Jazz Pharmaceuticals Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 10, 2023

There are 15 speakers on the call.

Operator

Day and thank you for standing by. Welcome to the Q1 2023 Jazz Pharmaceuticals Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Andrea Flynn, Vice President and Head of Investor Relations.

Operator

Please go ahead.

Speaker 1

Thank you, operator, and good afternoon, everyone. Today, Jazz Pharmaceuticals reported its Q1 2023 financial results. The slide presentation accompanying this webcast is available on the Investors section of our website. Investors may also refer to the press release we issued earlier today, which is also posted to our website. On the call today are Bruce Cozad, Chairman and Chief Executive Officer Rene Galla, Executive Vice President and Chief Financial Officer Dan Swisher, President and Chief Operating Officer and Rob Yonon, Executive Vice President, Global Head of R&D.

Speaker 1

Kim Sablich, Executive Vice President and General Manager, United States, We'll join the team for Q and A. On Slide 2, I'd like to remind you that today's webcast includes forward looking statements, such as those related to our future financial and operating results, growth potential and anticipated development and commercialization milestones and goals, which involve risks and uncertainties that could cause actual events, performance and results to differ materially from those contained in these forward looking statements. We encourage you to review the statements contained in today's press release, in our slide deck and in our latest SEC disclosure document, which identify certain factors that may cause the company's actual events, performance and results to differ materially from those contained in these forward looking statements made on today's webcast. We undertake no duty or obligation to update our forward looking statements. Turning to Slide 3, on this webcast, we'll discuss non GAAP financial measures.

Speaker 1

Descriptions of these non GAAP financial measures and reconciliation of GAAP to non GAAP financial measures are included in today's press release and the slide presentation available on the Investors section of our website. I'll now turn the call over to Bruce.

Speaker 2

Thanks, Andrea. Good afternoon, everyone, and thank you for joining us today. I'll start on Slide 5. In the Q1 of 2023, we once again delivered strong commercial results, Continue to advance our pipeline and built on our record of operational excellence. Our results for the quarter underscore the durability and growth of our core commercial products and our enhanced R and D capabilities.

Speaker 2

On the commercial front, our focus on execution continues to drive Key product sales headlined by the strong performance of low sodium Zywave. We're especially pleased that physicians and patients Continued to choose Zywave even as a high sodium oxybate authorized generic or AG entered the market. We continue to expect that Zywave will both grow and remain the oxybate of choice in 2023, Even with the availability of high sodium oxybate AG and branded fixed dose high sodium oxybate, Zhiwave active patients grew in both narcolepsy and idiopathic hypersomnia or IH in the Q1 And our efforts to educate prescribers and patients about the benefits of Zywave remain effective and are resonating in the market. Zywave is now annualizing it more than $1,000,000,000 in net product sales, making it our largest product by net sales. And as outlined in Vision 2025, we anticipate our oxybate franchise will generate $2,000,000,000 in revenue in 2025.

Speaker 2

We saw significant year over year growth in product sales for Epidiolex. Importantly, outside the U. S, we have now launched Demand for Rylase remains strong in the U. S. With potential European approval later this year.

Speaker 2

Zepzelka remains the treatment of choice in second line small cell lung cancer and longer term our ongoing efforts to explore Zepsilk in several new patient populations, including first line small cell lung cancer may open up opportunities for meaningful growth. Moving to R and D, we continue to advance multiple investigational therapies in our pipeline and expect to have at least 3 late stage readouts By the end of 2024, including JCP-one hundred and fifty in post traumatic stress disorder, suvacaltamide in essential tremor, We have a business that continues to generate meaningful cash flow. In line with our disciplined capital allocation, we continue to invest in areas of our business that we believe will drive the most benefit for patients and value for shareholders, including a robust pipeline with more than 20 novel candidates across neuroscience, oncology and cannabinoids. We are reaffirming our 2023 guidance, which Renee will discuss in more detail. Turning to Slide 6, Vision 2025 remains our strategic North Star, which we believe will deliver sustainable growth and enhanced value.

Speaker 2

We have made meaningful progress in all three areas of Vision 2025 and believe we are well positioned to These important milestones, each of which are critical to our transformation into a high growth global biopharma leader. I'll now turn the call over to Dan to review our commercial performance, after which Rob will share an update on our R and D progress. Renee will provide a financial overview and then we'll open the call to Q and A. Dan?

Speaker 3

Thanks, Bruce. I'm excited to share the continued progress across our commercial portfolio. I'll begin on Slide 8 With neuroscience in our oxybate franchise, we remain confident in the durability of our oxybate franchise and have established low sodium XY Wave as the oxybate treatment of choice. XY Wave became our largest product by net product sales as of the 4th In the Q1, average active Jazz Oxivate patients increased to approximately 17,400, representing growth of approximately 5% and total oxybate revenues, including royalties from high sodium oxybate AG, grew by approximately 6% compared to the year prior. In narcolepsy, we continue to focus on educating patients and on the benefits of reducing sodium intake, and this message is resonating.

Speaker 3

We were very pleased with performance in the Q1 And exited 1Q 'twenty three with approximately 9,050 narcolepsy patients taking XY Wave, an increase of approximately 500 patients from the There were approximately 2,000 IH patients taking ZI Wave. IH is a 24 hour sleep disorder and ZI Wave is the 1st and only treatment approved by FDA to treat the full condition of IH. Importantly, it has been studied across The multiple symptoms of IH. Our field force remains focused on educating prescribers on the importance of proper diagnosis and identifying appropriate patients for XY Wave therapy. And a recent Jazz survey of sleep specialists indicate that approximately 70% Anticipate increasing their prescribing over the next 6 months.

Speaker 3

Slide 9 highlights the compelling low sodium health benefits we are sharing with healthcare professionals and patients. Narcolepsy is a debilitating chronic condition and we have focused on education around the lifelong burden of high sodium intake for narcolepsy patients We live with an increased risk of cardiovascular comorbidities. XYwave is the only approved low sodium oxybate and has 92% less sodium than high sodium of 1500 milligrams of sodium per day, Ziwave has 100 to 140 milligrams, A reduction of 1,000 to 1500 milligrams of sodium per day compared to high sodium oxidates. This has significant potential health benefits, including lower blood pressure and improved cardiovascular health. To add to the literature on sodium impact, we presented data at this year's American Academy of Neurology meeting that showed narcolepsy patients treated with high sodium oxybate had a higher risk of new onset hypertension diagnosis For antihypertensive medication initiation within 180 days of starting therapy, when compared to a mass control group Narcolepsy patients not being treated with high sodium oxybate.

