal to talk about some of the developments on the clinical side of things.
Right. Hello everyone. A lot of exciting catalysts in oncology. The most imminent one for us is the Zepzelca approval. We have an sNDA that's been filed with the FDA for Zepzelca in combination with atezolizumab in patients with extensive-stage small cell lung cancer who have previously received induction and then go on to maintenance Zepzelca. The PDUFA date is right around the corner, October 7th. Really excited about this upcoming milestone. We have several other important data readouts that we are expecting this year. Obviously, the major one is the Horizon 301, which is our frontline GEA study with Zanidatamab in combination with chemotherapy in patients with HER2-positive advanced or metastatic gastroesophageal adenocarcinoma versus the standard control, which is a combination of Herceptin and chemotherapy. We're anticipating those results and readout in fourth quarter of 2025. A lot of exciting upcoming catalysts.
We've also recently initiated a phase two trial in the neoadjuvant setting for breast cancer and Zanidatamab HER2-positive breast cancer. We're expanding on the promise of what Zanidatamab can deliver in breast cancer. That's the 208 study. We also have three ongoing phase three studies for Zanidatamab. The 301 trial, the Horizon 303 trial, which is Zanidatamab in combination with chemotherapy versus Herceptin and chemotherapy in patients with HER2-positive metastatic breast cancer who have previously received TDXD and have progressed on it or are intolerant to it. We have our 302 trial, Horizon 302 trial, which is the frontline study of Zanidatamab with chemotherapy plus or minus an anti-PD1 in frontline metastatic biliary tract cancer that will be supporting our accelerated approval for Zanidatamab in BTC. A lot going on. We also have the ACTION trial that will support the accelerated approval of Dordaviprone.
Four, three large phase three trials that are ongoing. Quite exciting.
A lot of action is going on.
Yes.
Great. I don't know where to start at this point. Maybe let's just talk a little bit about oxybates. I mean, Xywav, I mean, again, we were like last couple of years, people were worried with generics and Avadel, like all the Lumryz and all the competition. Seems like Xywav has been growing through all that, not just in IH, but also in narcolepsy as well. Can you talk a little bit about where is this growth coming from and how much confidence does it give you for the second half and 2026 as well going forward?
Yeah, absolutely. No, you're right. We've been really pleased with how well Xywav has done. Obviously, the big driver of growth, when you look at the net patient adds, also translates into revenue, is coming in idiopathic hypersomnia. We do expect for that to continue to be the case going forward. That is still, I'd say, a market that we're building, building awareness in physicians and patients as well on the benefits of oxybate therapy for idiopathic hypersomnia. It's difficult to know exactly what the epidemiology is there. Anecdotally, we do hear from a number of treating physicians that in their practice, they feel like they have as many idiopathic hypersomnia patients as narcolepsy patients. Although, if you look at some of the published epidemiology, it might indicate that that population might be half of the narcolepsy population. Again, we still see good opportunity for continued growth in IH.
Narcolepsy, you know, we'd indicated a while back that we could see quarters where there were not net patient adds, but net patient decreases. We've not seen that. We're very pleased with the performance of Xywav with both branded competition and with authorized generic competition. Definitely think this speaks to the benefit that patients and physicians see to low sodium, as I mentioned earlier, which is the unique attribute that Xywav can offer. We do have upcoming the potential for generic Xyrem to come to the market, beginning effectively at the beginning of 2026. Technically, the unlimited volume authorized generic player HCMA has the ability, and they have had for quite some time, to come in with their own generic. To date, they have elected not to do that. We'll monitor the situation going forward.
Certainly, the introduction of generic Xyrem would affect potentially not only that authorized generic revenue that we have, the Xyrem revenue that we have, and then I think question mark on would there be an impact or not, and if so, to what extent on Xywav. I think that'll depend also on how payers are looking at the space and how payers are thinking about this dynamic of the unique benefit that Xywav offers in terms of low sodium for these patient populations.
Got it. I mean, 2026 could also be an interesting year given that there is a possibility of generics. What is your internal expectations regarding these generics? I mean, again, you cannot guide for next year, but again, I doubt, like, directionally, should we be expecting growth or should we be concerned about these challenges a little bit more?
