Jazz Pharmaceuticals plc (JAZZ) Earnings Call Transcript & Summary

Good afternoon, everyone, and thank you very much for joining us at the Cantor Fitzgerald 2021 Virtual Healthcare Conference. My name is Brandon Folkes, and I'm one of the biopharma analyst here at Cantor. Next up, we have a fireside chat with Jazz Pharmaceuticals. And joining us from Jazz is Renee Gala, Executive Vice President and Chief Financial Officer; as well as Dan Swisher, President; and Dr. Rob Iannone, Executive Vice President, Research and Development and Chief Medical Officer. Thank you for all joining us today. Just a quick word to the audience. Should we run short of Q&A time, if I don't get to everyone's questions, please feel free to either add them into the chat feature or e-mail them directly to me. I will get them across to Renee and the team and get them answered. So Renee and team, thank you very much again for joining us. And Renee I'm going to pass it over to you for some opening remarks. Thank you.

Great. Well, thank you, Brandon, for inviting us to participate. And just before we get started, I'll remind you all that we will be making some forward-looking statements today, and I'll point you to our SEC filings and website for more information about our business. So now turning to Jazz. This is an exciting time for our company. We're demonstrating strong execution across our business, which is driving our continued transformation to an innovative, high-growth global biopharma. If we step back just a year ago, we were generating more than 80% of our revenues from a single product and laying out an ambitious plan to deliver on five key product launches across 2020 and 2021. And today, we're preparing to execute on the fifth of those five plan launches with Xywav and IH now approved and expected to launch in the fourth quarter, and we're on track to deliver on our revenue diversification objectives with our newer products expected to drive 65% of our product sales in 2022 and then, of course, already providing over 40% of our net product sales in the most recent quarter. So we're clearly demonstrating the transformation of our commercial business. And that's really just one part of the story when you look at the company. If you step back, there are three core components of value that are underpinning our business. One is our commercial portfolio; two, our expanded pipeline; and then three, and importantly, our strategic approach to capital allocation, including corporate development. So if we start with the commercial portfolio, maximizing the value of our products is a core component of value for the company and one that we've demonstrated for more than a decade. Our new product launches, coupled with our existing products, have extended that value into a growing durable and diversified revenue stream. Behind that, we have a robust pipeline spanning early to late-stage and expanded capabilities to realize the value of that pipeline. Historically, Jazz was really viewed as a commercial company and now we have two products on the market with Xywav and Rylaze, that Jazz developed from concept all the way through to commercialization, demonstrating that value we can deliver from our pipeline and with Rylaze progressing from Phase I to launch in just about 2.5 years, our ability to do that effectively and rapidly. And then the third component is really our strategic approach to capital allocation. If you think about our transformation into the diversified growing biopharma company that we are today, this has been driven by the strategic investments we've chosen to make in our products, our pipeline, our capabilities and corporate development. So the PharmaMar transaction for Zepzelca enabled us to bring an important new therapy forward for patients and convert cash on our balance sheet into a new revenue stream. And then more recently, our acquisition and subsequent integration of GW, demonstrated our ability to complete a large, complex, transformative transaction which we expect to drive significant long-term value for patients and for our shareholders. So quite a productive time at Jazz. An exciting future ahead. And with that, Brandon, I'll turn it over to you for Q&A.

Great. Thanks so much, Renee. And then the sodium oxybate franchise is obviously remains extremely important, right? And I'm sure we all get asked a lot of questions about the Xyrem, Xywav switch in narcolepsy. But I do want to focus this discussion on this innovation you called out that we've been seeing at Jazz and just the differentiated Jazz we see today. So starting on Xywav, this is a product -- and digging into the idiopathic hypersomnia opportunity, right? You mentioned this is a product developed fully in-house. Maybe without giving too much away before the October call that you are hosting regarding the launch strategy, can you just talk maybe about the market that you're launching into? What is the patient population? How should we think about reimbursement coverage here and that launch trajectory in IH?

