Good afternoon, everyone. I am Sean Laaman, head of U.S. Mid-Cap Biotech Equity Research here at Morgan Stanley, and welcome to the Morgan Stanley Global Healthcare Conference. Before we commence, I need to make you aware of certain disclosures. For those disclosures, visit the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. For this session, we have the pleasure of hosting from Jazz Pharmaceuticals, Chumi Khurana. Welcome, Chumi.
Thank you, Sean.
Jack Spinks. Thank you to the both of you.
Thanks for having us.
Jack, might throw it over to you. I think you wanted to make some statements.
Yeah.
Yeah.
As we make any forward-looking statements, I would encourage you to look at our SEC filings filed on the 30th along with our earning statements. And take a look at our risk factors. If I do refer to guidance today, that would be the guidance as spoken to on the 30th of this year. And maybe I will toss it over to Chumi just for a brief intro of the portfolio for those who might be new.
Yeah. Thank you, Jack. Thank you, Sean. Chumi Khurana, I lead the U.S. Oncology Commercial team at Jazz Pharmaceuticals, and it truly is a very exciting time at Jazz right now, specifically for the oncology team. We have shown great revenue growth in oncology, 32% year- over- year. In 2025, we crossed the billion-dollar mark. More importantly, we are bringing some truly innovative therapies to the marketplace. We have had three launches in the last year, Zepzelca and FORTE, Regimen, Modeyso, and most recently, just three weeks ago, our frontline launch in GEA. And we are very pleased with how we are performing. It is a transformative time. Oncology is going to be a growth driver for Jazz Oncology, and we really look forward to continuing the trajectory. Yeah. And with that, we can go to questions.
Okay. Thank you. Maybe just to zip through three quick macro questions we are asking all our companies. So first one is on China. How is the rise of China-originated innovation changing your competitive positioning, if at all, or your BD and R&D playbook?
Yeah. I think it's a good question, and I certainly think it's something we keep a close eye on, both from an R&D and a BD standpoint. I will say we have made it a focus of ours to continue doing smart business development across our three verticals in sleep, epilepsy, and rare oncology. We did recently hire, this year, Tom Riga, a new Chief Business Officer, to help us continue with that effort. It's something we're watching closely.
I don't think it's impacting us today, but certainly something we keep an eye on.
Sure. What about the adoption of AI across your business? First of all, are you? Second of all, can you point to somewhere where it's changed a decision, a cost outcome, or even a POS assumption?
Yeah, maybe I can start, and then I'll toss it over to Chumi for some specifics. I do think Jazz, as an innovative biopharma company, we are looking to leverage things like AI to improve the speed of drug development.
improve our decision-making, and really be more strategic overall. I know I use it quite extensively, and Chumi, I know her team is leveraging it quite well. I would love to toss it over to her for a couple examples.
Yeah, for sure. I think it is the way of business now, right? From the way that we communicate with each other, even internally, to how we are communicating externally, getting the insights of being faster, more agile. I think the goal for AI for my team specifically is to use it to get faster customer insights and action on it so that we can bring innovation and information to our customers as soon as possible.
Wonderful. Last question, just on the policy variable, which seems to be fairly stable at the moment, but which of the following do you consider the most important to your economics at the moment? Is it FDA, Medicare negotiation, MFN, tariffs, or global pricing?
Yeah. I think it is a good question, Sean. I do not know if we are seeing a ton of impact from any of those at the moment.
As you know, I think most in this room would agree, it's a quickly changing environment, so it's something we watch pretty closely. I think we've commented on tariffs historically. There hasn't been much impact to Jazz. We've certainly taken steps to mitigate that. MFN is something we certainly keep our eyes on to date, recognize that nothing's been finalized. Again, all things we watch really closely, but no huge impacts we'd speak to today for the Jazz business.
Sure. Thank you. Given we have Chumi, we're going to focus this more on the oncology side.
Sure.
Ziihera, obviously, zanidatamab, one of the most debated topics, occupies most of my inbound on Jazz. Following the HER2+ 1L GEA approval, what percentage of eligible patients are currently being HER2 tested appropriately, how much upside exists simply from improving testing rates?
