Good afternoon, ladies and gentlemen. Welcome to the Jazz Pharmaceuticals Q2 2012 conference call. Following an introduction from the company, we will open the call to questions. I will now turn the call over to Ms. Ami Knoefler, Head of Investor Relations, Corporate Communications at Jazz Pharmaceuticals. Ma'am, you may proceed.
Welcome to the Jazz Pharmaceuticals Q2 2012 financial results conference call. We reported financial results in a press release issued earlier today. The release is available in the News & Events section on our company website. Among other things, the press release includes a reconciliation of GAAP net income to adjusted net income for Jazz Pharmaceuticals plc, along with the related per share amounts. With me for today's call are Bruce Cozadd, Chairman and CEO, Kathryn Falberg, CFO, Russell Cox, Chief Commercial Officer, and Jeffrey Tobias, Head of R&D and Chief Medical Officer. Also joining us is Jim Cramer, our new Director of Investor Relations. Following some prepared comments, we'll open the call for your questions.
Certain remarks we make on this call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements related to the future events, future financial results, growth potential, financial guidance, plans, expectations and intentions and pipeline. These forward-looking statements involve numerous risks and uncertainties that could cause our actual results to differ significantly from those projected, including risks and uncertainties associated with the business combination transaction and related integration efforts, as well as risks related to our business, including our ability to maintain and increase sales of Xyrem and other products, our need to obtain appropriate pricing and reimbursement for our products in an increasingly challenging environment, and the difficulty and uncertainty of pharmaceutical product development and the uncertainty of clinical success and regulatory approval.
These and other risks related to our business are detailed in our SEC filings, including under the heading Risk Factors in our quarterly report on Form 10-Q for the quarter ended March 31, 2012, as updated by our current reports on Form 8-K filed on June 4, 2012 and July 9, 2012, respectively. Our SEC filings and reports are also available on our website. We undertake no duty or obligation to update any forward-looking statements contained on this call as a result of new information, future events, or changes in our expectations. We also use non-GAAP financial measures, adjusted net income and adjusted net income per diluted share on this call. We believe that the non-GAAP financial measures are helpful in understanding our past financial performance and potential future results.
They are not meant to be considered in isolation or as a substitute for comparable GAAP measures. Our press release issued earlier today provides a full reconciliation of GAAP and non-GAAP financial measures and includes tables that break out the non-GAAP adjustments by line item to arrive at an adjusted income statement. Please note that we expect to file shortly the Form 10-Q for the Q2 on behalf of Jazz Pharmaceuticals plc. Following some brief introductory remarks, we'll open our call to questions. Now I'll hand the call over to Bruce.
Thank you, Ami. Good afternoon, everyone, and thanks for joining us. We're a little over halfway through the year, and I'm pleased to report that we've made very real progress executing on our strategy and growing our business. Not only have we closed two significant transactions that expanded our operations and management capabilities, we've also broadened our portfolio and made important investments in key products, extended our geographical footprint into Europe, and structured our commercial organization for efficiency and scalability, all while continuing to drive top and bottom line growth. Our Q2 financial performance was extremely strong, with record revenues of $130 million in the Q2, more than double last year's Q2 revenues. GAAP net income of $27 million and adjusted net income of $56 million, 72% increase over the Q2 of last year.
While this growth was partially driven by the expanded portfolio from our recent acquisitions, Xyrem was the major driver, posting 11% year-over-year Q2 volume growth. The average number of active patients during the quarter increased significantly to 9,850 from 8,700 in the prior year's Q2. We think this strong performance is the result of our ongoing programs to improve compliance and persistency and the focused efforts of our Xyrem dedicated sales force, which has now been in place for a full quarter. We think there is further room to improve on compliance and persistency measures, and we've recently been able to obtain that data at a physician level, which will allow our reps to share with physicians how their patients are doing relative to the overall treated population.