Speaker 3

In fact, the risk of those taking high sodium oxybate was approximately twice that of the control group. With regard to oxybate competition, our high sodium oxybate AG was launched in January, And we anticipate additional AG and branded fixed dose high sodium oxybate competition in the coming months. With competition now in the marketplace, I'll share a few key takeaways based on our experience in the Q1. First, we continue to build on the successful launch of XY Wave. It remains the only low sodium oxybate available to patients, and we expect it to be the only oxybate indicated for IH for the foreseeable future.

Speaker 3

2nd, we expect that XYwave will both grow and remain the oxybate of choice in 2023 even with the availability of high sodium I'll highlight that the large majority of narcolepsy patients beginning oxalate therapy in the Q1 chose Zywave over high sodium oxalate, And we expect to continue to see patients transition from both Xyrem and high sodium oxybate AG to XYwave. 3rd, we believe that the majority of patients and healthcare providers will continue to prioritize long term health When evaluating oxybate therapy, FDA continues to recognize 7 years of orphan drug exclusivity through July 2027 for XY Wave and narcolepsy. FDA has also recognized the difference in sodium content between XY Wave and Lumerize, A fixed dose high sodium oxybate is likely to be clinically meaningful in all patients with narcolepsy and that Zywave is safer than Lumeriz I'll also note that branded fixed dose high sodium oxybate has the same sodium content as Xyrem and the high sodium oxybate AG. And Ziwave is the only approved oxybate therapy that does not carry a warning and precaution related The high sodium intake. All of these factors give us confidence that ZiWave is a durable product that we believe will continue to be a core growth driver for Jazz.

Speaker 3

Moving to Slide 10, we are pleased with Growth of Epidiolex with net product sales in Q1 2023, growing by 20% year over year to $189,000,000 Growth was driven by underlying demand in the U. S. And expansion to new markets outside the U. S. And we are seeing increasing use of Epidiolex earlier in the treatment algorithm.

Speaker 3

We continue to see seasonality in ordering patterns in the U. S. With the combination of a more gradual build in inventory Over the second half of the year, an insurance plan resets with payers impacting the Q1, not dissimilar to what we've seen historically with Oxivate. Turning to Slide 11, we are building on our solid foundation to capitalize on additional opportunities we see to drive Epidiolex growth. We've recently launched a number of initiatives, including educational efforts focused on optimal dosing and caregiver reported outcomes of Epidiolex Treatment including seizure, behavior and cognition data from the BECOM survey.

Speaker 3

These new initiatives are complemented by the compelling data So has an enhanced focus on further penetration into the adult setting. We remain focused on growing Epidiolex outside the U. S. We have now launched in all 5 key European markets and while it's early, we are very encouraged by uptake in those markets with pricing and access Remaining strong. Moving to Slide 12, net product sales for Rylase were $86,000,000 for the 1st quarter, A 58% increase year over year.

Speaker 3

Based on the availability of Rylaid, healthcare providers have indicated they are returning to best Clinical practice and switching therapy at the first signs of hypersensitivity. The approval of Monday, Wednesday, Friday dosing allows for a dosing schedule that is more in line with preferred clinical practice. Rylase is maintaining Strong momentum in pediatric oncology protocols and has been almost universally adopted in this setting.

Speaker 4

We are

Speaker 3

also encouraged to see that there is an increasing use of Rylase in the treatment of adolescents and young adults or the AYA market, which is an area of increased emphasis for us in 2023.

Speaker 5

Outside of the U.

Speaker 3

S, we submitted a marketing authorization application to the European Medicine Agency in May 2022. We are also continuing to evaluate patient needs in other geographies. Slide 13 highlights that we have rapidly established Zepsilka

Speaker 4

as the

Speaker 3

treatment of choice In 2nd line small cell lung cancer, Dabselka net product sales increased 13% to $67,000,000 in Q1 2023 compared to the same period in 2022. Rob will discuss our development plans for Zestelka, which also includes trials in first line small cell lung cancer and other tumor types, providing the opportunity for meaningful future growth in new patient population. I'll turn the call over to Rob for an update on our pipeline and upcoming milestones. Rob?

Speaker 5

Thanks, Dan. Starting on Slide 15, we've detailed key clinical programs in our pipeline. Our team is energized by the advances we've made And we're looking forward to late stage data readouts from at least 3 clinical stage programs in 2023 2024, JVP-one hundred and fifty in PTSD, suvocalcinide in essential tremor and zanadetimab or ZANNI in GEA. I'll highlight several programs in more detail shortly. But first, I want to touch on a few key points as we look across the breadth of the pipeline.

Speaker 5

Starting with neuroscience, taurolumabine is ongoing in our Phase 2 PTSD trial for JZP-one hundred and fifty, with top line data expected late this year. We are also advancing trials for suvacalcomide in both essential tremor or ET and Parkinson's disease tremor. The top line data from the ET trial expected in the first half of twenty twenty four. In our orexin 2 receptor agonist or JZP-four forty one Phase 1 program, We anticipate initial proof of concept in healthy volunteers this year. KZP-four forty one has the potential to treat narcolepsy, IH as well as other sleep disorders.

Speaker 5

Moving to oncology, Sanadatamab is a priority program for us and we are committed to bringing this novel therapy to patients. In late April, we amended our agreement with Zymeworks and are excited to welcome new colleagues who are focused on zanodatumab at Zyneworks to Jazz. This allows us benefit from their wealth of knowledge and expertise as we look to bring Zanadatumumab to the market as rapidly as possible and explore other opportunities beyond BTC and GEA. For ZYBELCA, we expect to complete enrollment this year for the ongoing Phase 3 trial to evaluate the VYZELCA in combination with Tecentriq in first line extensive stage Small cell lung cancer. Turning to Slide 16, I'll discuss zanadatamab in more detail.

