Jazz Pharmaceuticals plc (JAZZ) Earnings Call Transcript & Summary

Good day, everybody. My name is Jason Gerberry. I cover Smid cap biotech and specialty pharma at Bank of America. I am pleased to be introducing our next company presenter at the BofA Global Healthcare Conference. I'm pleased to be introducing Jazz Pharmaceuticals and COO, Dan Swisher. Jazz is known for its lead position in sleep medicines but also has an ever-growing oncology portfolio. So interested to talk about the company's expanding pipeline and on market business. So Dan, thanks so much for joining us today.

Yes. Thanks, Jason, for having us.

So maybe we can just jump into Q&A here. And obviously, the company has a substantial blockbuster drug in Xyrem and coming along with that is positives and some negatives. A genericization event of some variety occurs in 2023. And so investors wonder what can be the impact? How does the company reposition its portfolio? When these large critical LOE events happen, maybe they won't be large, and we'll get into that in the conversation. But maybe just in lieu of recent product launches that you guys have had and the evolution of the sodium oxybate space in the last year or so. I'm just sort of curious if you feel as though the company is better positioned to absorb the pending Xyrem LOE event in 2023 when Hikma is the first of a limited supply generic to come to market. Do you think that the company is less in need of doing a large M&A deal and is better positioned with its existing assets?

Yes. Thanks, Jason, that's a great setup for setting the stage for where we are today. Let me just do one quick disclaimer, so likely be making forward-looking statements. These are subject to risk factors, and you can learn more about those in our SEC filings. I may also refer to non-GAAP numbers. And if so, there's a complete reconciliation of non-GAAP to GAAP in a presentation that's uploaded on our website. So it's a nice new deck that lays out our story really well. So, if people want to see that. But to your question, I mean, 2020 has been fantastic here despite COVID. It's been one of execution on the commercial side with 3 launches this year. So Sunosi in Europe and continued growth from the U.S. We've had Zepzelca, of course, which we went from acquiring the product in December through a rapid FDA approval process, 2 months ahead of schedule and moving into solid tumors with a very nice product launch in July. And then, of course, on the oxybate side to prepare for the Xywav launch where we got the approval this summer, working through the REMS implementation and are really excited for what Xywav can do for us in the coming years. And then in the not-too-distant future, we're working very aggressively on our JZP-458, which is the recombinant Erwinaze asparaginase program. And we're targeting a mid-2021 launch for that. And then idiopathic hypersomnia is an important new indication, it could be the first approved therapy for Xywav in that indication with data coming this quarter. So a lot going on. We do think that the current business strategy will generate very sustainable and ongoing revenue growth through 2022 and beyond. Our guidance this year had been recently raised in the Q2 call between $2.2 billion and $2.3 billion. Beyond the product launches, I'll just say, too, we're investing in the product pipeline. So we've got a transformative sort of pipeline that's grown, yes, since 2015, 4x in terms of projects. And then we've also been growing our international business to have a global platform for those programs. And then as you mentioned, I mean, we've got liquidity and still a deal appetite, and we've taken in a number of assets, both with the pipeline and on market or near market, and we continue to be very active in evaluating what those are. But the basic current portfolio and ongoing launches give us a lot of confidence for the near and midterm future.

Got it. And just to clarify one point that you made, I think you said the Xywav IH data could be this quarter. I just want to make sure you meant fourth quarter?

Fourth quarter, yes. Yes. Thanks, Jason.

Yes. In terms of appetite for deal activity. I think you surprised the market with the Zepzelca deal. I think investors were surprised that Jazz would make a move into solid tumors, the recent Redx deal as well. So does Jazz as a company see solid tumors part of the longer term strategy? Or was the Zepzelca deal more opportunistic and to plug the hole for any revenue gaps that you might see with Xyrem?