Looking ahead, we're now projecting that Xyrem volume growth for the year will be in the low double digits, and we're raising our guidance for Xyrem sales. We have recently begun to increase efforts to improve the awareness and diagnosis of narcolepsy via medical education. In early June, at the annual meeting of the Associated Professional Sleep Societies, or APSS, held in Boston, a standing room only crowd of over 400 healthcare practitioners attended a physician education symposium on narcolepsy. Jazz was the sole sponsor of this CME event, the first such event at the APSS meeting in over four years. We also issued results of a narcolepsy awareness survey known as AWAKEN, which highlights the low understanding of narcolepsy among the US public as well as in the medical community. These findings suggest that meaningful opportunities exist to help improve the diagnosis and treatment of this serious disease.
We have supported additional independent research to further characterize the disease and its burden. One such effort includes new data to be presented by Dr. Maurice Ohayon from Stanford at the upcoming American Neurological Association, or ANA, meeting in Boston in early October. Dr. Ohayon's analysis has elucidated for the first time some of the very serious comorbidities associated with narcolepsy, again reinforcing the need for effective diagnosis and treatment. Let me turn now to Erwinaze, the most recent addition to our specialty product portfolio. As a reminder, Erwinaze was approved by the FDA late last year for the treatment of acute lymphoblastic leukemia in patients who are hypersensitive to E. coli-derived asparaginase.
We are pleased to report that Q2 worldwide Erwinaze sales matched the strong Q1 level of $33 million, and we have increased our originally reported forecast range for the full-year from $115 million-$125 million to a range of $125 million-$129 million. Note that as the acquisition closed on June 12th, only $6 million of Erwinaze sales are included in our Q2 results. A significant majority of Erwinaze sales are in the US, where we now have 20 sales representatives and a team of oncology-focused medical science liaisons that support the product.
The market is highly concentrated, with roughly 50% of sales coming from fewer than 30 institutions, including the major oncology centers in the US, such as Children's Hospital of Orange County, MD Anderson Cancer Center, and Dana-Farber Cancer Institute. Erwinaze has strong payer support at both the state and commercial level. To our knowledge, no patient has been denied treatment due to lack of reimbursement. Since approval, approximately 30 new hospitals have purchased Erwinaze, suggesting additional growth can be achieved within the currently accepted treatment protocols. We intend to invest in additional medical education and scientific affairs activities. A particular focus of these initiatives will be to help the medical community and oncology nurses in particular, to better recognize and detect hypersensitivity to E. coli-derived asparaginase.
With meetings hosted by the Association of Pediatric Hematology/Oncology Nurses, or APHON, and the American Society of Hematology planned for later this year, we have several opportunities to increase the promotional and medical affairs presence for Erwinaze and to provide information about its appropriate dosing and administration. Going forward, we anticipate seeing increased utilization of asparaginase-based regimens among the adolescent and young adult populations, reflecting current practice trends and efforts by the National Cancer Institute and National Comprehensive Cancer Network. Over time, the adolescent and adult populations could be an opportunity for expanded use of Erwinaze. I'll now turn to Prialt, the only non-opioid intrathecally administered drug approved for severe refractory chronic pain. Prialt sales for the Q2 increased by 12% compared to the year-ago Q2, in line with our expectations.
This year, we've been investing in and executing on three core initiatives, expanding and training the sales force, increasing medical education and clinical affairs, and optimizing distribution and support services. As you will recall, we added 10 sales consultants earlier this year, bringing our total to 30, and we have since implemented expanded training programs. This group is off to a good start, with expansion of current and addition of new accounts that could help drive Prialt growth over time. We recently implemented a nationwide speaker program, and separately, we are beginning to provide medical education with several programs planned this fall to improve the medical community's overall understanding of intrathecal therapies available for pain management.
We are also increasing our medical affairs focus, including building a larger medical affairs staff to support Preop and pursuing related activities to help improve utilization of Preop by ensuring understanding of its benefits when appropriately dosed. Finally, we are designing a customized, centralized distribution system that we expect to begin implementing through a phased launch starting late this year. We continue to believe that more patients could benefit from Preop, and we remain committed to increasing awareness of and access to Preop therapy. I'd also like to make a few comments regarding our development pipeline. We are working to obtain US regulatory approval for IV administration of Erwinaze, and we plan to initiate enrollment in the US registration trial this fall with the intent of improving patient comfort and compliance. In the US, Erwinaze is administered to patients three times per week via intramuscular injections.