Speaker 5

Sanadetumab is a novel HER2 targeted bispecific antibody with biparatopic binding and the potential to transform the current standard of care in multiple HER2 expressing cancers. As an oncologist, I'm impressed to see the monotherapy activity with XANNI across multiple HER2 expressing tumor types, including cases resistant to prior HER2 therapies. The most advanced clinical work with XANI is in biliary tract cancers or BTC and gastroesophageal adenocarcinoma or These are both cancers with significant unmet need and poor outcomes with current standards of care. As a reminder, last year, we and our partner Zymeworks reported positive top line results from a pivotal Phase 2b trial evaluating famadatimab as monotherapy in patients with previously treated HER2 amplified expressing BTC. In the trial, 41% of these patients with BTC achieved an objective response as assessed by blinded independent sensory review.

Speaker 5

By contrast, standard of care chemotherapy and second line BTC would be expected to have an objective response rate of less than 10%. Currently, there are no HER2 targeted therapies approved for the treatment of BTC. And we are in dialogue with the FDA regarding the potential regulatory path forward for ZANI and BTC. We're pleased that data from this Trial have been accepted as an oral presentation at ASCO this year. For those of you interested in more detail on those data, I hope you will join us for the KOL webcast we are hosting following that presentation.

Speaker 5

We are also progressing our program in GEA. At the January ASCO GI Conference, the first nanodatimab Overall survival data were presented from a Phase 2 trial evaluating zanodatamab in combination with chemotherapy in first line patients with HER2 expressing metastatic GEA. The preliminary results show that the median overall survival had not yet been reached, with an 18 month survival rate of 84%. The overall survival findings in this trial are compelling, Given that historically reported overall survival rate for the currently approved standard of care is a median of 14 months. These results show Thanodatamab's potential as a foundational treatment for patients with HER2 positive GEA.

Speaker 5

And we look forward to additional data from the ongoing pivotal Phase 3 TEA trial expected to read out in 2024, which may support U. S. And global regulatory submissions. Since we acquired zenodetimab, Our confidence in this program has only grown based on positive data from both BTC and GEA. And while our initial focus is on those two tumor types, we believe zanidatumab has the potential to transform the current standard of care in multiple HER2 expressing cancers.

Speaker 5

To that end, we're excited that ZEMU was added to the iSpine breast cancer platform this year. In addition, we have multiple early stage trials assessing zanodatimab's clinical potential in a range of tumor types and are actively evaluating opportunities to pursue additional label indications. Turning to Slide 17, I'd like to highlight suvacaldamide, which is a highly selective and state dependent modulator of T type calcium channels and clinical development for the treatment of essential tremor or ET and Parkinson's disease tremor. Top line data readout for the ET trial is anticipated in the first half of twenty twenty four, so I'll focus my comments today on that indication. There is a high unmet need for ET treatment with no new medicines approved in over 50 years.

Speaker 5

ET can be highly debilitating with significant effects on patients' quality of life and activities of daily living, such as eating, drinking, dressing, shaving and writing and can lead to substantial impairment on physical functioning. Some patients also experienced cognitive deficits, anxiety, social phobia, depression and sleep disturbances. In the U. S. And key European markets, there are approximately 2,000,000 diagnosed patients with a prevalence estimated than 11,000,000.

Speaker 5

Slide 18 illustrates suvocalcinide's differentiated mechanism of action. While the exact underlying pathophysiology of ET is not clear, there is strong evidence to support the role of T type calcium channels. T type calcium channels regulate the balance of calcium ions, acting as a gatekeeper to help ions both enter and leave the cell membrane. In some pathologic states such as ET, increased activation of these channels leads to excessive rhythmic signaling that prompt tremor. The high selectivity of suvacalthamide for T type calcium channels make it a promising candidate for the treatment of ET.

Speaker 5

Importantly, suvocalcimide is differentiated from other T type calcium channel blockers in development as it is state dependent, meaning that it targets channels under conditions of hyperexcitability, while sparing the form of the channel important for normal neuronal signaling. Slide 19 provides an overview of the suvocalcinide ET Phase 2b trial design. Approximately 400 participants with moderate to severe ET will be treated with 1 of 3 dose levels of suvacalcomide or placebo for 12 weeks. Based on the results from our prior Phase 2a proof of concept trial known as TCALM, as well as FDA feedback, The primary endpoint being used in this trial is a change from baseline to week 12 on a composite of the Tremor Research Group Essential Tremor Rating Assessment Scale, known as TETRIS. The 2 composite measure is composed of items from 2 scales, 11 items from the TETRIS Activity of Daily Living, which includes measures such as feeding with a spoon, hygiene and using keys, and 2 items from the Tetris Performance Scale, which represent handwriting and drawing in the Archimedes spiral, which was depicted on Slide 17.

Speaker 5

We conducted post hoc analyses on TCOM, which was a 4 week randomized double blind placebo controlled study to better understand the treatment effect with the TETRIS composite endpoint. We believe that our ongoing Phase 2b trial has been optimally designed to use the Phase 2a learnings and that an appropriate patient population, primary endpoint and study duration have been selected to adequately evaluate the safety and efficacy of suvacalcomyde across 3 dose levels. On Slide 20, we've highlighted several key aspects of our program exploring JZP-one hundred and fifty for the treatment of PTSD, A psychiatric disorder that affects millions of people. Patients frequently have uncontrolled symptoms that impacts their ability to perform activities of daily living and social function. PTSD affects up to 8% of adults during their lifetime and is associated with significant morbidity and mortality.

Speaker 5

There haven't been any new medicines approved for the treatment of PTSD in over 2 decades. Current standard of care includes cognitive behavior therapy with SSRIs and SNRIs used as first line Pharmacotherapy Treatments. However, response rates to pharmacological treatments rarely exceeds 60% and even fewer patients achieved clinical remission. JCP-one hundred and fifty is a potent, selective and irreversible inhibitor of Fatty Acid Amide Hydrolase or SOD. This is a novel mechanism of action to potentially target the underlying pathophysiology and core symptoms of PTSD.