Yes. No, great question. Indeed, it's very much on strategy. So we've been saying for some time that we're looking at close adjacencies to hematology into solid tumor and sort of broadly into oncology. Yes, the same thing I'd say from sleep disorders into movement disorders and broadly into neuroscience. We've got a lot of folks, both in the R&D side as well as the commercial side with both hematology and solid tumor experience. And so what's been more important to us is what are the unmet needs? What are really differentiated assets there? Are those addressable markets that we can compete effectively and so just staying with Zepzelca for a minute, which was a near market product. We really like small cell lung cancer, a very addressable market. Top 1,500 prescribers represent more than 60% of the business. And similar to some other areas, we've been in, not a lot had changed for second-line therapy in a couple of decades. And the profile that was emerging on the Zepzelca was of interest. And like many things that we have active in the deal sort of portfolio, we've been following that program for some time. And as that data was maturing, I think we could be very opportunistic and also convince and demonstrate to PharmaMar that we can be a partner of choice where we can bring a program like that in. It's a high priority, and we can do a very effective job around that. So initial launch is going well and excited to do more in solid tumor as well as hematology. And as I say, kind of more broadly into the neuroscience side as well.

Great. Well, maybe we can perhaps focus on Zepzelca next because it's an interesting launch. One of the things that some physicians in the oncology world will tell us is that on single-arm data that community oncologists may be slow to adopt a new therapy if it's approved on the basis of an accelerated approval on single-arm data. Unique to Zepzelca, obviously, is a less frequent administration than the alternative both in terms of the amount of time to give it, but a number of times it needs to be given. And so that does play nicely in a COVID-19 backdrop where oncologists want to minimize the time. The patients have to be in infusion center. So can you talk a little bit about are you doing better than you might have expected with the community oncologists? Could this be an accelerant to adoption of Zepzelca beyond just the academic oncologists who seem to be very positive on the profile?

Yes. Good question. So I would say, despite COVID, which does get in the way of some of the face-to-face interactions. We've had a good opportunity to build awareness around the program in part because of the unmet need, but also using nonpersonal as well as personal outreach methods. The NCCN adoption into the guidelines very quickly after product launch was helpful, too, and that's an area where the community looks as well. In this market, community is important because more than 70% of the patients are getting treated within the community. So we've been pleased so far with both community uptake as well as the academic uptake. We gave a little bit of update with our earnings call, we had 1 month so far of launch experience. And at that point in the month of July, we'd already had 250 centers, many of them community centers. Obviously, there's some of the big academic centers are having multiple patients, but we saw 250 centers ordered. And of those who ordered in the first 2 weeks, 40% had already ordered in the second 2 weeks, so it speaks to patients there that could benefit from it. And so I think, again, despite COVID, I think we're getting the message out and look forward to continuing the momentum in that product launch.

Great. Great. And mindful that it's early, but can you comment at all whether or not you are seeing the marketplace become a segmented marketplace? What I mean by that is platinum-sensitive, platinum-resistance, are there patient subgroups that Zepzelca is a more logical, easier first array for the oncologist to try it out in? Or do you think it's kind of more broadly being positioned and use all comers?

Yes. Good question. So I think at this point, it's mostly anecdotal. We'll be doing more detailed chart reviews and have a better sense of exactly what patients are going on to it. But from the anecdotes, we're hearing fairly broad adoption that patients who are benefiting in second-line are both platinum-sensitive as well as platinum-resistant. The platinum-sensitive data was well supported by the NCCN and you can see even some recent data cuts with ESMO showing that even more platinum-sensitive patients do even better, as you would expect. So we see good efficacy, good tolerability, convenient schedule. And we're probably also addressing bolus of patients who are third line, fourth line and are looking for other therapies. I think increasingly, the regular flow of patients will be that second line. And I would expect it's going to be both broadly platinum-sensitive and platinum-refractory.

