Jazz Pharmaceuticals plc (JAZZ) Earnings Call Transcript & Summary

Yes, I mean we've been -- let me just jump in with historical context to say, even before either of those market events happened last year, we gave guidance, and we actually raised that neuroscience guidance during the year and then hit it. So that was before we had experience. I think we had a good handle on where things were headed. And I don't think anything that's happened recently, P.J., would shake our confidence that we have a pretty good idea of where things are headed.

Yes. I mean we've been in the oxybate business for over almost 20 years. And the market events that happened last year were events that we were well aware of well in advance to prepare for. And I think if you look at any metric, Jason, whether it's the total number of active patients, the 12,950 that are on Xywav, if you look at consensus estimates that are published as to the different brands, I think it's clear that Xywav remains the oxybate of choice by a significant margin.

Okay. Maybe the IH indication is really kind of the important aspect of where there might be some leakage in the other parts of the business to sort of defray that revenue loss. And so as I look at kind of 3,000 patients through some claims database, numbers out there are like 37,000 as sort of a TAM. So when we look at that penetration rate, right, high single digit. When I look at like the penetration rates of oxybate in narcolepsy, is that a good proxy for sort of how you see the market evolving over time? Is that a good proxy for peak? And this is -- all these sleep markets, just they're kind of like these slow smoldering builds, right, that occur over a period of, say, 10, 12 years.

Let's divide that into 2 pieces. I'll take market size and then you take penetration, P.J. On market size, we certainly have seen the claims data, 37,000 diagnosed with IH and interacting with the health care system. I want to be clear that we think the market opportunity is bigger than that. As is typically true of a disease that's had no FDA-approved therapy in the past, you tend to see underdiagnosis. That tends to go up when you get promotion, good education of sleep specialists on proper diagnosis of the disease. When we ask sleep specialists, do you have more narcolepsy patients or do you have more IH patients? We often hear the answer, I have as many or more IH patients. And that's estimated to be closer to 80,000 to 90,000. Penetration?

Yes. And I think there's really a paradigm shift in how physicians are thinking about idiopathic hypersomnia because until there was an approved therapy, it was a symptom-based approach. And often, it was around the excessive daytime sleepiness because those were the agents that they were used to using. And when Xywav was approved, it was approved for the treatment of idiopathic hypersomnia, which is not just any one symptom but the treatment of the overall disease. And given our strong clinical efficacy, both on the primary endpoints but also the secondary end points, it's really about educating the physicians about the totality of this disease, that it's not just about excessive daytime sleepiness, why that might be the primary symptom that came in for that you need to look beyond the excessive daytime sleepiness. Things like sleep inertia. What good is a wake-promoting agent if you can't get up to take it. And we're seeing that shift in mindset and confidence from physicians. And we're also seeing patients, I think the feedback we're getting from patients is, these are patients that were hungry, I mean, they were validated with a diagnosis, but not with a treatment for so long. And now there's a treatment out there. And so we're seeing them actively engage with us in terms of their treatment and wanting to be an active participant in that treatment. So I think as that mindset shifts, I think it's really as the only approved therapy. What we're seeing is, yes, it is so built because it's a slow shift in the mindset and really focusing on this as an independent disease with its own symptoms and the value that Xywav brings to that.

Okay. Well, let me pull Rob in the conversation here. Thinking about the orexin update on the quarter, it sounds intriguing that there may be the potential for this asset to still have some life. The QT interval prolongation issue that, I guess, you guys are further interrogating. I guess I'm struck by the -- it sounds like both you and Takeda are prioritizing NT1 over NT2. And wondering, I guess, is the thinking that perhaps QT interval prolongation might be a dose-dependent side effect? Just wondering if you could sort of characterize some of the consideration, knowing that you're in 2Q, you're going to have a more formal update here.

And just to be sure the broader group has the full picture. What we said previously was that we had paused a healthy volunteer study because of a QTc signal that we saw in the automated reads. We took some time to go through the manual reads, get some expert input to really characterize that better. Having done so and having assimilated some other information around where we think we'll need to dose in NT1 patients in particular. And what the field is learning is that to sort of maximize the effect in a sleep deprived healthy volunteer model, that takes higher exposures and doses than it does to get somewhat more maximal effect in NT1 patients, and that makes sense based on the hypocretin deficiency that occurs in NT1 and the probable up-regulation of receptors. So with all of that, we feel there could be therapeutic index in NT1 patients in particular. And we are looking at the option with our partners. We haven't decided yet what we're going to do. We promised we would give an update next quarter. But we're discussing whether we should evaluate NT1 patients to really define whether there is a therapeutic index. We haven't given the level of detail around whether we're seeing dose response or anything like that. But typically, QTc effects are -- their media channels than they are dose responsive. So it's really about understanding, where do we think we need to be dosing and where are we relative to the toxicity that we want to stay away from.