Speaker 5

We expect top line data from this trial late this year. Slide 21 provides an overview of our Syselka first line small cell lung cancer program. Small cell lung cancer patients have particularly poor outcomes with a 5 year overall survival rate of less than 10%. Currently, Xepcelka has indicated to treat patients in the 2nd line setting, but we see a clear mechanistic rationale for sepselka to potentially increase the duration of response in the first line setting as maintenance therapy in combination with the standard of care, which is chemotherapy plus a PD L1 inhibitor. We have an ongoing first line trial being run-in collaboration with Roche to evaluate SYBELCA in the setting with chemotherapy plus Tecentriq or atezolizumab.

Speaker 5

The trial design is outlined on the bottom portion of the slide and we expect to complete enrollment by the end of the year. Now, I will turn the call over to Renee for a financial update. Renee?

Speaker 6

Thanks, Rob. I'll start with our top and bottom line results on Slide 23. As a reminder, our full financial results are available in our press release and 10 Q. In the Q1 of 2023, we recorded impressive year over year revenue growth of 10%, achieving $893,000,000 in total revenues. This was driven by growth of our key products in both neuroscience and oncology, including year over year double digit growth of Zywave, Epidiolex and Rylase.

Speaker 6

Our disciplined capital allocation And focus on operational excellence drove adjusted net income of $285,000,000 growing broadly in line with our revenues compared to the same period in 2022. We continue to generate significant cash from our business, Recording more than $320,000,000 of cash from operations in the Q1 of 2023, an increase of 53% compared to the Q1 of 2022. With healthy cash flows and a strong balance sheet, We have strategic flexibility to invest in growth drivers within our current business as well as corporate development opportunities. Corporate development is an important component of Vision 2025 and we are actively assessing that we believe will deliver innovation for patients and contribute to building a sustainable business that provides meaningful returns to shareholders. Turning to Slide 24.

Speaker 6

We are reiterating the 2023 revenue guidance we provided in March. We are executing in line with our expectations and are confident in meeting those targets. The guidance reflects our strong performance in the Q1, our expectations around the durability of our oxybate franchise and anticipated growth across our key products. Our total revenue guidance range for 2023 is $3,675,000,000 to $3,875,000,000 positioning us for year over year total revenue growth. Our 2023 guidance for neuroscience of $2,675,000,000 to $2,825,000,000 incorporates expected growth for both Zywave and Epidiolex as well as the continued decline in Xyrem due to robust Cywave adoption and the introduction of competitive high sodium oxybates.

Speaker 6

As a reminder, our neuroscience guidance also includes high sodium oxybate AG royalties, which are recognized within total revenues under royalties, not under neuroscience net product sales. Due to the royalty structure within our AG agreement with Hikma, we expect our royalties to be significantly higher in the second half of twenty twenty three Relative to the first half, as a reminder, in the first half of twenty twenty three, while Hikma maintains The royalty rate paid to Jazz is tiered and wide ranging, Starting at 10% and going all the way to 90% based on the volume of AG units sold as a percentage of total oxybate units, with the total referring to Zywave, Zyrem and high sodium oxybate AG. During the second half of twenty twenty three, the royalty rate to Jazz becomes fixed at a rate where we and Hikma both have substantial economics regardless of the AG volumes. Our oncology guidance reflects expectations of continued double digit growth for this franchise with a revenue range of $950,000,000 to $1,050,000,000 resulting in a midpoint of $1,000,000,000 Continuing on Slide 25, our SG and A guidance for 2023 is a reduction compared to 2022, and we are tracking through the Q1 as expected.

Speaker 6

As we noted in our last quarterly update, our R and D guidance of 700 dollars at the midpoint represents enhanced investment over 2022, reflecting the growth and maturation of our pipeline, as Rob noted earlier in the call. On the bottom line, we expect to continue to deliver strong adjusted net income with 37% growth at the midpoint and a guidance range of $1,240,000,000 to $1,310,000,000 The midpoints of our financial guidance imply an adjusted operating margin of approximately 46% for the year. We'll continue to prioritize commercial, R and D and corporate development efforts that we believe will deliver the most value, Leveraging our cash generation to invest in our business, improve our bottom line and deliver strong shareholder returns. With our strategic investments, expanding product portfolio, R and D progress and focus on operational excellence, We believe we are well positioned to achieve vision 2025 and deliver further diversification, sustainable growth and enhanced value I'd now like to turn the call back to Bruce.

Speaker 2

Thanks, Renee. I'll conclude our prepared remarks On Slide 27, we started 2023 with significant momentum and I'm pleased to report that we've continued making strong progress in the Q1 of 2023. On the commercial front, we've successfully launched multiple products over the past several years, which are now demonstrating strong and durable performance. Our pipeline is more robust than it's ever been in the company's history, And we have at least 3 anticipated late stage data readouts through 2024 that have the potential to continue to diversify and transform our business. We also remain focused on strategic capital allocation.

Speaker 2

With our strong cash flow, balance sheet and margins, We have the flexibility to make significant investments across commercial, pipeline and corporate development to drive sustainable growth and enhanced value. That concludes our prepared remarks. I'd now like to turn the call over to the operator to open the line for Q and A.

Operator

Please standby while we compile the Q and A roster. And our first question comes from the line of Jessica Fye with JPMorgan. Your line is now open.

Speaker 1

Hey, guys. This is Na san on for Jessica Tsai. Can you give us some color on how the introduction of the Xyrem AG is playing out versus what your expectations are? And then second, what kind of business development

Speaker 2

All right. Well, let's start with the question about the authorized generic and then Renee, maybe you can jump in to handle corporate development. The most important thing to say about our Q1 with an AG on the market is that it's played out Very much the way we thought it would thus far. We have a new entrant in the high sodium category when we are obviously growing XY Wave as the only low sodium product both in narcolepsy and in idiopathic hypersomnia where it remains the only approved product without an AG generic. The ability to grow in both narcolepsy and idiopathic hypersomnia in the face of the AG generic, I think is consistent with what we had I guided to and you saw us reaffirm our overall guidance for the year based on that Q1 experience.

Speaker 2

Renee, you want to take corporate development?

Speaker 1

Sure. Thanks, Bruce.