Okay. The -- and the other thing that I think we've heard, obviously, with community oncologist reluctant to adopt on the basis of single-arm data. It raises the question around the importance of ATLANTIS. And I think you guys have been very clear how you see ATLANTIS outcomes impacting -- I think the message is what if it's noninferiority outcome on OS than the likely requirement would be another post-market confirmatory trial would be the outcome there. But correct me if I'm wrong on that assumption. And then secondarily, is having a Phase III comparator trial critical for the community adoption.

Well, stepping back, if we never had the ATLANTIS data, no, we don't think it's critical to adoption because it was the monotherapy data, which actually kind of came later and PharmaMar was pursuing more as confirming the work they were already doing with combination. And the data was better than they expected with encouragement from the FDA, they expanded that monotherapy study, and it became the basis for accelerated approval. And it was really the basis for the profile we tested, and we're confident, was a big market need. Yes, that being said, it's always nice to have additional data and what the combination data will look like. We're excited to see. In terms of what it could mean from a regulatory perspective, it wasn't designed originally because it was the other way around the comment that the ATLANTIS trial got started first. So it wasn't designed as a true confirmatory trial. But the FDA has indicated it could serve as a confirmatory trial. And even if we don't meet every endpoint, including the OS endpoint relative to the control, there's a strong trend and it confirms safety. There's a good reason to think it could be confirmatory. If it's not confirmatory, we don't think there would be much impact, if any, with the community uptake. And sort of the current experience they're getting from the monotherapy. It would just mean that we would have to lean into another trial, which PharmaMar is -- would be responsible for conducting and paying for to confirm benefit. The focus that we've got, is thinking about other areas of expansion. So how do we move Zepzelca now into first-line therapy? How do we think about additional combination and we'll get from ATLANTIS, the combination with doxorubicin, but other new targeted therapies, could that be a benefit in small cell? And then from basket data that's coming across other tumor types, both Pharmamar is doing and we'll be supporting as well, what other areas could we explore on a monotherapy basis.

Great, great. And so your point about expanding into the first-line setting. We've seen in both non-small cell lung and small cell, a seeming synergy with chemo and a PD-1 or PD-L1 agent. So what's the rationale for potentially positioning lurbinectedin in front line? Would it be on top of a PD-L1 chemo combination, so a triplet because it's safe and well tolerated? Would it be more of a chemo-sparing angle that you'd look to pursue there?

Yes. Good question. And I think with the -- definitely from the experience of chemo combinations with checkpoint inhibitors and PD-L1's, in particular, are what's becoming standard of care now for first-line therapy in combination with the doublet top side platinum. We are thinking actively working with investigators, collaborating with PharmaMar. They do have an ongoing study with combination with the checkpoint and we think given its tolerability profile, it could be readily combinable with the checkpoint inhibitors. And I think there's a couple of approaches. But probably the fastest path to market would be to add on to the PD-L1 after the original sort of chemo combination and think about that as extending the tail and remission rates, where patients are going into maintenance. So that's probably the area of primary near-term interest but again, I think we're going to consider what could be a longer study of going into displacing the current chemotherapy or as you say, chemo-sparing with lurbinectedin. But we're also kind of actively thinking about other tumor types. So we'll have more to share. We'll definitely be active in this area in 2021.

I see. So the idea would be to -- as a potential sequential therapy, on the front line. And we know that front line small cell gets a meaningfully higher duration of therapy than -- once you get the second and third line, your duration therapies are pretty short. So the benefit, I guess, could be more patients are available as well as longer durations? And when might that additional data from PharmaMar in combination with checkpoint inhibitors become available?

Yes. I don't have an update on when that data is coming, but -- so I'll just leave it at that, but it's an ongoing study that's accruing well. But what I will say is, as you see with checkpoint inhibitors and other solid tumors, that there's definitely a tail that benefits well. Can we expand that tail? I mean that's the idea, there's still a big drop-off of patients who get that initial chemo combination with the checkpoint. And can we expand and reduce that dropoff and expand that tail. So more patients stay in first-line remission for a longer time before proceeding to second line.