Yeah. The HER2 GE market is actually relatively well-established because trastuzumab has been out in HER2 for a while. So testing rates are currently somewhere around 80%, so pretty high. So there's still opportunity, obviously, to influence the testing, though that's not a huge area of focus for us. What is a huge area of focus for us is that right now, trastuzumab is only used in about 60% of the patients that are eligible, that's simply because really no one's proactively promoting trastuzumab or Keytruda in GEA. So driving that treatment rate to be 100% for every patient that is HER2-positive to receive HER2-directed agent is our goal, to obviously replace trastuzumab given the data that we see.
Okay. I guess your sBLA was approved for both the doublet and triplet regimen. You recently updated the peak sales opportunity for ZEJULA to $3 billion-$5 billion, I think, all the way up from $2 billion+ .
It is + $2 billion.
But noting there is potential for targeted HER2 therapy to expand into breast, non-small cell lung, and colorectal, how much of the increase in that upgrade reflects greater confidence and higher penetration assumptions in GEA, BTC versus incremental revenue from CRC and lung?
Yeah, I think that's a really good question. So like you said, originally, our numbers that we shared were around GEA, BTC early breast cancer. We don't give indication level guidance, as you know. But I think it's everything. Honestly, it's the great data that we saw in GEA, so that's giving us more confidence, and we have a lot of ambition there. But then obviously adding indications like CRC, lung cancer, early breast cancer, and even metastatic breast cancer with TKIs, those are all the drivers for us to take the number up.
What has to happen to reach the $4 billion-$5 billion case?
Yeah. Do you want to?
Yeah, I can maybe jump in there.
I do think we recognize that we did provide a range of $3 billion-$5 billion and do recognize that there are risks inherent to drug development. Not everything will be successful. But to Chumi's point, I think zanidatamab has really shown with this GEA data that it is a differentiated product. We know we have a differentiated mechanism of action. We are seeing that in the data. So when I think about what gets us to the high end of that range, I think about the broadness. Where can we take this drug? I think if we can develop the drug as we think we can and have a number of shots on goal here and replace trastuzumab, which we think fundamentally Zani is the best HER2 antibody, I think we can certainly get there. But again, we do provide a range recognizing not everything is 100% probability of success.
All the data we have seen to date from Zanidatamab, that is from BTC, that is GEA, that is late line studies, that is breast cancer, early breast cancer, colorectal cancer, has been very positive and I think does help define the thesis that we have that this can be the HER2 targeted therapy of choice.
Awesome. Thank you. I guess you have more than 90% physician overlap between BTC and GEA. So how much commercial infrastructure is already in place for the launch? What incremental SG&A is required to grow GEA uptake?
Yeah. So from a commercial footprint and investment perspective, obviously we are investing in the launch. As you said, the sales force that is selling frontline GEA has already been in place, is actually also the sales force that promotes Zepzelca. So we have a really good presence in both the academic and the community settings. We did invest a little bit in. We did expand our MSL team just to make sure that we had the right scientific exchange. Other than that, a lot of our investment is really in the community and making sure that we are educating around the change of standard of care that needs to happen with using zanidatamab. So, at this point, there is really nothing in the way. We have an established J-code. We have a team that is ready to go. We have supply.
Our JazzCares program is up and running. We have really no payer kind of barriers. So we are very pleased with the label. So there is really nothing in the way for the ramp-up.
All right. Thank you. I think Jazz has estimated approximately 8,000 U.S. HER2-positive GEA cases, but only 3,000 to 4,000 Zepzelca treatable patients after accounting for things such as unresectable disease, first-line treatment eligibility, and HER2 testing. Which part of that funnel represents the largest near-term opportunity to expand the addressable population?
Yeah. Just to clarify, right? We've been very consistent. The incidence of GEA in the U.S. is 8,000 patients. When you look at our label, if you put in the filter of unresectable frontline, right, and then also the testing rate, that's how you land at the 3,000 to 4,000. As I said earlier, the biggest opportunity is to make sure that all those patients are treated, because currently, some of them are treated with Herceptin, but not all. That's where really our opportunity is to leave no patient behind.
Sure. Thank you. On the second interim OS analysis for zanidatamab,
for the doublet change, could a positive doublet ultimately be more commercially relevant than the triplet?