I'll probably stop short of saying should you look for growth or not at this point in time. Obviously, that would come with our guidance in 2026. I do think we're planning for a variety of scenarios. I think it's prudent to plan that generics would come in beginning in January of 2026. Again, as I mentioned, let's take the example where HCMA is one of those coming in. They can only do the authorized generic with us or their own true generic. They can't do both. If they were coming with a generic, the impact for us would be that authorized generic income would go away. Clearly, we'd expect a significant impact on remaining, which is a pretty small amount, remaining Xyrem revenue. Again, very uncertain what would be the impact to Xywav from the introduction of a generic Xyrem.
Again, the only product that has low sodium, we've talked before about the benefits that we've seen and been publishing data on of low sodium in a patient population that has an increased risk for cardiovascular events. We think we're as well positioned as we can be. We're prepared for a number of different outcomes and we'll be flexible and react as we go forward to the market condition.
Got it. At least from HCMA, you would know beforehand that.
We haven't said the exact notice period that they have, but they do have a notice period to tell us that they want to stop with the authorized generic. We also have commented we'd expect that would be of high interest to analysts and investors, and should we receive such a notice, we'd pretty promptly make a public statement to that effect.
Got it. Very helpful. The other question is about Durexins in this market. How do you see Durexins as a challenger and what investors should look at the world's lead data to understand the profile better? I'm sure you are looking at that as well.
Absolutely. Coming up soon. We actually look at the Durexins as to be the most potent sort of daytime waking agent that we have seen to date and actually be able to provide narcolepsy patients in particular, I think question mark still on IH patients, with improved outcomes. We don't see that coming at the expense of oxybate therapy. We do see this as being, like current daytime waking agents are now, adjunctive combination therapy to help patients to get better outcomes to deal with their narcolepsy symptoms. This is a condition that has both nighttime and daytime symptoms. Oxybate's been shown to deal very effectively with a number of the sleep parameters that plague these patients and also lead to improvements in a number of their daytime symptoms as well.
I do think as you're looking at data coming from the Durexin, looking at things like what is the incidence of insomnia that's being caused in these patients. This is a class where if that effect, that waking effect, is not wearing off in time for someone to begin getting normalized sleep in the evening, does that actually complicate some of the issues that they're having with their condition or not? We think this could be great for patients to get better relief of their symptoms in combination with oxybate, but not as a substitute form.
Got it. Very, very helpful. I promised that I'll ask a lot of questions about Zanidatamab, so let's just start with that. There's a very important readout with the NDA coming up. In oncology trials, a trial or readout getting pushed out is not always a bad thing. Can you just help us set the expectation, how you are thinking about this trial? There are three different arms, and then I have a lot of specific questions there.
Yeah. It is obviously a complex trial. There are three different arms. One of them is the control, which is the combination of Herceptin and platinum and 5-FU regimen. There are the active arms, and one of them is Zanidatamab that would replace Herceptin with the combination of chemotherapy. The third one is Zanidatamab plus an anti-PD1, this is atezolizumab in combination with chemotherapy as well. Those two arms will compare themselves to the control. The arm of atezolizumab plus Zeni versus the control, and then the arm of Zeni alone and chemotherapy versus the control. We do have two active arms for this study. What we do know is the control. The control has been tested over many years across several trials, three phase 3 trials, large trials that are global trials where that control has been really used over more than 1,000 patients.
What we've seen is even with the most recent trial, the KEYNOTE 811, that control has performed consistently, which is a median PFS of seven to eight months, six-point change, and eight months. That's pretty much the extent of it from a PFS standpoint, as well as the OS standpoint has been pretty consistent as well. We are pretty confident with as much data possible about this control arm. That's one reassurance. The other aspect that makes us believe that potentially our active arms could be performing better than what we had initially anticipated is the data from two Zanidatamab studies in the frontline setting. Those are two phase 2 studies run by Jazz and BeiGene.