Speaker 6

So corporate development continues to be an important priority for us, As I mentioned in our prepared remarks, in terms of the assets we are interested in, we are squarely focused On commercial and near commercial assets as part of our Vision 2025 revenue goals, We think that Vanadetimab can certainly contribute to that goal, but it will not fully cover it. We also are looking at pipeline assets. We have a rather robust pipeline right now that we're pushing forward, and we think we can continue to look at bringing in assets that can complement that pipeline. We do believe there are some good opportunities for us to transact across both of those areas. With respect to commercial or near commercial assets, to be clear, we're not going to overpay for assets, Nor do we think that we need to in this environment.

Speaker 6

So sitting here today, there are multiple opportunities we're And we're quite busy within that team. And then just to get a bit more specific in terms of the types of assets, We really tend to focus on areas of great unmet need, where we think we can have a really meaningful impact for patients, where there's an addressable commercial call point that enables us to leverage our expertise, Our global footprint and then create a durable revenue stream for the company. We're largely focused on neuroscience and on side of those 2 therapeutic areas given the vast majority of our current commercial products are currently serving rare or We think there's a lot of opportunity. We're well positioned also from a financial perspective to be able

Speaker 4

to transact.

Operator

Your next question comes from the line of Marc Goodman with SVB Leerink. Your line is now open.

Speaker 7

Yes. Hi. Could you give us

Speaker 8

a little more color on what's going on in the IH market? We know the number of patients that you moved from Last quarter to this quarter, but just some color, anecdotal information, anything you can help us with to understand what's happening behind the scenes? Thanks.

Speaker 2

Yes. Mark, let me turn that question over to Kim.

Speaker 9

Hi. Yes. So we are continuing to see the growth in idiopathic hypersomnia is quite compelling with 2,000 active patients exiting the first quarter. And when you look underneath that, we see that we're continuing to bring new prescribers on board and creating a larger prescriber base, which is great. And what we see is that as prescribers get experience with the product, Dan mentioned in a survey of sleep specialists, 70% of their indicating that they're going to increase their prescribing of Zywave for IH over the 6 months, so good indicators of both the experience that they're having to date as well as their intentions in the future.

Speaker 9

But do keep in mind that Zywave remains the only FDA approved treatment option for adults with idiopathic hypersomnia, which is a rare multiple symptom sleep disorder and the only treatment studied across the multiple symptoms of IH And we're really still just building this kind of non existent market. And as a result, we're executing a comprehensive These education campaign both for healthcare providers as well as patients across multiple Channels and Platforms and our emphasis really is on educating prescribers on the importance of a proper and solid diagnosis and identifying the patients that are appropriate for Zywave and really about the fact that Zywave is approved to treat Full condition of idiopathic hypersomnia, not just the excessive daytime sleepiness that they have been treating for a number of years with off label Stimulants and weight promoting agents and really important at the core of that as well since they've been so focused The daytime symptom of excessive daytime sleepiness is reminding them that idiopathic hypersomnia is actually a 24 hour condition And the XY Wave can address multiple symptoms of idiopathic hypersomnia. So an important Patiental effort there and we're gaining traction. Patients so far have been reporting that they're quite pleased with the comprehensive And customized support that they're receiving from Jazz during the past to access.

Speaker 9

So overall, we're feeling really good, remaining very confident in our ability to maximize the potential of Zywave in this really underserved market.

Operator

Your next Question comes from the line of Jason Gerberry with Bank of America. Your line is now open.

Speaker 4

Hey guys, thanks for taking my questions. Just a question on the step up, the meaningful step up in the Hikma royalty in the second half. Is that driven off of the assumption that the Hikma AG Volumes will step up in a big way and thus their sales or is it more just that the royalty rate spikes up in the second half Or is it just sort of an accounting convention where you're realizing revenue and it may not perfectly align with the period within which is captured? And then also just on the once nightly oxybate, would you expect that to have to be stepped through the AG generics, just Payers historical reluctance to pay for convenience. Thanks.

Speaker 2

Yes. On the first part of the question, Jason, it's pretty Straightforward. The emphasis we're trying to put there is really that the royalty rate is expected to be meaningfully higher in the second half of the year. Not really a timing or accounting thing. Hikma has been adding patients over time, so they probably have more patients at the end of And at the beginning of the period, so that will contribute too, but the royalty rate is meaningfully different.

Speaker 2

And on the payer side, In the sort of high oxibate space and how they might handle that. Kim, maybe I'll come to you.

Speaker 9

Sure. So we started out the year and we continue to experience greater than 90% of patients, commercial patients Having payer coverage, formulary coverage for XY Wave and we anticipate that to continue. We've been educating payers for some time now about the importance of reducing sodium and we do believe that payers are generally understanding the importance of that reduction. And they're seeing the fact that XYwave is the oxybate market leader with More than half of all octopate patients on Zywave and the fact that we've continued to grow this market leading position over the high sodium oxibate. So we anticipate that as other high sodium oxibates, including the high Sodium AG activator added to formularies that we expect Zywave to maintain broad commercial coverage.

Operator

And your next question comes from the line of Joseph Ng with Cowen. Your line is now open.

Speaker 4

Hi there. Good afternoon. Thank you for taking my question. Maybe one on the pipeline for JZP-one hundred

Speaker 2

and fifty and PTSD considering to

Speaker 4

see those data this year. Maybe what sort of change in the CAS5 scale do you think is clinically meaningful or would support additional investment in this program? And Placebo response rates are they can be historically pretty variable in neuropsych indication. So is there anything that you can do In the conduct of the Phase 2 to try and minimize placebo response? Thanks.

Speaker 5

Sure. I'm happy to take

Speaker 2

the question. Rob, over to you on that one.

Speaker 5

Yes. Thanks, Bruce. Happy to take the question. So on the first part, we haven't said exactly what we think would be clinically meaningful, but we certainly had Discussions with FDA and key experts and we feel that the study is well powered with the 2 dose levels that we've concluded. And to your point, it's a well controlled design with placebo.

Speaker 5

We certainly think the level of severity And the patients that we're recruiting and the well established endpoint will allow us To differentiate from any placebo effect that you might see in that particular population is pretty severe upon study entry.

Operator

Your next question comes from the line of Brandon Folkes with Cantor Fitzgerald. Your line is now open.

Speaker 4

Hi, thanks for taking my question. Maybe just Following on from an earlier question about the IH market, can you maybe just elaborate a little bit on the willingness you're seeing in the field of prescribers To use a sleep promoting agent for the IH patients, especially those patients with heavy sleep inertia, are you seeing prescribers initially maybe try With less intense morning sleep inertia, just any color there on that education you called out for prescribers. Thank you.

