Jazz Pharmaceuticals plc (JAZZ) Earnings Call Transcript & Summary

Good afternoon, everyone. Thank you for joining the next session with Jazz Pharmaceuticals. As a reminder, I'm Ami Fadia. I cover biopharma and generic here at SVB Leerink. And as we go through some of the Q&A, if you'd like me to ask any question on your behalf, feel free to send it over to me in the dashboard. I have a pleasure of hosting Bruce Cozadd, who is the Chairman and CEO of Jazz. And along with him, Justin Gover, who's CEO of GW Pharma. Thank you both for joining us today. Also from Jazz's side, I've got Robert Iannone, who's the Head of Research and Development; as well as Kim Sablich, who's the Executive Vice President and General Manager of North America.

With that, I'd like to thank everybody for joining. And Bruce, if you could kick us off with some initial comments. You've had a few busy months recently. And with multiple pipeline advancements as well as the transformational deal that you announced recently. Can you talk about what your key priorities are for 2021? Let's start with that.

Yes. So Ami, thanks for the invitation. Glad to be here with all of you. And thanks to Justin for agreeing to join us today. So as we announced our earnings yesterday and set forth our 2021 guidance, what we really want to communicate to people is how excited we are about the transformation of Jazz that we're in the midst of right now. With the launches recently of Sunosi in Europe and then Zepzelca in the U.S. for second-line small cell lung cancer, the November launch of Xywav for the treatment of EDS and cataplexy and narcolepsy, and with the upcoming launches of JZP-458 in ALL mid-2021 and the launch of JZP-258 in idiopathic hypersomnia late in 2021, we really feel like we are changing where our revenue stream is coming from and the future growth prospects for the company in a pretty exciting way. Add to that, the progress in our pipeline and our strong top line and bottom line financial performance, and we think it's just an extraordinarily productive period for the company. New disclosure yesterday, obviously, which we'll talk about, Ami, in this call is how are those launches going and what milestones are upcoming. But on top of all that strength, we were in the fortunate position with GW to announce earlier this month the combination of the 2 companies in a deal we hope will close in the second quarter of 2021. And that, for us, gives us a third large and growing commercial franchise with Epidiolex, which is off to just a tremendous start. Also it gives us a more robust neuroscience R&D pipeline. And I think the 2 companies are just a great fit even from a cultural perspective. So we think a great next move for us. Financially, this would take last year's pro forma revenues to about $2.9, billion growing from there. Excellent cash flow, which will allow us to quickly delever, and we believe the deal will be earnings accretive in the first full combined year, which will be 2022 and substantially accretive thereafter.

Great. Thank you. Justin, if I may ask you for listeners who are not very familiar with the GW platform. What gets you really excited about the platform? And in your view, what is underappreciated about the platform?

Yes. Well, again, thanks for the opportunity to be part of the call today. Look, I think GW spent 20 years creating a dominant position, if you will, in the field of cannabinoid science. We really have led the way for 20 years and have ensured that not only do we have an incredibly important worthwhile and valuable product in Epidiolex, that we've built a platform from which we can create these new classes of medicines across different areas of neurology. So I think as a way to introduce GW here, it's -- we're a company that has kind of discovered and elevated cannabinoid science, an area where we can produce multiple products across neurology and neuropsychiatry. Epidiolex, as Bruce just said, is only 2 years into a launch and already exceeded $500 million in its second year. We have a late phase asset in a product called nabiximols, with multiple Phase III studies that are ongoing now and then a pipeline that follows.

Okay. I want to dive into some of the different aspects of the company. So maybe if I could start with neuroscience and the Xyrem, Xywav switch. And you gave us some update yesterday, Bruce. Can you talk about how payers view the Xywav foundation relative to Xyrem? And how they are thinking about covering both, especially in the context of the next couple of years, where we will start to see authorized generic competition starting 2023?

Yes. So we could not be more pleased with how the Xywav launch is going. From early November, we've already seen 1,900 patients as of the end of December on Xywav. That's not, Ami, technically all conversion, right? That's all patients on Xywav, which includes oxybate-experienced patients who may have come directly over from Xyrem, may have taken Xyrem in the past and now come back to Xywav, could be newly diagnosed and put on Xywav or could be patients that historically were not deemed to be good candidates for Xyrem because of the high sodium content of that product. So we're really happy with the adoption of Xywav we're seeing and the fact that it's resonating with health care providers and patients that choosing the low-salt option is a better long-term treatment choice for all patients, not just those with current high cardiovascular risk. We know the narcolepsy population in general does suffer from significant cardiovascular comorbidities. As to payer reaction, we intentionally went with a parity pricing strategy. So we believe we brought a better product to market at the same price. We think that's resonating with payers. We're very happy with the access we already have, with over 60% of commercial lives covered and with 2 of the largest -- 3 PBMs having coverage. We had said expected to take 6 to 9 months after launch for us to get to optimal coverage. We feel like we're right on track with that. So I think payers understand the value in Xywav.

Got it. Can you talk about the market opportunities from the standpoint of the patients who have comorbidities, whether they are already on Xyrem or ones that couldn't be put on Xyrem because of those comorbidities. Can you help us quantify that in the context of, let's just say, the 15,000 patients roughly that are on Xyrem?

