Jazz Pharmaceuticals plc (JAZZ) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to day 2 of the Jefferies Healthcare Conference. We're delighted to have with us the management team of Jazz, and it also looks like the CEO of GW Pharma, which I did not know you were going to be joining Justin, so thank you. With us is Renee Gala, Chief Financial Officer; Robert Iannone, Head of R&D., I believe, that's your title Rob; and Kim Sablich, and I don't know your title, I apologize. And so we will start off with Renee, who will kick off the session with a couple of minutes of comments before we get into Q&A. Thank you.

Great. Thank you, David, and thank you for inviting us to participate. As we get started, I'll just remind you, we'll be making forward-looking statements today, so I'll point you to the risk factors outlined in our SEC statements. So it is a very exciting time for Jazz as we continue to transform to an innovative, high-growth biopharma, enabled really by strong execution in 2020 and in the first half of this year, which sets us up for a very productive full year 2021. We have an increasingly diversified revenue stream across both our neuroscience and oncology franchises. You would have seen 23% of our first quarter revenues came from our newer products. I'll remind you, we had 3 product launches in 2020, and we're on track for 2 more product launches later this year, again, positioning us for additional growth and diversification in 2022. And then our commercial portfolio is underpinned by an innovative pipeline with both mid- and late-stage programs. And we continue to target and focus on disease areas where patients truly need new treatment options, consistent with our mission to transform the lives of patients. And then, of course, with the addition of Epidiolex and the GW pipeline to the broader Jazz portfolio, we expect to deliver double-digit revenue growth, accelerated revenue diversification and substantial shareholder value. So again, a very exciting time for Jazz. And today, David, we have some additional news to share regarding our development plans with Zepzelca. We had previously announced a plan to initiate a Phase III trial evaluating first-line use of Zepzelca in combination with I-O. This is compared to I-O alone as maintenance therapy in patients with extensive stage small cell lung cancer after induction chemotherapy. So I'll ask Rob to share our news on this front.

Thank you, Renee. And so we'd like to announce today that we have entered into a collaboration agreement with Roche to initiate a Phase III trial, as Renee indicated, in First-line small cell lung cancer patients who are extensive stage at the time of diagnosis. This will be an add-on therapy. We think there's a continued significant unmet medical need in these patients whose survival continues to be very short with an average survival being around 12 to 13 months despite the really significant advance from the addition of PD-L1 inhibitors, such as atezolizumab. Atezolizumab is the leader in this space, and we're really pleased to be partnering with Roche, again as an add-on therapy, such that when patients complete their initial chemotherapy and the standard of care, then it becomes a continuation of atezolizumab. The study will evaluate the addition of lurbinectedin in that stage, so-called switch maintenance approach versus continuation of atezolizumab. We hope to initiate or expect to initiate this trial this year. We are very excited to potentially bring this highly important advance to patients with small cell lung cancer, who still have a significant unmet medical need.

Thanks, Rob. And on the R&D front?

I want to highlight that our team has brought 2 programs forward really from concept through to what we expect will be registration this year, namely Xywav in idiopathic hypersomnia; and JZP-458 in acute lymphoblastic leukemia and lymphoblastic lymphoma, both showcasing our expanding pipeline and also our expanding capabilities and development to really go from concept to approval, and we're really excited now to be preparing for commercial launch for both of these therapies later this year. So with that, I turn it back over to Renee.

Yes. And thank you, Rob. We'll go ahead and open it up for questions. We're excited about everything that's been accomplished. But David, please, we're looking forward to your questions.

Okay. Thanks, Rob. Thanks, Renee. Breaking news is that Jefferies conference love it. And impressive collaboration to boot with Roche. So thank you. So I thought I'd start with the GW acquisition. It's a pretty seminal event, definitely the biggest acquisition Jazz has ever made. So perhaps that's a good place to start. So obviously, Epidiolex has had a strong launch, and it seems to be more runway. Given the penetration rates in Dravet's, LGS and TSC thus far. For this drug to reach blockbuster status in terms of sales, which is over $1 billion, can you get there on just the current approved indications? Or what else needs to happen for this franchise to do that? Do you need, for example, another rare epilepsy indication? And Justin, I'm glad we have you on the line. I don't know if that's for you or for Renee, but anyone who would like to answer it, is more than welcome.

Okay. Well, why don't I start with just saying, yes, we do believe there is significant potential for Epidiolex. And as we looked back at -- looked across a number of opportunities for transformational transactions for Jazz, we just kept coming back to GW and Epidiolex, which we think is an incredible product, strong growth opportunity and a really nice just overall fit for Jazz. So I'll allow Justin to chime in here and address your questions directly.