Yes. Thanks, Brandon. So Xywav, as you know, is one of those concepts all the way to market. So very proud of bringing that innovation forward. Importantly, it's the first and only FDA-approved treatment for idiopathic hypersomnia. So for this very serious disorder, finally, there is an FDA approved therapy. As we've said before, there's 37,000 active adult patients seeking treatment, only half of which are currently on treatment. Many of them are dissatisfied with those treatments as we saw even from the patient population that came into our clinical study. We remain on track for an upcoming product launch in the fourth quarter. We've got the approval, and now we're in the midst of adapting our REMS implementation. So focus is on ensuring that we get payer access and coverage. We've got that strong access now with the narcolepsy indication. So it's relatively easy to add on sort of a clinical review, and we are working actively with patients to get that across. We've been doing disease education, both branded and unbranded campaigns and sort of building that awareness. And so we really look forward to bringing this forward. And as we say, you're going to hear more about the details of the launch on the October 13th webcast. And importantly, we'll be joined by Dr. Bogan, who's very knowledgeable both in this area, but also with first-hand experience on Xywav.

Great. And then Xywav has been on the market for narcolepsy, right? And I think over 5,000 active patients already on therapy. So can you just talk about the brand recognition of Xywav that's already out there in the market? And maybe this excitement you have this safe alternative in the market for narcolepsy, but also now to have that product with a label for IH?

Yes. We're really pleased. And there's obviously a strong overlap between the idiopathic hypersomnia treater and the narcolepsy treater, good 90% of that market overlaps with relationships and physicians that we've had long-standing working with. Importantly, with Xywav, the sodium really matters. I mean, this is at the doses that they typically get with oxybate, there'd be 1 gram, 1.5 gram with Xyrem. So we're taking 92% of that sodium out with Xywav. That was recently recognized by the FDA with the orphan drug exclusivity, where we had to cross the bar in the FDA's mind that this is clinically superior to Xyrem because of the greater safety, as stated in the difference of the sodium content and that this -- these doses will be clinically meaningful in reducing cardiovascular morbidity in a substantial portion of patients for whom the drug is indicated. So on idiopathic hypersomnia, we do think there's going to be growing enthusiasm because of prior payer restrictions. There really hasn't been -- there hasn't been access to the oxybate. So it's been primarily stimulus and wake-promoting agents. And what we saw in the clinical program was not only clinic -- was not only significance in the clinical endpoints, but clinically meaningful benefits, whether it's EDS or other clinical benefits. So there is a real pen of energy and need, both among the physicians as well as patient groups for this new treatment option.

Great. And then switching gears to Epidiolex. So I wanted to talk about what you're seeing since taking over this product. I think we're looking at 3Q is maybe the first full quarter of Jazz promoting the product and getting some sort of indication on how this is going, but up pop up the COVID variance right, and I don't think they've made things very smooth for anyone, right? So maybe just taking a step back, I think something that's probably important is any color on the retention of the GW commercial team, I think, how has that gone? And then maybe secondly, can you just elaborate on the challenges of switching to patients to Epidiolex with these outbreaks? Maybe a concern of switching patients on a polypharmacy routine. When parents may want to keep their children out of the ER physician offices. Just any color would be fantastic?

Well, I'll start with an update on the integration, and then I'll turn it over to Dan. So first, we continue to be impressed just with that strong underlying cultural fit between the teams. And that's not only in commercial but broadly across the organization. So the integration has gone and is going really well. And then second, on retention, we have successfully retained many GW employees who are in roles that really are crucial to our continued ongoing success. So we're pleased with progress there as well. I've mentioned earlier, the GW acquisition was really transformative to our business. And so we remain excited about the long-term value that we believe that we'll deliver. And then with respect to Epidiolex specifically, our confidence has certainly grown since we've brought this product in-house and got to know it even better. Maybe I'll turn it over to Dan to comment more specifically there.