Outside the US, Erwinaze is often administered intravenously. We anticipate that IV administration will provide significant benefits to patients, their families, and nurse providers. Asparec, a pegylated recombinant Erwinia-derived asparaginase, is currently being evaluated in a phase 1 dose escalation trial in Europe. We are also continuing with the development of Leukotac, an anti-CD25 monoclonal antibody intended for the treatment of steroid-refractory acute graft-versus-host disease. Leukotac is currently being evaluated in a phase 3 study for which we anticipate results in mid- to late 2014. Finally, I want to acknowledge the outstanding efforts of all of our employees, including our new colleagues from EUSA Pharma. Integration efforts are proceeding well with the US commercial operations of EUSA now incorporated into a new Erwinaze business unit under Russ Cox's leadership and the international business of EUSA remaining under Bryan Morton's leadership.
The Azur and EUSA transactions this year have not only brought us great products and product candidates, but also great people who together are committed to achieving our mission to improve patients' lives. Let me now turn the call over to Kathryn.
Thanks, Bruce, and good afternoon, everyone. Total net sales for the Q2 were $128 million, which includes a partial month of revenue for our EUSA products dating from the transaction closing on June 12th. On a pro forma basis, net sales for the quarter would have been $165 million, as noted in the footnote in our press release issued today. Our updated full-year guidance for net sales in a range of $600 million-$610 million reflects expected growth from this pro forma run rate. Net sales of Xyrem were $89 million in the Q2, a little more than half of our total pro forma net sales. Our revised full-year guidance for Xyrem reflects a price increase that we implemented Friday, coupled with our expectation for low double-digit volume growth this year.
As an orphan drug that addresses a serious medical condition, Xyrem continues to have excellent reimbursement coverage, and we remain committed to ensuring that appropriate patients have access to Xyrem therapy. Last month, we modified our coupon program so that we now cover patients' out-of-pocket costs that exceed $35 per month. Another example of our commitment to patients is a partnership launched with the Patient Advocate Foundation to help ensure that all narcolepsy patients, not only those on Xyrem, have access to case management services related to their insurance coverage and benefits via a toll-free narcolepsy care line. Net sales of our psychiatry products were approximately $20 million for the quarter, up 18% year-over-year on a pro forma basis, driven by a 44% increase in Luvox CR sales.
While the FazaClo products were relatively flat in total, the proportion of sales from the higher dosage strength continued to grow and now reflects over a third of total FazaClo sales. We continue to expect near-term generic competition to both FazaClo LD and Luvox CR under existing settlement agreements. Net sales of Prialt were $5.6 million, up 12% year-over-year on a pro forma basis, driven by higher volumes. We were pleased to see an uptick in the growth rate as compared to the 8% US volume growth rate posted in the Q1. As a reminder, Q1 2012 Prialt sales included $4.6 million of sales to Eisai for the EU market. Net sales of other products were $7.9 million for the quarter.
This group now includes Women's Health and other products resulting from both the Azur and EUSA Pharma acquisitions. On a pro forma basis, this group declined from the prior year, largely due to declines in sales of the unpromoted brands, partially offset by strong continued growth of Elestrin. Gross margin for the quarter was 88%, which was impacted by $4 million of non-cash expense due to purchase accounting inventory fair value step-up. Excluding this expense, gross margin would have been 91%. There will continue to be some of this non-cash expense over the coming quarters as the inventory is sold. For the full-year, we expect gross margin to be in the mid-80s % on a GAAP basis and about 90% on a non-GAAP basis. SG&A and R&D combined for the quarter were $63 million.