The results were pretty consistent in terms of response rates, PFS, with also a very compelling OS that was recently presented at ASCO, going over 36 months median OS for that combination of Zeni plus chemotherapy. A lot of evidence would lead us to believe that the delay could be coming from the active arms. That remains to be seen.
The other question I get is how should we interpret the arm C data when the data release, right? It is comparing itself to arm A, but not to arm B. How meaningful is arm B versus C comparison, which inevitably people then do? Does it matter more for Tisli versus Yodran?
Yeah. I mean, there are several things that we are looking into. One is the subset of patients that are PD-L1 negative, how they would benefit from the arm that has Zanidatamab plus chemotherapy alone versus the arm that has the anti-PD-1. We're also looking at the patient subset that is PD-L1 positive because there the benchmark is a bit different in light of the readout and approval of the KEYNOTE-811 regimen. It's going to be several things that will factor into our decision, but we'll be looking at all those aspects.
KEYNOTE 11 is not the right comp, right? Because they enrich the patient for PD1 high.
That's correct. Yeah. Yeah.
That's good to know. In terms of disclosure, how would you disclose the data? Because Jazz's history is like you release the top line and then you release more data at the conference. In this case, there are two things which people want to know: whether the OS trend was positive and what did you do in arm C, which is not, you cannot say stat C because it's not powered for that versus B. How would you characterize these two points there?
Still to be determined. We've got first to be able to see the data and then figure out how do we characterize that data in a qualitative way that's meaningful for investors that when they see the eventual data at a medical meeting, they feel like we've accurately portrayed that. I can't give you specifics exactly right now. I think it will be data dependent. I do think in terms of your question on what we might be saying in terms of some of the performance on various measures, whether that's arm C or arm B, or we talked earlier this morning about overall survival versus progression-free survival. Some of those may be evident in the way we're qualitatively describing the study. For example, we said in the past to be able to submit, we need obviously to hit the primary endpoint for PFS.
We don't necessarily need to have statistically significant improvement in overall survival, but certainly not be showing a detriment to be able to meet what we would view as FDA's likely expectation. If we're saying met primary endpoint, providing some safety commentary, management quote, and then our next steps from a regulatory perspective are proceeding to submission, I think that would indicate that the OS is in line with what we think regulatory expectations would be. Conversely, if we're saying we're going to wait until the second OS interim to be able to submit, that would mean that there was something happening that was not providing us that level of confidence. We still need to have, with the data in hand, that robust discussion internally on how do we provide a qualitative view that would accurately capture the data.
Got it. Very helpful. Regarding OS, at this, there will be an interim at this point for OS as well. Basically, it doesn't have to be static. It needs to be in the right direction you think. Amal?
Yes, that's correct. There are dual primary endpoints, but the final PFS obviously has to be static. The OS does not have to be static.
Got it.
If we get there, that would be great.
Very helpful. I mean, given that the trial has taken longer than anticipated, OS data are probably more mature than you would have gotten.
That's correct.
We don't know where the OS data are coming from. Obviously, we're blinded to the arms, but we are getting more events the longer we wait, which does increase the chances that we can make a meaningful interpretation of the OS data when we have that first analysis.
Very helpful. The other question we get a lot is that, I mean, we'll have GEA data. I mean, like Jacob trial, as he tells us that, I mean, that combination of Herceptin plus Perjeta did work in GEA, but did not work on OS. It does work really well in breast cancer. By converse logic, if your drug works in GEA, does it increase your chances in breast cancer here as well?
Yeah, I mean, I believe so. There are obviously differences in the biology of breast cancer versus GEA, but there are a lot of similarities. One of them is the use of anti-HER2 agents and definitely more sensitivity to anti-HER2 therapy in the breast cancer setting than there is in GEA. If we can actually make a dent in GEA, I'm even more confident about what we can do in breast cancer. We've also seen activity of Zanidatamab across many, many tumors that overexpress HER2, many other tumors, including biliary tract cancer, where we have an approval, where the activity is really compelling, and several other tumors as well that we've tested the monotherapy as well as the combination of Zanidatamab. This would be an extra kind of piece of evidence that Zani is a potent anti-HER2 agent and safe.