Yes. As Renee says, we were able to lift and shift the field teams and really build upon the momentum, both in the U.S. and Europe behind the launch. And what we saw was a really good uptake, a real interest and a novel mechanism that's got great efficacy, safety, combinable with other anti-epileptic therapies. So we look to build upon that. What has been very apparent since launch is a real stickiness and persistency for those patients who get on to the therapy. Importantly, we do still see good opportunity across the in-line indications with Dravet, LGS and the most recent approval last year with TSC. There has been a little bit of headwind with COVID, as you referenced, Brandon, in your remarks, not only with customer engagement, getting to the physicians more broadly and ensuring that they have full awareness of the new clinical data, but also because many of these pediatric patients may be unvaccinated, they may have fragile health. There is reluctance to bring them into the office, tinker with the medicines, potentially have breakthrough anti seizures that lead to hospitalization. So I think we should see a tailwind as we go into 2022, not only to get more customer engagement going, but also that the patients -- the 5 to 12-year olds, as we saw with the recent Pfizer data will start to be vaccinated. And there will be more focus again back to their optimizing treatment. But we're really excited for what this brand can do for us. And we're excited for what it can do not only in the U.S., but internationally, as we're rolling into all of the major markets across the globe.

Great. And now just digging deeper into that comment you made Dan. If I'm a parent and I am concerned about changing therapies in this COVID backdrop. Should we think of those patients has really just been pushed out in terms of when they'll come on to Epidiolex as maybe a better therapy in terms of what they've been treated with now? Or are those patients lost to -- I don't say the conversion, but coming on to Epidiolex?

No. I don't think they're lost in any means because there's always going to be an interest in how can you get the best optimized treatment to these patients and the treatment-resistant patients are often on polypharmacy, and Epidiolex fills a unique need relative to the other mechanisms. So I think for the physician groups who've had good experience and obviously, the patients who are already on therapy, we see the profile playing out really nicely in the real world. The challenge now for us and we've got some tailwind as we're coming out of the Delta variant is to get to more physicians face-to-face, make sure that they get the peer-to-peer experience and then with the additional experience of TSC and other indications that you can see, the drug is very effective across a range -- a broad range of seizure indications and seizure types.

Great. And maybe staying on the potential for broad application of the drug. Can you talk about the EMAS trial, right? What does this do to the addressable market? And are there some patients already on therapy out there?

So let me just speak a little bit to EMAS, which is Epilepsy with Myoclonic-Atonic Syndrome, also known as Doose syndrome, is a relatively common pediatric epilepsy syndrome at 2% of all pediatric epilepsy occurring in the first five years of life with an average onset -- mean onset of about three years of age. These patients have a significant seizure burden and often have an unmet need even with available therapies. And so Epidiolex has the potential to be a really important new therapy in this fourth childhood-onset epileptic encephalopathy. Beyond the value for this particular patient population, it's also an opportunity to evaluate Epidiolex in a different seizure type. As I mentioned, these patients have Myoclonic-Atonic Seizures, which is distinct from the seizure types that occur in the three other indications that Epidiolex has. We know that Epidiolex is broadly active against a variety of different seizure types, for example, in LGS, more commonly, they have Tonic atonic or drop seizures in Dravet, atonic seizures in TSC focal onset seizure. So already, Epidiolex is broadly active across several seizure types. This is an opportunity for a fourth seizure type. And as you know, physicians treat the seizure is not necessarily the underlying disease. And with this, Epidiolex would be shown to be broadly active against virtually every type of seizure.

Right. And just continuing on the pipeline, seeing historical GW, do you remain on track with the nabiximols trial for MS in spasticity?

Yes, we do. And as a reminder, nabiximols have, Sativex approved in 29 European countries. And so we would be bridging from a strong body of data showing efficacy of nabiximols and spasticity to meet the FDA requirements around, also bridging to some more proximal measures of spasticity, including muscle tone and spasm frequency. We have a suite of studies that's intended to address this for regulatory approval, but also to demonstrate in different ways, the efficacy of nabiximols and spasticity. And so those trials read out sequentially and anyone would have the potential to support an approval in the U.S.