This amount includes $11 million of transaction and integration expenses that are primarily comprised of professional service fees related to the EUSA transaction and $5 million of share-based compensation expense. Excluding these items, combined SG&A and R&D expenses increased by $5 million compared to the Q1 of this year, with about half of that increase being due to inclusion of a few weeks of expenses from EUSA. As a percent of sales, adjusted combined SG&A and R&D expenses were 37% in the quarter, consistent with 39% in the Q1 and 35% in the Q2 a year ago. For the year, we are updating our guidance for SG&A and R&D combined to a range of $260 million-$270 million, which includes expected transaction and integration expenses of $22 million-$24 million, as well as share-based compensation expenses.
As a percent of sales adjusted for these items, SG&A and R&D combined are expected to be in a range of 34%-37% for the full-year. Turning to the balance sheet, in keeping with our strategy to deliver attractive shareholder returns while maintaining a lower risk profile, at quarter end, we had $155 million in cash and investments and debt of $475 million, which is less than 2x trailing adjusted EBITDA. In closing, we are very pleased with our performance for the quarter and year to date. We are increasing our guidance today to reflect our expectation for continued solid execution and strong growth.
As noted in our press release, we now expect GAAP EPS in the range of $2.34-$2.57 for the year and adjusted EPS in the range of $4.70-$4.85. Thank you for joining us on the call today. I'll now ask the operator to open the line for your questions. Operator?
Thank you. Ladies and gentlemen, at this time, if you wish to pose a question or a comment, please press star followed by one. I repeat, to pose your question or comment, please press star followed by one. Questions will be taken in the order received. We'll pause for a moment to compile a list. Our first question comes from the line of Douglas Tsao of Barclays. You may proceed.
Hi, good afternoon. Bruce, I was just hoping to get an update on the commercialization of Prialt. Obviously, now you've had the product for about half a year. Just curious in terms of what you've learned about the product and what you see as the challenges and the opportunities today versus when, you know, you first acquired the product?
Sure, Doug. I'll make some opening comments and maybe I'll turn it over to Russ to add his perspective. Now, the first thing I'll remind you is that we see Prialt as a long-term growth asset for us, worthy of investment in the near term to generate growth over time. We're confident that growth can come because as we've looked at physicians who have good experience using the product in their patients, they're getting good results, and we're seeing use in, as I've mentioned on prior calls, you know, up to 25% of their intrathecal pump pain patients as compared to the overall market share in pumps of something like 3%.
We think that it's worthy of the investment to improve understanding of how to properly use this product, and to make sure our distribution system takes reimbursement concerns away from the doctors so doctors can focus on choosing the appropriate therapy for them.
Yeah. Doug, this is Russ, and I would just comment that consistent with what Bruce said, we have not learned anything different than what we thought prior to going forward with the Azur acquisition when we did our market research on Prialt. We do think it reminds us a lot of Xyrem. A lot of the issues that we're dealing with today are misunderstanding of how to titrate and how to best use Prialt. We're starting to make some good progress in education there. We also think that there is a distribution issue that needs to be resolved. And as that happens, we think that that will also help us over time. We're continuing to focus on the two things that we thought were an issue going in. We're starting to see some progress there.
The new sales force that we have in place on Prialt is starting to make.
Okay, great. Just another question in terms of the increase in guidance for Erwinaze sales. What has changed your expectations or what different in terms of your assumptions today versus when you first acquired EUSA?
Yeah. Doug, I don't think there's any significant change. It's just that we've had, you know, another quarter of performance to evaluate. We've now had a chance to put the team together, with the rest of our business, align our expectations for the rest of the year. Because of that, I think we, you know, at this point, we're giving guidance we're confident in. I think going into the deal, obviously, we were leaving room for, the potential for some disruption, during the integration process. I'll just have to say, I think the integration process has gone very smoothly.
Okay, great. Thank you very much. I'll hop out of the queue for now.
Our next question comes from the line of David Amsellem with Piper Jaffray. You may proceed.
Thanks. Just a couple. Regarding Xyrem, and I know you get asked this a lot, but given the latest pricing action, I thought I'd ask it again. What's the extent to which you think you can continue to take aggressive price increases? What do you think the managed care landscape will be like, assuming you continue to engage in the same kind of pricing actions as we've seen in the past?