Got it. I mean, at least in GEA, you are the first. I mean, HER2 is also running a trial in first line. How do you see HER2 as a potential competition in that area?
Yes, I mean, you stated it. Obviously, the most obvious is that Zanidatamab readout in the front line will come first. We believe it has the potential to redefine the standard of care. What that will do to the benchmarks for the HER2 trial remains to be seen. We do believe that we have strong reasons to believe why the 301 trial would be positive. There are also other reasons to believe why Zanidatamab could be a best-in-class HER2 targeted therapy. Some of it is coming from our BTC monotherapy trial, where single-agent activity of Zanidatamab in BTC is comparable to combination therapy in BTC of anti-HER2 agents, as well as the activity noticed with HER2 in that setting with really good durability. We are seeing good activity across several trials of Zanidatamab.
We also believe in the uniqueness of the mode of action of Zanidatamab, which is to bind to the two epitopes of the HER2 receptor. The way it binds in that trans-configuration actually adds to its effectiveness in blocking the HER2 pathway. Effective downstream blockade of the HER2 signaling, effective blockade of the homo and heterodimerization of the HER2 receptors, as well as something that we've observed that is unique to Zanidatamab that we don't see in preclinical models when you combine Herceptin and Pertuzumab is an activation of the immune system as well with complement activation, ADCC as well, that we believe will boost its activity and potentially durability.
Got it. That's very helpful. The last one is that, you know, like your breast cancer program, a little bit of the thought was that HER2 will move into first line, right? You will have second line. HER2 does look like it'll move into first line, but my recent checks with the doctors are like a couple of doctors are a little bit, you know, oh, maybe I'll move 60% patients or 50% patients because the safety is also real, right? They have so much experience with the two-drug combo there. If, let's just say, if HER2 is not the first-line agent for the most patients, does that change your opinion about your own drug, or do you still see the drug fitting in somewhere?
Yeah, I mean, just to go back to the comment about the HER2 study results, I mean, as an oncologist and previously a breast medical oncologist, I would feel compelled to share those results with my patients to give them, you know, that option to have that conversation. The results of DB09 are quite compelling. Will it be used with pertuzumab, which is the arm that read out, or alone? That remains to be seen. I think that there is going to be broad adoption just because of the results. There's also a lot of familiarity. The oncologists are quite familiar with using HER2 because it's been on the market for breast cancer for a while now. They know how to manage those toxic effects. I don't think there are major hindrances to the uptake in the front line.
The one thing that we are hearing is how long do I need to keep patients on? Do I need to keep them on all the way until they progress the way the trial is designed, or can I give them a break? Because, you know, it does have a cytotoxic payload. It does have cumulative toxicities, and, you know, patients may want a break. That's a possibility. We're still waiting to see how, you know, it's going to be used. Now, for the 303 trial, it is designed to address both scenarios. They must have received TDXD. It doesn't matter if they receive it in the front line or second line. There's no specific order. If they either must have progressed following TDXD or if they're intolerant to it, they can also come in.
If that other scenario where they discontinue TDXD because they can't tolerate it, they would still be eligible for the trial. We should be able to address that.
Awesome. Thank you very much for this. Maybe the rest of the oncology portfolio at this point, starting with Zepzelca? I mean, this market has become a little bit more competitive, but again, you will have a label update as well. There are pushes and pulls going forward. How should we think about the portfolio or the Zepzelca growth going forward? You have first line coming in, but second line, you have a lot more competition.
Yeah, I think it's an exciting time, actually, for physicians treating small cell lung cancer. I think one of the physicians at one of the sessions at ASCO had said the data that was presented, both first line maintenance as well as in the second line, represented more advancement in those three hours than had been seen in the prior 30 years. I think both in a first line maintenance setting with Zepzelca in combination with atezolizumab, really pleased with the progression-free survival and overall survival benefit that was shown. Certainly very hopeful that that would receive a first cycle approval and become standard of care in that setting. Also, Zanidatamab has very strong second line data, also with an OS benefit. We probably expect that in that setting to become standard of care and pretty widely utilized over time as well.