Yeah. We did, and it was good news that we had statistical significance for the doublet as well. We had the OS data for the doublet in our label. We have it now. I think what we'll see, and we'll be presenting the data at an upcoming meeting, and we're excited to do so, is a very consistent way that we're looking at both arms. We truly believe that for those patients that are eligible, the triplet is the treatment of choice. It's where you can see the best results with the overall survival. I think we all know that PD-L1s also have a great tail of the curve in terms of overall survival. Really the doublet comes into play for those patients that might not be eligible for the triplet. That is how we see that splitting up.
I do just want to point out that what's important here is that that triplet is eligible for all patients, regardless of PD-L1 status.
Yes.
That is new in this patient population, where it was previously bifurcated into PD-L1 positive and PD-L1 negative. Now, patients have the opportunity to receive one regimen, the triplet regimen with ZEJULA, chemotherapy, and tislelizumab, if they're HER2 positive. That's regardless of PD-L1 status, which is important.
Sure. Thank you, Jack. I guess, how consistent was the benefit across HER2 expression levels?
Yeah. In the triplet arm, we were approved in both IHC 3+ as well as IHC 2+, so very consistent across. In the doublet, we were approved in IHC 3+. It was interesting. There were some confounding factors like the Herceptin arm really over-performing there. But in the triplet arm, we can be used across the IHC 2-
Sure. Thank you.
patient population.
Thank you. What are the key determinants of regimen selection between ZEJULA plus chemo and ZEJULA plus chemo plus tislelizumab?
Yeah. To me, there really isn't anything that should bar a physician from using the triplet unless there's a contraindication. It should really be the triplet. Yeah.
Okay. How do you expect the emerging HER2 ADCs and bispecific competitors to influence long-term share dynamics?
Yeah. The current potential competitors are a few years out. They would get approved, or we'd see data towards the end of the decade. To be honest with you, at this point, we're not too concerned. Some of the early data is actually not that positive, and I think the burden of proof is on them, right, to beat our overall survival. By then, we'll have more long-term follow-up. So at this point, not too concerned and believe we can compete. But of course, it's always good to have other options for patients out there.
Sure. How should we expect the launch curve to look? What have you learned from early academic center adoption and-
how effectively may that be translating into the community setting?
Yeah. It's very early. We're two weeks into the launch, so we don't really have any data yet. We'll obviously be sharing that at the right time. But as I said earlier, there's no barriers to ramp up. We have great ambition there. We don't see anything getting in the way to achieve our ambition. We're hoping to achieve peak sales. Usually, we don't share those details, but it usually takes about a year or two to get there. But again, no barriers in place to achieve that as soon as possible.
Sure. How quickly do you expect NCCN inclusion after approval? Is the guideline inclusion a meaningful gating factor for adoption?
Yeah. To be honest, we're surprised that we're not on the NCCN guidelines yet. But they have all the information that they need, and we're expecting that that will happen any day now. We're obviously looking forward to the inclusion in the NCCN guidelines. However, in terms of adoption, it's really not a barrier for us, again, because there is access to the drug. The drug's already on market. We have an established J-code. It really isn't a barrier to uptake at this point.
Sure. Thank you. Before I move on, is there anything that I didn't ask on zanidatamab and the launch that perhaps I should have?
No, just that we are thrilled with the label that we got. Honestly, Jack spoke to it. The fact that we're indicated in both PD-L1 positive and negative is great. We are very pleased, and really, there's nothing in the way for zanidatamab to become standard of care and replace trastuzumab and treat every HER2 patient in GEA.
Wonderful. Thank you. Maybe to move on to Zepzelca.
Yep. So really strong growth. How much runway remains as physicians convert eligible patients?
Yeah. So we've had over 40% growth, as we've shared. 30% to 40% of that growth is actually coming from our new indication, the frontline indication in FORTE trial. Very pleased with our performance there. We've seen great adoption of that indication and have the ambition and belief that we can continue to grow that. Our strategy has always been to shift into frontline for Zepzelca. So that is a growth opportunity for us as we look forward. I think what's important to know is that it's also where we see a longer duration compared to second-line. So, it's a great opportunity for the small cell lung cancer patient. As you all know, unmet need is very high there. Again, we're seeing very good uptake there, specifically in the community setting.