Yeah. David, as you know, we generally don't comment specifically on future pricing. I would say, you know, you heard some of our comments about the research we're doing on the burden of this illness and the importance of treating narcolepsy well. We think the therapy remains an important part of narcolepsy treatment and adds substantial value to the healthcare system. You know, as we said, we had fewer than 10,000 patients on therapy in the Q2. This is a highly focused orphan population with a very debilitating condition and for which we have a therapy that we believe is very beneficial and unique.
Okay. Regarding patients on Xyrem, this is a longer- term question, maybe tough to answer, but what's an appropriate way to think about the peak number of patients on Xyrem? Maybe another way of asking is, as of now, what's your estimate of the number of US narcolepsy patients that you think are appropriate for the drug?
Yeah. I'll start that question, then I'm gonna hand that over to Jeffrey Tobias. You know, our estimate of the number of narcolepsy patients, and this is not, you know, unique to Jazz Pharmaceuticals. Obviously, we're going from a d ata collected by other groups, you know, continues to be in the 125 or 150,000, up to 200,000 patients. But we also know that it's only a minority of those patients that are currently diagnosed and receiving a treatment for the condition, and that number is estimated to be about 50,000.
You know, in terms of who's appropriate for Xyrem therapy, I'll say that, you know, my lay understanding before we go to Jeff's medical view is that this is a very serious condition. It's not as though there's mild narcolepsy and serious narcolepsy. You know, if you have narcolepsy, you know, you have a disease that very much changes your life. Xyrem is seen as an important and first- line therapy for the disease.
Right. I think what Bruce pointed out is very interesting, and that is the epidemiology of this disease, although numbers have been bounced around for some time, is not necessarily well characterized. In fact, some of the data that we're beginning to generate might suggest even larger numbers of patients with narcolepsy. That being said, there certainly will be a subset of those patients that once they are identified and diagnosed and referred to the proper treating physician, that is somebody who may be comfortable with the use of Xyrem, a proportion of those will be started out with them, either added onto a stimulant in most cases, or for example, cataplexy is their predominant symptom may be going straight on to Xyrem.
In that kind of background of uncertainty, we guesstimate about a third of those patients may be appropriate for Xyrem use based on either the severity of their disease, their refractoriness to other treatments, or certainly the cataplexy component, which Xyrem is the only approved treatment for cataplexy.
Okay, thanks. That's helpful. Just very quickly on Erwinaze. Just remind us how many total institutions you're currently calling on.
The majority of the Erwinaze volume is coming from the top 28 accounts, and there is an additional 128 accounts that exist.
Okay, thanks.
Our next question comes from the line of Chris Holterhoff with Oppenheimer. You may proceed.
Hi. Thanks, guys. Just a question on Xyrem first. Of the 1,000 or so additional target physicians that you identified last year, do you have a sense of you know, how many have prescribed the drug to date? Just trying to get a sense of you know, if a lot of the new patient growth is coming from these docs you know, or if you think you're getting uptake from existing prescribers of the drug.
Yeah. I think it's a combination of both. I think of those additional 1,000 that we're calling on, we have, closing in on 100 now that are ultimately involved with SBS and are, potentially, new customers who are prescribing. We also have a segment of physicians who were not necessarily large prescribers, who were dabbling in that, you know, 1, 2 or 3 patients that are now getting into 4 or 5 patient range, which appear to be, a threshold for them to use more, Xyrem. We're seeing a combination of new physicians as well as the existing population that we were calling on being more productive.
Okay, that's helpful. Thanks. In your prepared remarks, you made a comment about thinking you can increase the compliance with Xyrem. I'm just wondering if you can kind of elaborate on that and maybe tell us, remind us where you are now and realistically where you think compliance can go?
Yes. Our current compliance and persistency rates are consistent with specialty pharmaceuticals, but there are certain areas where we're starting to see some improvement. Certainly in the area of disenrollment, we're making some progress. Clearly, given the fact that we can now give physician-level compliance and persistency data, we saw certain physicians who were outliers. Now on a case-to-case basis, we're actually dealing with those. I think that will change over time.