Yes. Thanks, Renee, and Dave, good to see you. So I mean Epidiolex is now 2.5 years into its U.S. commercial life and just over a year into its European commercial life. And at the end of -- in 2020, we had achieved sales of over $500 million. So I think near-term blockbuster status is a very realistic goal. And I think the opportunity relies on continued execution, primarily on the commercial front, of course, as well as supported by R&D. Specific to your question, we have, I think, penetrated well into Dravet and LGS, but still a long way to go, I think, with further penetration achievable in both those 2 original indications. The third indication, TSC, only launched in the third quarter of last year in COVID. So I think there's a long way to go there and a lot of opportunity there. We do plan to add new at least one additional rare epilepsy indication, which, again, will continue to expand the franchise. But I think what the key to understand with Epidiolex is the level of unmet need within epilepsy and with these highly refractory seizure disorders means that a drug like Epidiolex, having demonstrated efficacy in these 3 distinct syndromes provides physicians with an understanding of its broad antiseizure effect. And I think that allows for, we think increasing adoption of this medicine over an extended period of time. And that's supported by the expansion in payer access that we've seen particularly in the last year with -- both on the commercial and Medicaid side, the opportunity for physicians to have quite broad access to use Epidiolex within the epilepsy field according to their own clinical judgment, which we think is a central part of the growth drivers. So I think the short answer is, yes, but hopefully the long answer gave you some extra color.

Thanks, Justin. And just a follow-up question. Do you have a sense of the use of Epidiolex in the general refractory epilepsy patient population? Seems to be a major untapped opportunity.

Yes. Well, obviously, there's no off-label activity that goes on at GW nor now at Jazz. But I think the -- and I think the -- there is, obviously, a lot of commonality between the seizure types and the intractable nature of the populations within Dravet, LGS and TSC and broader refractory epilepsy, particularly childhood onset epilepsy. It's the same -- physicians essentially addressing the same problem. So it is something that we know goes on. Payers also permit this under -- in general, and a number of the commercial Medicaid plans do that. So it is part and parcel of dynamic of the epilepsy market. It's not unique to Epidiolex. In general, well-known and established highly effective antiepileptic drugs do tend to get used quite broadly. And particularly because most of these patients are on more than one therapy, so it's really Epidiolex, plus maybe 1 or 2 other drugs that would commonly get used in this refractory group.

Now this is for the Jazz team, and it relates to your acquisition of GW. Obviously, Jazz is no stranger to the debate about the durability of IP. You've lived it for years with Xyrem. So what gives you confidence that Epidiolex and the GW assets will be long-lived? Just as you've made significant headway in getting out from under the Xyrem legacy, do you see the Epidiolex debate dragging on for years? Or are there going to be some milestones and developments that will give people more confidence that this truly is a long-lived asset?

Yes. No, it's a great question. And again, as I reflect on the process we went through in identifying and evaluating the right acquisition for Jazz, we completed extensive diligence, both before engaging in discussions with GW and then afterwards and dug deeply into all aspects of the product, the broader pipeline and then including, of course, on IP. And now even with a more wholesome view as we integrate and learn even more about this business, we're extremely comfortable with the durability and long-term potential of Epidiolex as well as the underlying GW platform, which is another exciting piece of the acquisition. And while clearly, this durability issue has weighed on the stock in the past, we've made significant headway, both in terms of value, people appreciating, better the value. If you look at the oxybate business and the strength of the Xywav launch, I do think you see our -- some of our more sophisticated investors that have dug deeply into oxybate, that have dug deeply into Epidiolex and GW, they understand both that the Jazz business has a very different growth trajectory today than it did 12 or even 6 months ago. But then also with respect to Epidiolex, the unique, I would say, structure around that program as well as the pipeline. And although this was a question you'd said for the Jazz team, with Justin being a part of the Jazz team now, I'll ask him to also maybe comment on durability specific to Epidiolex.

Over to you, Justin.

Yes. Thanks, Renee. And just to really echo and build on Renee's comments, I think, the diligence that Jazz did was extensive. Obviously, it came up with a specific conclusion that we, at GW, have previously formed ourselves. And it was reassuring, frankly, for me, to have that level of expertise and diligence from third parties come in and, I think, really reinforce the position that we have taken. I think whilst Wall Street sort of probably like some controversies from time to time, it was a bit of a frustration with GW as an independent company that the Epidiolex IP story haven't quite had the probably airtime than it needed to. And I think, hopefully, with Jazz as sort of third-party, if you will, evaluation of this -- investors should take a lot of comfort from that. And I've always believed with 16 patents in the Orange Book, more on their way, that there's a really -- this is a very durable franchise. It's a very complicated product, more complex than I think investors realize actually.

Got it. We do like our controversies, but not too many of them. Just one more question on Epidiolex before we get to narcolepsy franchise. As we look beyond that product, Renee and team, which of the GW pipeline opportunities do you think are underappreciated by the investment community that you're particularly excited about? And which could potentially surprise some people?

Yes. Well, why don't I invite Justin, again, to comment. I think we're very well aligned on the programs.