Yes. Well, it's important to remember that narcolepsy patients, in general, have high cardiovascular comorbidity. It's estimated that 70% to 80% of narcolepsy patients are currently being drug-treated for a cardiovascular risk. So this is not something that happens in a minority of patients. And of course, narcolepsy is an incurable disease. So therapy is lifelong. And so even if you have a younger patient who's starting on treatment, to have them take that treatment for years and decades with up to more than 1.5 gram of extra sodium per night doesn't make sense in this patient population. As to the size of the population that hasn't been given oxybate historically, specifically because of this concern, we don't have great quantitative data on that. In a survey we did a couple of years ago, doctors said it might be true that up to 20% of the patients they would otherwise put on Xyrem didn't get Xyrem because of sodium concerns alone. We don't really have a way of verifying that information, but it's meaningful.

Got it. One of the key debates on the stock is that despite this initial success with regards to the Xywav adoption, I think investors still feel like they have limited visibility into how the sodium oxybate franchise can remain sustained through the middle and the second latter half of the decade. What would you ask investors to sort of consider as they think about that?

Yes. Well, there are a couple of pieces to that question, Ami. Part of it is understanding at the patient and physician level how people feel about the importance of this lower sodium option and would they, in the future, when authorized generics are available, go back to a much higher sodium content product. Remember, to go from Xywav to Xyrem or generic Xyrem, you'd be increasing your sodium load by more than 10x, right, and to a level that puts you beyond what the American Heart Association would say should be your maximum daily intake of sodium. And of course, this is for medication alone. You have to add dietary sodium on top of that. So I think people are understanding this is the right choice for lifelong therapy. But as we think about this opportunity, it's not only that near-term success of Xywav we're excited about. We're also very excited to bring it to the idiopathic hypersomnia patients. We just unblinded our Phase III data in IH in October. Earlier this month, we completed a rolling sNDA submission, and we hope to launch later this year in a severely disabled population with this hypersomnolence disorder that has no FDA-approved treatments today. So we think that adds yet another market where we can provide benefit to patients with oxybate.

I want to move to IH. But before I do that, one last question on the narcolepsy indication. How high is your priority around low sodium once-nightly product? And it sounds like you've indicated that it's moving along. When might you be ready to give us a more specific update on it?

Yes. We're not ready to give a more specific update yet. I'd like to remind you that we do view Xywav, with its more flexible dosing, as the optimal product for patients. That's why when we've talked about a goal out a few years in 2023, when you could imagine there could be other oxybate products on the market, including authorized generics, we've said we believe Xywav will be the largest brand in that market, that Xywav would have more than 50% of all oxybate patients. We -- while there may be a minority of patients who would prefer once-nightly dosing, we think those patients should have the low-sodium option. So as a reminder, our program looking at extended-release oxybate is the lower sodium form of that. But patients find that ability to vary their dosing important. You can imagine if you were going to sleep at night, the decision to take a full night's worth of oxybate has implications, right? This puts you into a deep sleep that can have implications for getting up to go to the bathroom, checking on your kids, when you can get up early in the morning and safely operate a motor vehicle. So we believe that Xywav gives more flexibility to patients.

Moving on to the idiopathic hypersomnia indication for Xywav. Can you talk about the market dynamics here? Because it's not been anything specifically approved for this indication. So when you bring this product to the market, how should we be thinking about the launch ground, especially amongst physicians who are already using Xyrem or Xywav for narcolepsy? Do you think that you could start to pick up adoption in that subset of the population fairly quickly?

Well, there hasn't been a drug launched in this population before. So we're going to have a fair amount of education to do. You correctly point out that the prescriber audience for IH is -- has high overlap with the narcolepsy treaters we currently call on. So we think we're perfectly positioned in terms of those relationships we have. We're excited to present the IH data at an upcoming medical meeting that will happen in the second quarter of this year. That will give people much more of a sense of what patients can expect in terms of response to treatment. So we're excited to get that data out. I'm not sure we're ready to give a particular figure for rate of adoption, but we know patients are going to be excited to have an FDA-approved therapy that really demonstrates it makes a difference in treating the symptoms they care about with IH.

And in your clinical study, could you remind us what percent of patients had a twice-nightly dose comparable to the dose that's given for a narcolepsy patient?

Rob, do you want to take that?

Sure. Happy to. So we allowed for -- well, maybe the starting point is that this is a titratable drug. So in IH, as it is for narcolepsy, you do titrate up to a maximal effect. What was a little different in the clinical trial we did for idiopathic hypersomnia is we did allow patients to go up to have either a single dose, single dose up to 6 grams or to do twice-nightly. In the trial, the great majority of patients did ultimately use twice-nightly. I would say, ultimately, what ends up in the label will be a discussion with the FDA. But in general, there was comparability in terms of how this was dosed between IH and narcolepsy, with similar total doses being used between the 2 populations and the great majority of the patients getting twice-nightly.

Okay. I want to move to Sunosi. You've added additional resources in terms of sales reps and also advertising behind the product. Can you talk about any initial traction you're seeing in response to that?