Okay, thanks. Maybe just one last one on Erwinaze. The EUSA transaction closed and you've had some more time with the product, so just wondering if you had a better sense of the average number of doses that you're seeing per patient.
Yeah. Unchanged. You know, we have historically said it's anywhere from, you know, as low as, you know, an average of 40 to as high as an average of 60, but nothing's changed in terms of our assumptions.
Okay. Thanks a lot.
Next question comes from the line of Michael Faerm with Credit Suisse. You may proceed.
Hi, good afternoon. Thanks for taking the question. Question on Xyrem. What was the prescription growth, year-over-year in 2Q?
The volume growth was 11%. Remember, what we report as revenues are shipments directly from central pharmacy to patients. That is an accurate prescription volume are identical.
I have a follow-up just regarding the relationship between patient and prescription growth. The last couple of Q1 and Q2, the prescription volume growth was just a tad below the patient growth. I'm just wondering why that is. That's a turnaround from what it was last year. Just wondering how to think about that.
Yeah, Mike, I think that may be a little bit of false precision. We report a an average active patients number during the quarter. That number obviously literally varies by day. You know, volume does include dose per patient, but honestly, the average dose per patient has been relatively constant over time.
Okay. Just one other question regarding progress on the warning letter. Is there any update there since the last update that you provided?
Yeah, I don't think there's any significant update. We thought the last update we gave was a substantive one, which was that we had finished our response to the May 2012 Form 483, and that we were substantially complete with all of our efforts to respond to the warning letter of last year. From a compliance standpoint, you know, we clearly have been doing the things both to make sure our ongoing AE reporting system is robust, as well as to make sure we had gone back and, you know, fully investigated any lapses that had happened historically, both from a compliance and a safety perspective. That information has all been provided to the FDA, but for the things that will go in our periodic safety update report in September.
As you know, we did, you know, last month have a phone call with the FDA to wrap up the investigation we had done into some of that older data. You know, we really feel like it's been an active couple months, you know, particularly May, June, July, for really getting to the point where we can put this behind us. We obviously can't do that without officially closing that out with the FDA, and we respect that that could still take some time. Then we also appreciate that, you know, ultimately the important thing here is to maintain great systems operating reliably over a long period of time. In that sense, it's never over, but we hope we're back on a solid footing now.
Thank you.
Our next question comes from the line of William Tanner with Lazard Capital Markets. You can proceed.
Thanks for taking the question. Congratulations on a solid quarter. Russ, just a question for you. I was looking at the transcript from last quarter. I think that it was mentioned that there were 1,000 physicians that had been identified and about 10% had enrolled in the Xyrem Success Program, with about 50% of them actually prescribing. Sounds like maybe a similar number of physicians enrolled, but just any, do you have any rough, and I appreciate the fact it's only a quarter removed, but any commentary as to accelerating prescribing by these physicians?
Yeah. Of that new 100, we had mentioned 50. Now we're, you know, more heading towards 75 and beyond. It definitely is progressing.
Okay.
That new 10% is contributing for sure.
Just as it relates to the size of the sales force, is 80 the appropriate number? I mean, is this because obviously, you know, you could get to a fairly good revenue number if the pricing keeps going up and you make some reasonable penetration. I'm just trying to gauge the leverageability, I guess, of the Xyrem dedicated sales force.
Yeah. Bill, we think 80 is the right number. I would characterize as it's important to have the right 80. I think we've got the right 80, and that's making a big difference. I think where you're seeing additional resources on Xyrem is in the area of patient services and our ability to make sure that those patients who are, in fact, potentially able to get in the system are actually being prescribed Xyrem and being able to start on therapy. We're layering on some additional services, and that's where some additional heads are being applied to Xyrem.
Okay. Bruce, just a couple of questions on the July CEP. I'm curious as to the expectation potentially for the company to get a response from the FDA.
Our most recent citizen petition was filed after you know the new legislation that shortened the CP response time to 150 days. I don't have any insight beyond that. That's when we're supposed to get a response, and we'll look forward to hearing about late this year on that.