Really pleased we're able to contribute to this advancement that's being seen in small cell lung cancer patients and that for us, it's in that first line maintenance setting, which should allow us the opportunity to treat more patients and for a longer duration of time.
Got it. Very helpful. Last couple of questions. One is on the operating expenses, right? I mean, exciting times, but at the same time, you have a lot going on. You have been very disciplined this year. How should we, how are you thinking about managing margins, expenses, as well as expansion opportunities that exist in your portfolio right now?
I'd say first and foremost, while we are cognizant of margins, we're most focused on the investment side of it. If we've got really strong investments to make in the R&D pipeline, we will make those. This happens to be a year where we're seeing a pretty significant reduction in R&D expense as we had the 385 trial readout negatively last year. No longer investing in that program. We had, just based on enrollment timing and some of the way that those enrollments were structured, higher expenses for Zanidatamab last year than this year. We're absolutely focused on identifying whether they're internal to Jazz currently or coming in from the outside, additional programs that we can invest in that could lead to significant advances in patient care and spending behind those. I think you'll see a disciplined approach.
If we don't have those opportunities, we're not going to spend on low likelihood or low impact trials. The SG&A, I'd say G&A, there's a strong emphasis to ensure that that is managed very tightly. Selling and marketing expenses go with the opportunities that we have in the portfolio. Really pleased that we completed that Chimerix acquisition, had the Dodavapene or Midaso approval before the PDUFA date. We're clearly investing to make sure that we're successful in commercial uptake, payer access, etc. You'll see increases in expenses in the second half of the year due to that. The approach will be to be focused on driving value with assets. The margin will sort of come out of that. We do want to look for ways that we can leverage existing infrastructure that we have.
For example, it would be great now that we're going to be in pediatric brain cancer if we can find other ways to leverage some of those same resources and relationships that we'll be building with additional assets over time. That's a really efficient way to scale the business. If we can find those opportunities, we'd love to prosecute those. Similarly, building out the epilepsy franchise beyond what we have with Epidiolex, the Saniona licensing agreement that we just recently announced, other potential corp dev as a way to leverage existing infrastructure to very efficiently utilize it, drive margin expansions.
Got it. The BD side of it, right? I mean, you have been active, but it seems like what you have traditionally done versus now you are kind of focused on your areas and you are just trying to build leverage on your existing franchise. At this point, do you think you have enough or you are still out there looking for something?
There's certainly significant opportunities in rare oncology. There's quite a bit of really interesting science in the epilepsy space. Obviously, objectively, beyond Durexins, there's not a lot going on in sleep currently. We do have a strong interest in looking for other rare diseases that we could participate, apply our accumulated expertise and knowledge. You have not seen us yet transact there, but we certainly have been looking for opportunities. That is a potential space where you can see us announce a licensing transaction or acquisition in the future.
Awesome. Now to my favorite question of the day. One year down the line, next year, Wells Fargo's conference. You are here. I hope you're here. I hope I am here too. If I ask you, like the same question that I asked, what would make you very happy looking back at the year and say, this has been a great year?
At a high level in our industry, there are sort of two main things that, like it's maybe one main thing that changes stock price, which is changing expectations. Two main ways you really do that in our industry. One's by having outstanding clinical data, and the other's by outperforming on launches. We have the opportunity to do both of those upcoming with the upcoming first line GEA readout with Zanidatamab, as well as with the launch of Dodavapene. I'm hopeful that a year from now we'll be talking about how both of those have outperformed expectations and have the potential or are realizing the potential to really change standard of care for patients with these diseases.
I also expect and hope we'll be talking about some of the tweaks that Renée Galá will have brought about as new CEO in Jazz Pharmaceuticals and how we're implementing on that strategy as well. Much more to come, I think, in terms of what we can do with some of the internal development of our molecules. We have a very strong position to do additional corporate development with the cash flow we generate, the resources we've got in hand already on the balance sheet of $1.7 billion at the most recent quarter- end, very well positioned to continue to build our business for future growth.
Thank you very much for joining us today.
Thank you. Thank you very much for having us. Really appreciate it. Thank you.