Speaker 2

Kim?

Speaker 9

Sure. So I think if there are physicians Out there that are hesitant to use a fleet promoting agent that just highlights the education that we need to do in this marketplace. We're, as I mentioned earlier, working to educate prescribers that IH is actually a 24 hour condition and that we And once they understand that the daytime symptoms, including sleep inertia that you mentioned are the result of poor sleep quality at night or what we call non restorative sleep. They understand why treating with Zywave at nighttime Makes sense. So it's we're making progress there and education is key to

Operator

And your next question comes from the line of Ami Faria with Needham and Co. And Company. Your line is now open.

Speaker 10

Great. Thanks for taking my question. I have one question and one Just on silvacalteamide, looks like the endpoint that you're studying is basically the same as what Praxis studied for the study that they reported earlier this year, where some of the performance that the PS scores were And so I was just curious what you thought you might see from your study and is this the endpoint that you expect to continue to evaluate going forward? And just as a follow-up to the dynamic in the oxidate market. Is it fair to say that There's Ange really influencing switches to the generic and it really boils down to physician choice.

Speaker 10

So in that case, who is really taking the generic Xyrem? Thank you.

Speaker 2

So, Rob, let's come to you first on suvacalteamide.

Speaker 5

Yes. So thanks for the question. We feel as though we learned a lot from the TCOM study that was the Phase 2a study in a number of respects, including Not only the endpoints, but how to measure the endpoints. And we certainly noticed that it can be challenging to assess performance Aspects of the TETRIS through a remote observer. And so in our trial, we're not doing that.

Speaker 5

But overall, the combined TetraZenpoint having to do with activities in daily living and performance scale is agreed upon with the FDA And is certainly something we were able to evaluate in our TCOM study and we have confidence around Our drug and I think you're highlighting differences in trial designs potentially, but I would also highlight differences in drugs. Our agent is a state dependent CAF III And that's critical because it allows you potentially to push the dose into higher efficacious ranges, given the differential activity on pathologic calcium ion channels versus normal resting state channels.

Speaker 11

So we think we

Speaker 5

have a differentiated ass we think we're able to push the dose and evaluate those 3 doses in a Phase 2 design that's supported by our prior data.

Speaker 2

And Kim, on the AG uptake, you want to make a comment on that?

Speaker 9

Yes, sure. I mean, so we don't have exact data on that. What I'll say is that we're continuing to see Nice uptake, as Bruce said, of Zywave in the face of the AG. Switching dynamics can happen in a number of places. They can happen with the Hayer, which I don't think we're really seeing is the case right now.

Speaker 9

They can happen in the HCP or they can even actually happen at Pharmacy, we have talked about that, XY Wave in particular is not therapeutically equivalent or AB rated. So we don't anticipate For switching at the pharmacy with Zywave, but that is certainly a place where switching can happen from Zyrem to the AG.

Operator

Your next question comes from the line of Balaji Prasad with Barclays. Your line is now open.

Speaker 12

Hi, good evening. Just two quick ones from me. Firstly, could you comment on the access That you have to the neurologists and physicians with regard to Epidiolex and your thoughts around Upside our commercial scope for the rest of the year from an access perspective? Thanks. And secondly, minor question, should we Any further updates on the on your litigation with Avadel, post the delisting direction that you received from the court?

Speaker 12

Thank you.

Speaker 5

Yes, I'll take the second part

Speaker 2

of the question first.

Speaker 8

Okay.

Speaker 2

I'll take the second part of the question first, Dan, and just say that we're not going to Comment on ongoing litigation, but Dan, why don't you talk about Epidiolex access sort of worldwide?

Speaker 3

Yes, just sort of thinking more broadly about epidiolex, the 20% year over year growth is great and we remain confident that We're near blockbuster status on that brand. In both markets, we've got strong HCP engagement and face to face engagement. We've got great access as we had some wins coming in to the U. S. Market.

Speaker 3

And so it's We've always had the quantity of access, but now we've got the quality of access. In Europe, France was the last of the 5 major countries to I get access to and we're continuing to drive in the smaller markets both reimbursement as well as TSC reimbursement So I think this stage is well set, with the face to face interactions, the ability to talk to the HCPs, Not only about the clinical rationale, thanks to the seizure benefit and the combination of clobazam, but also Some of the become data from caregivers that was shared, which also had behavioral and cognition outcome. And then there's the areas that I mentioned in the presentation or the prepared remarks about additional areas of growth with enhanced focus with adults. Adults were also Getting to those physicians have been impacted by COVID and we see that plus long term care as an area to further double down on as well as optimal dosing, etcetera. So I think the stage is well set and we're pleased with the year over year growth and where the brand is going for 2023.

Operator

And the next question comes from Moskumar with Goldman Sachs. Your line is now open.

Speaker 4

Hey, thanks for taking our questions. Maybe on the corporate and business development front, how do you think about kind of The boundary between commercial versus near commercial assets as each quarter moves forward towards 2025, is there a sense that like if you get to a certain point, It really shifts from commercial or near commercial to really wanting to be commercial assets to kind of contribute meaningfully to Vision 2025?

Speaker 6

Yes, thanks for the question. I would say, our primary focus is ensuring that we're targeting assets that we think can have a really meaningful benefit for patients and meaningful impact and therefore benefit Our business and our shareholders. With respect to that on commercial or near commercial, it really depends on the asset. It depends on the nature of the underlying business, that it's an M and A type of opportunity where you're gaining access To a significant amount of expertise that you're going to continue or whether we're looking at something that we can essentially lift And drop right into our footprint. So our focus is essentially the long term value generation, durability of the asset, how it fits Into our overall portfolio.

Speaker 6

And we do think there are opportunities to ensure that we're hitting our Vision 2025 goal. But we're not focused myopically just on that goal. We're focused on broader growth and the longer term sustainability and enhanced

Operator

Your next question comes from the line of Gregory Ramza with RBC Capital Markets. Your line is now open.