Thank you. Looking at Amgen's DeLLphi-305 study-
if the phase III confirms the early survival signal, what is the strategy for maintaining durable Zepzelca growth?
Mm-hmm. Yeah, first of all, I think it's great news for small cell lung cancer patients that they're going to have more choices. The tarlatamab regimen, and we'll wait to see the data, and hopefully, it will be positive for patients. However, Imdelltra is not going to be right for every single patient. There's some biomarker data out there that says that tarlatamab is better in DLL3 patients. Zepzelca doesn't really have that limitation. Even though there has been some recent news around updating of monitoring, there's still a lot of monitoring required and follow-up for tarlatamab, which we don't see with Zepzelca, and this is one of the reasons why we lead in the community space. The operational issues with Imdelltra are real. Again, we believe we can compete in that setting, and there's patients that will benefit from Zepzelca.
Frankly, probably what would be good from a sequence perspective is to use Zepzelca in front line and then save Imdelltra for the second line because patients need options.
Sure. Still on Zepzelca, what are the key milestones over the next 6, 12, 24 months that could meaningfully change the peak sales expectations?
I think it's continuing to compete with IMforte and really doubling down in the front-line setting and driving that front-line use. That is really our main focus to drive Zepzelca business.
Okay, thank you. Moving on to Modeyso or dordaviprone. Since launch, what has surprised you the most versus your pre-launch expectations?
I don't know that we've had any major surprises. We're incredibly pleased with the launch uptake of Modeyso. We've had great uptake in the academic setting, which is where most of our business is. Great adoption there. I think one of the things that we're continuing to try to understand is what will be the duration of therapy in the real world. It's too early for us to say, but it's something that we're watching, and there's a potential for that to be an inflection point. This is ultra-rare disease. It's what Jazz does really well. The team's really focused on patient finding, and so now really also looking to leave no patient behind in the community setting. That is another way that we're finding patients there. There's also been a lot of focus and investment on driving diagnostic testing so that we find our DPYD patients.
These are some of the inflection points for Modeyso. Then, again, we're very excited about the ACTION trial that we'll read out next year. That will put us in an earlier setting, so still very much in launch trajectory mode with growth forecasted.
Okay. How large could the opportunity become if ACTION reads out well?
I think what we've communicated at this point is a peak sales of $500 million. Anything else that we need to share there?
No, I think it's $500 million+ in the U.S.
Yeah
That's first line and second line. I will note that the ACTION trial would serve as the basis for submission ex-U.S. as well. Certainly an opportunity there should the ACTION trial be positive, which to Chumi's point, we're quite excited about.
Yeah.
Hopefully, we get to flip that data card early next year in the first half of 2027.
Yeah, it's incredible progress in that space.
Okay. Maybe moving along to RYLAZE. Despite being the established product, what is the biggest remaining opportunity to grow the RYLAZE franchise?
Yeah. RYLAZE for us has been a real success and obviously is what we consider at this point a stable business, and that is what we continue to do. I think the team is focused on making sure that treaters are treating as soon as hypersensitivity appears. Again, a good success for us, and I would say what we would consider a stable business in the oncology portfolio.
Okay. I guess more broadly, maybe it is a question for you, Jack, although it is oncology. Ziihera, Modeyso, Zepzelca, RYLAZE, what do you believe is the most underappreciated asset by investors? We know what the biggest opportunity is, but what do you get the least questions about, and you wish there were more?
Yeah, that is a really interesting question, Sean. Maybe I will start then Chumi.
Yeah
can add in here. There's a couple of areas that I think are underappreciated. I won't tell the room full of investors what's undervalued. That's certainly for you to decide. But when I hear feedback we get, I still spend a lot of time helping people understand the zanidatamab opportunity. I recognize that we did just put out a peak potential, but when we think about this product, this is something we licensed in 2023 that I think many had expectations for just in BTC and GEA. Now we're looking at a very broad development program in late-line breast cancer, early breast cancer, colorectal, non-small cell lung. I think anywhere HER2 agents are used, we see potential with zanidatamab. I do think there's a lot of potential there.