Great. And then bringing it back to another Jazz in-house developed product Rylaze. Any color on that launch to date? And then, I guess, similar along those lines, just looping in, what's your ability to supply the demand to date? And then also longer term, anything we should think about here? Or now that the process is a reliable one compared to what Erwinaze was, should there be no concerns in terms of ability to supply market demand?

Yes. Brandon, thanks for the question. To be clear, we haven't given any update yet on the launch and look forward to at the upcoming earnings launch. But we -- at the upcoming earnings -- sorry, at the upcoming earnings updates. But we are really thrilled to bring this to the market. It's an innovative, high-quality or [ winning ] oriented medicine. We took it from concept to market. Went from IND to market in 2.5 years. Strong support from the FDA, from the patients, from the caregivers and from importantly, COG. We are taking some time now with promotion and medical education to reestablish the market, because of the chronic shortages, there was a real triaging of who got it and to make sure that all patients who could benefit, all patients who are showing some hypersensitivity or silent in activation can come on to this medicine. Importantly, with the fully recombinant, high-quality manufacturing process, we've got very robust supply. We've got a very fast manufacturing process that's robust. At the time of launch, we had more than a year's worth of product supply. And so that all speaks to confidence that physicians and institutions can have to supply the product and make sure all patients that could benefit from it can start the therapy and have the confidence they can get all the way through, which is where you get maximal treatment benefit.

Great. And then in terms of the competitive dynamic, is Erwinaze now out of the market until Clinigen's BLA approval? Or what is that market dynamic?

Yes. So what we've observed recently from the Clinigen conference call is that they referenced that there was some emergency supply and some U.K. product that had come into the market before our approval. Now with the supply and the robustness of Rylaze, that no longer is occurring, and they've largely depleted their stock as of end of September.

Great. And there's one more on Rylaze before we move on. Any update on the IV formulation?

Yes. So as you may know, Rylaze was approved under the real-time oncology review, an expedited process that allowed the approval even during the conduct of the trial based on emerging data. That trial continued. And in fact, we completed another high-end cohort that would allow us to expand the label to Monday, Wednesday, Friday, dosing with a higher dose given on Friday in order to better support Spirogen's activity through that longer 72-hour period when given on a Friday to Monday schedule. We also completed a cohort of patients who were dosed intravenously, and together, the additional IM data and the additional IV data are expected to support expanded labels around both of those.

Great. And then moving on to another product that's done tremendously, while since taking over Zepzelca. And any color in terms of how we should think about the revenue? How far we are from a steady-state run rate of revenue within the current label? And then beyond that, can you just remind us of the time lines for potential label expansion as well as a confirmatory trial?

Well, as we noted on our second quarter earnings call, we saw growth in second-line share and our overall demand continues to increase. We had sequential demand growth over the first two quarters of 2021 at 8% and 9%, respectively. And then that lower sequential growth rate in net sales over those first two quarters was mainly the result of reduced inventory levels at the distributors, and that was in this early launch period. And we do expect that as distributors gain more experience with customer demand levels that, that growth in net sales will then be more closely aligned with the overall demand in future quarters. And then, Rob, I'll turn it over to you to comment on development plans.

Thank you, Renee. So as you may know, we're collaborating with Roche on a Phase III trial in first-line extensive stage small cell lung cancer. This is in combination with immunotherapy. So on top of standard-of-care compared to placebo, gives us an opportunity to show the benefit in that disease setting, which would reach more patients and allow them to benefit from the treatment for a longer period of time as part of the maintenance therapy. Additionally, after discussions with the FDA and with our partner, PharmaMar, we now have plans for a confirmatory trial in the second line small cell lung cancer space. This is expected to be a 3-arm trial comparing the higher dose monotherapy dose, 3.2 milligrams per meter squared of Zepzelca to standard-of-care, physicians choice. And also comparing a novel combination of Zepzelca and [ irinotecan] as a third arm. Lastly, we are exploring the benefit of Zepzelca outside of small cell lung cancer in several additional tumor types in a new basket trial.