Yes. So is the issue with NT2 that maybe it's harder to find a therapeutic index? Or is it more commercial, knowing that the unmet need is much higher in NT1 relative to NT2?

It's more about having the therapeutic index in a disease that may not be as sensitive. But again, we're all learning as we go along. The field is still early. So were we to go into an NT1 population, we'll assimilate those data, have more information around, okay, could you even go beyond. We don't know yet.

When you did put a pause on the program, you did flag visual disturbances as well. Did you do ophthalmic assessments of these patients? Is it something that you understand is an AE that has fast onset and can be transient? Just wondering, I know that Alkermes is now building into their Phase II trial ophthalmic assessments, just to better understand and characterize that. So I asked because it was one of the AEs that you guys have filed.

I mean we have limited data on that based on the healthy volunteer studies, and it's something that we'll need to continue to evaluate to really understand if there's an exposure that keeps you from that or whether it's persistent or whether it's interfering with important daily activities. I do think it's interesting that other molecules are seeing it. So we'll sort of learn it as a field.

I guess, ultimately, to me, anything cardiovascular seems more showstopping visual disturbances. When I think about these patients, I mean they have a hard time operating hazardous machinery things like that. So if you do have a transient blurriness, right, that seems to be less of a showstopper, right, versus like if you had a signal with those cardiovascular related, that gets more problematic. Is that fair?

Yes. I think it's fair. I mean time will tell on that. Obviously, if it's a nuisance, that's one thing. If it impairs your ability to drive, that's another. But to your point, I mean, cardiovascular effects sometimes go unnoticed by the patient and then puts them at risk for a more serious consequence like an arrhythmia. If a patient has experienced some visual disturbance, they may well know how to manage that and to avoid driving while it's resolving.

Okay. Maybe shifting gears to your Phase IIb essential tremor trial, which could be pivotal. It's a big market. Doesn't get a lot of love, I think, from the investment community because of some other calcium channel modulating approaches that had -- maybe didn't hit their prespecified primary endpoints, if I had to summarize. You get questions a lot about just like bogeys for success. And I know you guys deflect wanting to kind of pin back yourself in. But I guess maybe asking the question a little differently, when I talk to physicians, I generally hear like you got to at least show 1.5 point difference on these ADL and PS measures as sort of a minimal clinical effectiveness differentiation. So is it fair to think about that as sort of a minimal threshold? And then as you kind of work your way up, that kind of builds the evidence case, right, for doctors to be compelled to use this versus the generic drug option that's the only alternative that people use?

So where I would start is, I'm personally very excited to see those results. We're getting close. Obviously, this is an earlier-stage asset, it's not like Zanidatamab where we know we have a drug, we know it works, and it's a matter of like how we can create the most value out of it. This is certainly an earlier-stage asset. But we've got a lot of reason to be excited. So I'm looking forward to those results. Why are we excited? Well, we think we have a best-in-class molecule. When we talk about selectivity, in this case, I think we have a special kind of selectivity in that some of these molecules are more state dependent than others. They tend to act in abnormal pathways in the brain rather than normal pathways on the calcium channel ions. So we think that, that could create a therapeutic index. The other thing is we took what we learned from the TCOM study, how to identify patients, what the most appropriate endpoints would be that would enable you to assess what's meaningful to patients, and got agreement with FDA on that, created a new once-nightly formulation, which kind of flattens out those peaks, helps you to maintain a trough, should also create a therapeutic index. And then designed a really, well-designed trial that is long enough duration to see persistency effects over 12 weeks where we're pushing the exposure to 30, whereas the total dose was 20 previously. So we think we have a good trial there. We're not dodging the question on what would be clinically meaningful. There are no effective therapies for this disease. I don't think I'm exaggerating when I say that there are approved therapies, but they're not particularly effective. Things like propranolol or primidone didn't use the TETRAS endpoint. So it's not like we can say, here's the standard of care, this is what you saw on TETRAS there, and this is what we want to be. We're really going to be defining that for the field. And I don't want to be pinned down to saying exactly what would be clinically meaningful on a composite because we have not only the primary endpoint, which is a modified composite of different components of TETRAS. We have clinician and patient reported outcomes. We have specific measures of distress and are designed to evaluate essential tremor. So I think we really need to look at the totality of the data. And just to give you an example, if you look at some of the subscales on the TETRAS, for example, drinking from a cup, a relatively small change on that scale is clearly meaningful. The difference between spilling when you're drinking versus not spilling, or the difference being between, on the performance side, being able to write legibly, sign a check legibly versus not. So we really need to look at the detailed data. And our commitment is when we present the results, because I know part of the reason people are asking is, are you going to tell us the results, how do we know what to do with it. When we present the results, we'll put it into a more detailed context so you understand whether we think it's clinically meaningful and what we're likely to do as next step.