And maybe just taking a step back, I do think the overall portfolio of Jazz is something that we're still helping people to learn about because as Renée outlined this year, we have ambitions in rare disease to be looked at as an innovative biopharma company. Something I think with a product like zanidatamab, Modeyso, we're well on our way. But when you think about our portfolio and where we've come from, three, four years ago, the vast majority of our revenue was from a single product. Now we have a diversified portfolio with three billion dollar-plus verticals that are all performing well. And I do think that's something that I spend a lot of time helping educate on. Maybe lastly, Chumi I'd be happy to toss it over to you.
When I think about EPIDIOLEX, we obviously acquired this asset from GW a number of years ago, and last year, we did hit blockbuster status with that. But as I think about the runway we have here with the settlement of our 10 ANDA filers, we now have runway into the very late 2030s. We have a billion-dollar drug today that's growing, and we just announced a number of new initiatives here from the clinical trial standpoint to continue to grow this asset. This is something that I think people have looked at as these three currently indicated indications and said, "Okay, that's it." But we obviously see a lot more there, both with Epidiolex and our broader epilepsy portfolio. So Chumi, I don't know if you have anything to add to that.
No, that was great. I think the only other thing is that I would mention is it's the how we do things at Jazz across oncology and neuroscience, which is, I think we're really showing that we can compete. So we might be rare disease, but we are in competitive spaces, and so I'm incredibly proud of how our teams are competing and executing in the marketplace. So yeah.
Sure. I've got some neuro questions here, Jack.
Sure.
But yeah. So just maybe remind the audience where we are on the outlook for your oxybate franchise and where are you seeing growth amongst NT1 and NT2 and IH, and maybe what's your latest perception on the potential impact of the orexin-2 agonists?
Yeah. I think it's a great question. Obviously, XYWAV has been an asset that's performed extremely well, and again, this is in light of two multi-source generics that have come to market this year. I think we've been very clear at the outset of this year that there did exist some uncertainty in the sleep portfolio, and I think what we've seen is that XYWAV's differentiation, it is the only low-sodium oxybate, has been really meaningful, and Sam and her team have done an excellent job of going out there and really executing commercially. You've seen that through our patient ads this year. You asked about opportunity for growth. Certainly on the IH front, I think there's still room to go there. It's still fairly early on in the launch.
And I think we have close to 6,000 patients today, but we do see that that market's potentially as big as narcolepsy. So I think on the XYWAV front, we've been performing extremely well commercially. And when we do think about the orexins coming to market, certainly we've seen data that has shown in NT1 patients they are a potent wake-promoting agent. But when I think about XYWAV specifically, I think it's important to note here that XYWAV's offering something that a wake-promoting agent is not, and that's the ability to get a better nighttime sleep.
When we think about that in light of wake-promoting agents that are used today with these narcolepsy patients, again, and these orexins would be used in NT1, I think we do see a pretty resilient XYWAV, and we've said for a number of years that we view these as complementary. There's still a number of things we'll need to see on the orexin front, pricing, scheduling. But I think where we sit today with XYWAV and the broader market, we've obviously performed very well, and I think we're looking forward to next year. I will note that on our second quarter earnings call, we did note that we expect XYWAV to grow double digits this year, which I think is incredible when you think of where folks thought we'd be last year.
Sure
With the launch of multi-source generics, with the branded competition. So certainly kudos goes to Sam and team as they look to continue that performance.
Sure. Thanks, Jack. Moving over to financials and capital allocation. So you've got full-year revenue guidance was raised to $460 million-$475 million. What are the largest second half swing factors we should be focused on? Is it the GEA launch timing? Is it generic oxybate pressure or Modeyso demand or something else?
I think it's a good question, Sean. When I think about that guidance and the reason behind us raising that guidance, really it was a number of things. It was performance of the portfolio, both on the sleep side, where we did raise our guidance to $2.025 billion-$2.125 billion with XYWAV growing double digits. Our epilepsy and oncology portfolio combined growing double digits. Chumi's team doing an excellent job on oncology performing. You've really seen the business perform extremely well. So certainly, as we think about the latter half of this year, you're right, there are a number of things that are still ongoing. The Zepzelca transition and first-line maintenance where we see 30%-40% of revenue today in first line. We expect that to grow. We expect Modeyso, it's still early in its launch.