Great. And now bringing it back to the sleep franchise almost where we began. But we do have the approval of a once-nightly high sodium version, potentially next month, right? So maybe just two questions there. Starting off, as you go out into the market now, what is the prescriber reception being to understanding the concerns around the Sodium levels in Xyrem and thus potentially -- well, well, in FT218, potentially, should it be approved?

Well, as you know, at Xywav, we did prioritize low sodium as the most significant benefit to patients, and we're really seeing that play out through the strong execution of our Xywav, the narcolepsy launch and expect that to continue as we go into idiopathic hypersomnia. We've been successful out of the gate at educating the high-prescribing Xyrem prescribers. So there's a good awareness now of the amount of sodium in those dosages that a typical patient would get. We're also -- the patients themselves are becoming aware that there's treatment options. And importantly, not only in the clinical study, but in the real world, we've seen you can titrate over dose for dose, one day to the next and continue to get the clinical benefit of an oxybate, but without that sodium load. As you know, Brandon, all narcolepsy patients are at increased cardiovascular risk. In fact, 70% to 80% of them are already having some comorbidity that's being treated for that. But even the young healthy patient, you don't want that modifiable risk factor, if you can reduce that sodium load. And again, the FDA's own words to get to the orphan drug exclusivity provides additional tailwind to that conversion. So we believe that the majority of patients are going to find Xywav as the treatment of choice based on lower sodium, dosing flexibility based on individual need and the overall profile.

Great. And you touched on that orphan drug designation. Maybe just any color or how should we think about that impacting the ability for FT218 to come to market?

So we can -- sorry, go ahead, Rob.

Thank you, Renee. I was just going to highlight that we certainly prioritized a lower sodium formulation with Xywav having a 92% reduction in sodium compared to Xyrem, given the high-risk of cardiovascular morbidity and mortality amongst narcolepsy patients. And the FDA, when granting orphan drug exclusivity, certainly agreed their requirement for orphan drug exclusivity is clinical superiority and the FDA's own statements indicate that Xywav is superior to Xyrem by means of greater safety, because Xywav provides a greatly reduced chronic sodium burden compared to Xyrem, and they go on to say, the differences in the sodium content of the two products at the recommended doses will be clinically meaningful in reducing cardiovascular morbidity, a substantial proportion of patients for whom the drug is indicated. So certainly validating our intent in developing a lower sodium product for narcolepsy patients.

And maybe I'll just add that we're not really in a position to speculate on what the FDA will determine with regard to FT218, but I would just echo Rob's comments in -- with respect to what the FDA has stated and then our design of this product such that we believe the compelling product profile and advantages make it such that Xywav will be the treatment of choice among the majority of oxybate patients based on that profile and those benefits.

Great. And we are just about out of time. But given that it's the launch session of the day, I'm going to sneak one more in, just because there is so much to talk about at Jazz these days. JZP-358 for essential tremor. Is this something that remains on track and remains a priority?

Yes, indeed. So we're really excited about JZP-385, which, as you know, is a novel mechanism for essential tremor. It's at T-type calcium channel or CAV III modulator. It was evaluated in a randomized Phase II study, and we were truly impressed with the results. And so we plan to initiate a Phase 2b study, which can be potentially pivotal later this year. We think it's critically important because there've been really no new treatments in many decades in essential tremor and what's available really is not particularly good, leaving a high unmet medical need for a very common and debilitating disease, which they have a prevalence as high as 11 million in the United States, and we think highly under-diagnosed because of the lack of effective therapies with very few patients getting any drug treatment around 500,000 of that 11 million in prevalence.

Yes. And just to add in addition to that program, we are broadly excited about the pipeline. We touched on nabiximols as well as JZP-150 for PTSD. So a number of value inflection points and catalysts coming ahead. So thank you so much for having us, Brandon and for all the great questions.

Yes. Likewise, thank you to yourself Renee, and Dan and Rob as all for attending. And yes, so much going on at Jazz, tough to fit in all the pipeline in 30 minutes these days. So a wonderful space to be in. So congrats to you on all the progress, and thank you for attending today. Thank you, everyone. That ends the session.