Then as I think in the last two 8-K's, the company's disclosed that you've been in the process of converting the riskMAP to a REMS. I guess that's still in process. What are the implications for whatever Roxane has submitted in terms of their ANDA as it relates to a REMS program, whatever Jazz may do or the FDA may request Jazz do in terms of modifying the riskMAP?
Well, for a full discussion of that, you'd probably wanna see our citizen petition and pay attention to our litigation. From a high- level point of view, you know, the RiskMAP of Xyrem and a number of other pre-FDAAA risk management programs are considered deemed REMS. It is a REMS. We've pointed out it needs to be approved in the new format. We're one of a number of instances where that process is not yet complete.
I don't think that has any particular bearing on the situation with Roxane. Our questions around the Roxane situation really goes to whether they, in fact, filed a, you know, a complete, workable, appropriate grounds to enable the FDA to evaluate whether they, in fact, are safely distributing a drug in the same way that we are.
Okay. Maybe just one last question. I know that I guess a lot of people are looking daily or frequently for the Markman ruling. I would suspect you guys have not a lot of visibility as to when it's gonna come, but what would be the expectation in terms of after it comes that if there is a court date set, it would be set?
Yeah, I don't have any particular insight into that, Bill. There are, you know, a number of things going on in the litigation that would come before a court date. In general, those have been moving back in time, not forward in time. I don't have any particular insight into when a Markman ruling would come. We recently got a ruling in a prior matter. I don't know that we can use that to extrapolate to.
Okay, great. Thank you.
Ladies and gentlemen, as a reminder, to pose a question or a comment, please press star followed by one. Our next question comes from the line of Michael Schmidt with Leerink Swann. You may proceed.
Hi, thanks for taking my questions, and congrats on a great quarter. A question on Erwinaze. You know, the hypersensitivity rate appears to be a great, you know, variable in determining product uptake and practice. I was wondering how is hypersensitivity currently determined? You had talked about maybe introducing a new way of doing that. I was just wondering if you could elaborate a little bit on that.
Yeah. Why don't I have Jeff take that question?
Sure. It's a very good question because there isn't really a uniform method of diagnosing hypersensitivity across institutions. It is a clinical diagnosis. It takes somebody evaluating the patient really at the bedside and determining whether or not they have a certain severity of hypersensitivity, ranging from just redness all the way up to anaphylaxis. It's a clinical diagnosis. One of the things that we can do is to help educate nurses and other practitioners about the recognition of the signs of hypersensitivity. Sometimes these are not noted and they go untreated in that way. I believe the second half of your question might relate to other forms of immunological reactions that could impact the efficacy of the E. coli asparaginase.
It's commonly referred to as silent inactivation, where people develop antibodies. They don't necessarily have a clinical manifestation of hypersensitivity, but they have an immunological reaction that can clear and neutralize the asparaginase. We think that may have. There's data that would suggest that may have a negative impact on the treatment of these patients. This is another area that we will be looking at as we move forward with Erwinaze.
What would you think, you know, a sensitivity rate, you know, might be with a different diagnostic potentially?
If you're looking at the clinical hypersensitivity reactions in the literature, it's all over the place. It can range from a few percent to 60% or more. We're generally looking at reactions at about 15%-18% of patients who are exposed to E. coli asparaginase. Whether or not the exact percentage of patients who have that immunological reaction, that's not well defined.
Okay. I guess you have the pegylated version of the enzyme in early- stage trials. Is that something that could be positioned for first-line therapy?
We're focusing now on the Erwinia placement in treatment, and that is as a second line to the E. coli. Certainly as we go forward with the molecule, we'll be looking at other potential indications and whether or not it has a role as first- line or second line in some of those.
Okay, great. Thank you.
There are no further questions at this time. I would now like to turn the call back over to the speakers for any closing remarks.
Thank you for joining our call today. Please note that Jazz Pharmaceuticals will be presenting at the Morgan Stanley Global Healthcare Conference in New York City in September. We'll also be participating in several medical conferences this fall, including APHON and ASH. We may see you at one of these events. Thanks for joining us, everyone, and thank you, operator.
Ladies and gentlemen, that concludes today's conference. Thank you so much for your participation.