To Chumi's earlier point, we just launched zanidatamab three weeks ago. It's something we're extremely excited about. We'll only see a month of contribution or so in the third quarter. We'll get a full fourth quarter. But certainly all of that's included in our expectations. We certainly hope to continue on the trajectory commercially that we have been for the first half of this year, where again, it's been excellent across the portfolio from sleep to epilepsy to oncology.
Sure. Thank you. Still on capital allocation, so like $2.2 billion of cash, I believe, and $4.4 billion of debt and announcing a $1 billion convert and then a concurrent $225 million share repurchase program, which suggests confidence in both your balance sheet and your equity value. How are you thinking about target leverage and balance sheet capacity?
That's a great question. I don't know if I'm ready to give guidance to this audience on a target leverage, but I can give some of our thoughts on that leverage because I do think as we think about the cash we generate in the business, I think we generated $824 million in the first half of this year. To your point, we had $2.2 billion and we just raised another $1 billion. I think what that allows us to do is A, you invest in our commercial business, and I'm thinking about our capital allocation priorities. Invest behind Chumi and team and Sam's broader team to ensure that they're able to execute on their strategy, allow Rob to continue to develop on the R&D side.
What we haven't talked to yet, Sean, which I do think is an important part of our strategy at Jazz, is doing and continuing to do smart business development. As you may have seen this morning, we just closed the Actio acquisition, which again, is exciting for us because it's another asset that we think really builds on our strength in epilepsy. As I think about leverage over time, while I won't give you a target, what I can say is that we've been consistent in how we view business development, how we view capital allocation priorities. I think we'd look to certainly continue to do smart business development, continue to generate cash from our business that allows us to invest further in it. So, certainly, we'd love to see the leverage.
I think we were maybe less than one time if you are looking at net leverage this last quarter. I think as we look to execute on that strategy, certainly it is something we think about. I do not think we need to necessarily box ourselves in with a leverage right now.
Sure. Sure. I guess, are you able to characterize your preference for rare oncology or rare neuro? There are certain metrics that you look at around deals. I mean, you will judge each one on its case. How do you think about how fertile the ground is out there for BD?
Yeah, it is a great question, Sean. I think there is a lot of substrate right now, and I do think Jazz benefits when we think about BD. You all heard Renée speak to her rare disease strategy for Jazz. We think Jazz really has found differentiation in being able to take these rare disease products, and commercialize them, develop them, and Jazz has these three distinct verticals in sleep, epilepsy, and oncology. What that allows us to do is we do not have to focus on any one area. We can say, "Okay, oncology valuations are getting a little high. Well, maybe we can look at epilepsy." I think that gives us a lot of flexibility on the business development side.
I think, again, another strength of Jazz is we can look at late-stage products like Modeyso from the Chimerix acquisition, which we closed last year and is in its launch now. We can also look to earlier stage, like the Actio acquisition in areas that we do have that expertise. I would look at us to continue on the business development front with these Jazz-like deals where I think we can compete and win. Chumi, I know you have a lot of thoughts on how Jazz competes on the commercial side and that kind of phenotype.
Yeah. I think, just having worked in Big Pharma and now being at Jazz, what we do really well is I think we're right-sizing the teams. It's not really about these huge sales teams anymore, but having a cross-functional collaboration, really leaning into omnichannel, investing in the right channels, and doing patient finding exquisitely well. We have teams that are highly trained with very strong relationships, and I really think that that's been our winning combination.
Wonderful. Well, we're just about out of time. Is there anything I didn't ask that I should have?
Well, Anthony, anything?
I don't think so. We didn't spend a ton of time on Epidiolex, but again, that's one of those products that I think we're quite excited about. I think with the addition of the Actio ABS-1230, it really allows us to go deeper on the epilepsy side, and we're looking to expand that program broadly. With that, Sean, thank you so much for-
Thank you.
the time today.
Thank you.
Thank you.
My call will close there. Thank you. Thank you, everyone.