Speaker 13

Great. Good afternoon, Bruce and team. Congrats on the progress and thanks for taking my question. Bruce, maybe just spinning back To Zywave and as you go to market with the low sodium messaging, which We acknowledge it is rather intuitive. And with respect to just the simplicity of that messaging, I'm just curious what Barriers would you point to that you think are perhaps underappreciated by investors and others as that messaging gain traction and pull through with

Speaker 2

Kim, why don't I let you take this one?

Speaker 9

Sure. So at this point, we do feel that our low sodium messaging is resonating with healthcare providers and with many patients as well, I think is evidenced by the amount of patients that have been Transition to or started on Zywave. That being said, as we've brought most prescribers on board and many of them have switched A good portion of their patients, the most common barrier that we really hear 2 barriers that we hear from a prescriber is either 1, I've offered it to my patients and they don't want to switch because Xyrem has changed their lives. We should never underestimate How much patients love their Xyrem and just don't want to take any chance no matter what you tell them about the product being the same active moiety In terms of switching products, so we're continuing to work on that patient side of things and educating patients about Zywave and making nice progress over time. The other reason that we hear most is that In the smaller healthcare practices, they feel they just don't have the Means to do the transitioning of the patients.

Speaker 9

So we do see these offices starting patients on Zywave and they believe in sodium reduction, but it does take some work to transition patients over. No problem for the larger offices with plenty of staff, but in some of these smaller offices, they just feel that they don't have the manpower to do that.

Operator

Your next question comes from the line of Akash Tewari with Jefferies. Your line is now open.

Speaker 14

Hi, this is Eri on for Kash. Thanks for taking our question. So I guess for the guidance, if the current trend in Q1 continues for the rest of this year, I guess with 250 NIH patients add, 500 eye wave narcolepsy patients add and over 1,000 that run patients loss And assume the same year over year asset dollar's growth rate as what you had for like last year, your franchise seems to trend to the lower end of fiscal year guidance. I guess, what do you think we are missing here? And then just a quick one on Oraxane.

Speaker 14

So Alkermes said they will use different doses And doses for type 2 patients will be several fold higher. And also they aim to dose below 10 mg. I guess what's your view on this comment and what dosage range are you targeting at right now for 441? Thank you.

Speaker 2

Yes. I'll take the first part and then come to Rob and just say, our guidance coming into the year was a And as we're saying today, we're very pleased with the way the Q1 progressed And we think we're right in line with all our expectations to achieve that overall guidance. So we're not going to get more specific on that. Rob, maybe you could take the Orexin part of the question.

Speaker 5

Yes. The question I heard was, do we expect the dose to be different across Patient populations. So correct me if I didn't hear that. I would say the dose of course depends On the drug itself and factors such as by availability and potency, etcetera, etcetera. But within any given drug, There certainly is a possibility that different doses might be needed across different populations.

Speaker 5

We know that the relative level of orexin in the brain may differ between NT1 and NT2 are other sleeping populations because we're certainly interested in other populations as well. As you know, we have an ongoing program where we're Evaluating and learning effects in healthy volunteers and ultimately use those data to transition the patients to understand best For 441, but the most appropriate dosing would be in different patient populations.

Operator

Your next question comes from the line of Greg Fraser with Tudor Securities. Your line is now open.

Speaker 3

Thank you. Good afternoon, folks. Just following up on the Xylate survey, did the survey include physicians that haven't yet prescribed Xylate as well as current Xylate prescribers and for those that plan to increase their prescribing of Xylate for IH, what were the, some of the key reasons behind the I'm curious if you heard your thoughts about I know this rate is growing, patient awareness growing. Any additional color on the survey earnings would be helpful. Thank you.

Speaker 9

Sure. Happy to do that. Yes, I do believe the survey was of specialists in general. So that increase would mean both those who've tried it and those who've yet to try it. In terms of, I don't have my fingertips whether in the survey we ask The reasons why, but I can tell you based on more qualitative feedback that we've had from physicians that the main reason that they I'm going to continue to use more of it is that it's actually performing in line with what they expected from the Phase 3 clinical trial Results which were better than healthcare provider community anticipated.

Speaker 9

They were very excited about those results and they're very happy to see that is performing in line with those results and they're getting positive feedback from their patients. And along with that the coverage from the payers has been there and The patient experience and getting on the product, all of that has been very positive In line where they have lots of these patients and they've had really very little to be able to treat with them with other than off label Weight promoting agents and stimulants over the years and many of those patients taking those still are not where they want them to be Clinically, so that's the simple story there that we're hearing out in the marketplace.

Operator

Your next question comes from the line of Jeff Hung with Morgan Stanley. Your line is now open.

Speaker 4

Thanks for taking my question. You mentioned that 60% of U. S. Providers are using Epidiolex earlier in the treatment algorithm. What do you think it will take Further drive this integrated proportion of providers and what kinds of initiatives do you have to help accomplish this?

Speaker 4

Thanks.

Speaker 2

Kim, do you want to start on that one?

Speaker 9

Yes, I can speak from the U. S. And again, we are Quite pleased with how Epidiolex has been coming along, not just this quarter, but the past year and 20% growth year over year It's very rewarding after years of being under COVID and not being able to interact with this community that's still quite new to Jazz. And so key to that really is continuing to have a very high level engagement with our customers that was absent there for a number of years In terms of access to treatment centers and physicians' offices, we're having some really great discussions and seeing the light bulb go off with quite a few of them and more prescribers coming on board. But in terms of driving growth Moving forward, that's very encouraging is that we've got some really great clinical data.

Speaker 9

The data we've been out there with for about a year now in terms of showing the great impact that you can have in combining clobazam with The DIALux, we're really getting a lot of traction with that in the marketplace. It's getting HCPs really to reconsider why they're not using more of it or using it earlier in And then layer on top of that earlier this year, we started to go out there and talk about more than just seizure control Through this caregiver survey called Become and showing HCPs quantitatively what they've actually been hearing from caregivers Since the launch of Epidiolex and that is that the caregiver sees improvements in behavior and cognition in the patients that they're caring for. So that combined with I'd say the adult setting, particularly the long term care setting in the U. S. Was slower to open up as many institutions were post COVID.