Maybe for Abizer, just to get everybody in here. So on Zani in the GEA study. This is an interesting study, a much larger population than BTC. I guess the one thing that I think people are sort of stuck on is the Zani chemo arm, that maybe represents about half the market, right? The triplet arm sort of allows you to compete more broadly and the other half of patients who are getting a KEYTRUDA triplet. How do we think about the demographic differences of this study versus the other studies that are ongoing? I think the Merck trial had 85% of subjects were PD-L1 positive. And so I think one of the challenges that folks have are how the comparison is going to be drawn with the triplets?

Sure. So thanks for the question on GEA. We feel really excited based on what we've seen in BTC and how this has performed against existing HER2 agents like PERJETA and Herceptin trastuzumab. And what we've seen in the early data in GEA and so what we think is, based on that existing body of evidence, as Rob said, derisked, we think Zanidatamab has a chance to be the HER2 agent of choice irrespective of PD-L1 levels. Now in a PD-L1 population that's high, that some PD-L1 combination, we're doing it with TZ. But it doesn't mean that's the defining arm. We, again, think the core value prop here is the HER2 agent. And we think we have a very differentiated, best-in-class HER2 agent, which will work in a PD-L1 population with a PD-L1 combination arm or -- and without a PD-L1 low where we have a chemo, and we think the data that we're doing in the front line will have both those kind of data sets differentiated, and we'll speak to it and we think we're going to differentiate against standard of care in both those sets.

Yes. So I guess the key is the doublet, it gets a win, but the triplet shows something incremental relative to the doublet. Is that sort of it?

Yes. I mean, again, I'll let Rob speak to how we're powering it, but we want to see differences in -- relative to standard of care, which is tras chemo. And we will see how this pans out, but we would expect to see, based on what we've seen in KEYNOTE, some incremental benefit to adding a PD-L1 inhibitor on top of a really good HER2 agent. Again, we think that a fundamental driver though is the HER2 agent. It's going to drive most of the effect. PD-L1 will add in a PD-L1 high, but it's really about HER2 because you've already defined a HER2-positive population. That's the key oncogenic driver there.

Yes. I mean, Zani will work regardless of PD-L1 status. What FDA or clinicians are going to want to know is, is it worth adding on PD-1 inhibitor. So you certainly want to be incrementally better than that. I would just highlight for the group who may not know this field in depth. In the KEYNOTE-811, it was 81% who were "PD-L1 positive" meaning they weren't a 0 TPS score. It hasn't -- 2 things. It hasn't been defined really what the optimal cutoff would be. If you're less than 5 or how much benefit you're driving. Regulators tend to look at that in terms of, did you cause a detriment, and certainly in the 0s, it looked like there was even a detriment, which can be because you're taking on different toxicity. So we don't know what that optimal cutoff is. Some of our data will help to define that. The other thing is I don't believe that 81% even represents the true prevalence. And I've been working in this field from way back in my KEYTRUDA days when we did a study in breast cancer in HER2-positive patients, which [indiscernible] because we thought there might be an inflamed phenotype in HER2-positive breast cancer. We don't think it's that high. We think that for this trial, docs had available PD-L1 results because it's routinely done and probably steered some of their PD-L1 patients toward that trial. So I don't think it's 81%.

Jason, I'll add one last comment. And the customers we talk to, when we talk about Zani, they're excited about what they see. So when I think about it and again, how we're going to market this pending positive data, they're really excited. They see the opportunity across GI cancers and HER2 positives.

Great. Well, we're out of time. But gentlemen, thanks so much for joining us. Appreciate it. Thank you.