All right. Great. Well, maybe shifting gears to JZP 458. This is -- this sets up to be potentially an interesting situation for you guys competing against the product that you currently are the marketer for. So our checks seem to indicate that if you are able to have a product that you can be a reliable supplier on and replicate your Phase I safety profile that potentially guideline setters like the children's oncology group could give a preferential recommendation to JZP-458. Again, it's a big if, but the data will tell, hopefully soon, how you stack up there. So just ahead of the data. Just curious if you have any theories as to why the safety profile looks so much better than Erwinaze in the Phase I adult study? Is it just different population? Or are there some other factors, maybe the purity of product might lend itself to some of the SAEs that are part of the front page warning section of Erwinaze?

Yes. I think the most important thing we've seen in this market is you're dealing with the pediatric patients that if they can start and stay on therapy, they do very well. It's proven with asparaginase. Having that as for all the patients who get that hypersensitive -- hypersensitivity to the E. coli, Oncaspar, et cetera, is very important. It's been a real challenge over the last several years because of limited product supply and quality issues in the batch by batch release, which is delayed production. So we've actually had fewer days of product available this year than days with product available by a significant degree, I should say. So we've been very interested in a more modern, robust recombinant process, which has led to the 458 program. And there's clearly interested stakeholders outside the company that are working closely with us that have the same interest, both the COG, as you referenced, the children oncology group, but also the FDA. So what's most important to us is to have a robust supply. So when patients start a therapy, they know they can go all the way to the end, whereas now it's titrated out and you don't have that same level of confidence. In terms of what the actual clinical data will say relative to Erwinaze, and if there will be advantages in AEs, that would be nice. But I think the most important is that it's a robust high-quality recombinant product that can both be used then broadly in the market that isn't used to the same degree that physicians and centers have to titrate out. Can we expand into the adult -- adolescent young adult population and then there's markets such as Japan, that could be significant -- that have had approval, but we just haven't had product to support and. Then there's clinical studies that we've stopped over the last several years, there's been no investigator or company-sponsored studies with the asparaginase and with the recombinant supply, we could also support. So we see a lot of growth opportunity, and there's good reason to think we could be the preferred product.

Qualitatively, what do you hear from the field, how physicians are managing through the shortage of Erwinaze. What we hear is that if you're at standard risk, those patients might not get the same amount of drug. There might be some rationing within that subgroup. I hear more of the issue with AYA adoption, this has to be the community has been slow to adopt the pediatric protocols. Even though there's been emerging evidence over the last couple of years that, that protocol is, in fact, safe and the best option for them. So as we think about your ability to open up the AYA opportunity, is that limited in any way by much higher dosing? Are oncologist reluctant to go to Erwinaze because of the supply concern?

So I'll start with the first part, just on the supply constraints, it definitely led to a rationing and sort of rechallenging patients with hypersensitivity, which is not a preferred option because a certain number of those patients are going to have anaphylactic reactions and other things that are quite extreme. So again, with confidence, you've got product supplied. You don't have to ration any patient with hypersensitive -- hypersensitivity or silent inactivation that not all centers are looking for because they don't have much that they can do about that today, it is important to get back into that segment of the market. And as you know, we're getting to a product that was starting to exceed over $200 million before we became supply-constrained so that's the first thing to address is make sure that patients and physicians can treat all patients who could benefit when they've got the hypersensitivity. I think you're right that as you get to the AYA segment, it's not just in the treatment centers of choice or the COG centers. It starts to get into a little broader group and more education than effort can be there. The clinical data definitely supports that the AYA population gets much better outcomes with an asparaginase type protocol. So we look forward to, we have done no active promotion over the last several years because there's been really no product to provide. It's been supply-constrained. So we look forward to that medical education effort to make sure that the data that's already there gets more broadly adopted.