Speaker 9

So we've been able more recently to get in there and we're excited about more fully penetrating the adult market, particularly in the long term Care setting and then last thing in the U. S, I'll say is that HCPs are still under dosing this They're not achieving optimal dosing, which is not achieving the optimal outcome for the patients. So We're continuing and to deliver and putting out there some new programs to really educate them on what optimally dosing Epidiolex looks like, So they can have an even more positive experience with it moving forward. So that's within the U. S.

Speaker 9

And then obviously we've got a number of ex U. S. Launches expected this year.

Speaker 3

Yes. And Kim, this is Dan. Just to add into it, as we see Epidiolex is one of our Four core growth drivers going into Vision 2025 and beyond. We're really pleased with the real world performance and Assisting physicians that are in a multi pharmacy setting to Change their habits and appreciate the unique profile of Epidiolex. So in addition to all the great work that Kim and her team are doing in the U.

Speaker 3

S. And Sam Pierce are doing In Europe, we're also trying to leverage our full ability from an evidence generation. Some of With new indications such as we have with EMAS in terms of exploring additional seizure types, some of it's going to be observational studies And some of it's going to be leveraging now an increasing number of medical records to show some of those trends that with Higher and more optimal dosing, you can get to better efficacy sooner. And then exploring what we saw in the caregiver survey, for example, of the Beyond Seizure benefit and seen that in additional clinical data. So super excited for this evidence generation that we've got, which should Support all regions in the long term growth of the product.

Operator

Your next question comes from the line of Annabel Samim with Stifel. Your line is now open.

Speaker 2

Annabel, we're not hearing you.

Operator

Your line is open, Annabel.

Speaker 2

All right. Operator, maybe we'll move on to the next one.

Operator

All right. Your next question comes from the line of Ash Verma with UBS. Your line is now open.

Speaker 11

Hi. Thanks for taking my questions. I had 2. So with respect to Avadel's Lumeriz, in your view, could payers push narcolepsy patients towards using a once nightly product If Avadel comes in with a significant price discount. And then second, like, do you think Lumierez can also be used off label for IH?

Speaker 11

As we understand, IH patients can And IH patients can particularly struggle with taking a second dose. I think based on our KOL feedback, we're getting to hear that Up to 1 third of IH patients can skip their second dilate dose. I don't know if you have any data That can elaborate on that point.

Speaker 2

Yes. Kim, do you want to jump in on this?

Speaker 9

Sure. I'd be happy to. And we talked a little while ago about payers in general. So really our strategy there is not changing. Again, we've been talking to payers for some time about The benefits of low sodium Zywave and we do believe that payers are understanding the importance of that and they understand that HCPs are increasingly You know choosing Zywave and that greater than 50% of patients are on Zywave today and they're enjoying Nice rebates on Zywave today.

Speaker 9

So, I really do believe that as other high sodium oxidates come on to the market and are Ultimately added to formularies that, Zywave is going to continue to maintain a broad commercial coverage. You asked about idiopathic hypersomnia and we don't expect the approval of FT218 will affect the IH market As it's not approved for idiopathic hypersomnia, XY Wave is still the only FDA approved therapy for this condition. And I think it's good to remind you that the Zywave can be administered as either a twice nightly or once nightly regimen for IH and adult patients. That's what the label allows.

Speaker 2

All right. And operator, I think we've got time for one more question.

Operator

And your last question comes from the line of David Amsellem with Piper Sandler. Your line is now open.

Speaker 7

Hey, thanks. So I wanted to get your thoughts on the potential impact of pitolacin or WAKIX on XY Wave to the extent that that product eventually gets approved. And then secondly on the Orexin, I think I've asked this before, but wanted to pick your brain on it. Any thoughts on why you're dosing it at night Here it seems a little counterintuitive. So I was wondering if there's any reason mechanistically or from a PK perspective That you're doing so.

Speaker 7

Thank you.

Speaker 2

If I understood that question, that was about Orexin. Rob, do you want to take that one first?

Speaker 5

Yes. I didn't fully understand it either, Bruce. The question is why would you be dosing terexin at night? I'm sorry, I didn't follow it.

Speaker 7

That's right. I mean, the others, I believe, it's a wakefulness drug, so why are you adjusting it at night?

Speaker 5

In our Phase 1. We're leveraging a model in healthy volunteers where you sleep deprive Healthies and then measure the wakefulness of the intervention when people are have a high, high propensity Sleep, that turns out to be a pretty good model for disorders of daytime sleepiness like narcolepsy. And so it just gives us an opportunity To learn more about the drug and ultimately select doses when we get into patients who will then receive the drug during the day.

Speaker 3

I was just going to say on patelosan, I mean, we yes, it's all going to depend on the data, of course, but the XYwave Got some very powerful efficacy across multiple endpoints to treat the full condition and having the nighttime Therapy is resulting in significant benefit through the day, whereas ptoleasant, similar to the wake promoting agents will be used during the day. And It's always going to be a bit of a challenge for the long sleepers because you have to be awake to take the oral dose. So we don't see it as a significant threat or a displacement.

Operator

And we have no further questions at this Time, I will now turn the call back over to Bruce Closin.

Speaker 2

All right. Thanks, operator. So just to wrap, thanks For the wide ranging questions, I think we hit pretty much all the key topics that we covered in our A news release on our script, I don't think we got many questions on oncology. I'll just reiterate we're really excited for the growth of our oncology franchise led by Rylase and Zepsilicon. Didn't get many questions on taneidetimab, but lots of news upcoming there with Additional clinical data presentations and we're looking forward to progress that program rapidly.

Speaker 2

Now most important, we're continuing to be focused on Vision 2025. Remember that we've got upcoming Phase 2b Zanidatumab BTC data at ASCO in June. That's the first time Zany findings are going to be featured during an oral session at a major oncology conference. And immediately after that presentation, we're hosting a webcast American Academy of Sleep Medicine Annual Meeting. If any of you are at ASCO or sleep, we may see you there.

Speaker 2

Also note, we're Participating in the upcoming RBC Investor Conference on May 16th. Let me close today's call by recognizing our Jazz colleagues for their work to deliver new therapeutic options to patients. And I want to thank our partners and shareholders for their continued confidence and support. Thank you all for joining us today.

Operator

This concludes today's conference call. Thank you for your participation. You may now

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Jazz Pharmaceuticals Q1 2023
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